US CPI is the best trading opportunity today
Today’s focus turns to AUD, NZD, GBP & US CPI
It looks like we’ve seen some mild profit taking yesterday ahead of today’s blockbuster schedule of releases, most notably the BOE Meeting, followed up by the US CPI release an hour and a half later.
The USD Index has dribbled back down from its high at 93.42 towards support around 93.00.
Sterling is whipping about all over the place in anticipation of BOE comments on the recent onslaught of weak economic data.
And the Canadian dollar rallied as expected to catch up to the move in Oil.
So that sets us up for a potentially big day of trading. But let’s focus on the events and work out where the best trades are.
The BOE Meeting
This is going to be hectic, to say the least. And before it, we have the high impacting Manufacturing data due for release.
I’m putting the BOE event in the ‘too hard basket’. That doesn’t mean we don’t trade GBPUSD today, but instead what we might have is pockets of smaller trading opportunities on GBP throughout the day.
The market has now factored in no rate change. Hence the big move down from 1.4300 to 1.3500. They are also expecting extremely Dovish comments from the BOE on future rate hikes.
I think all the weak comments and actions have already been factored in, so if the BOE doesn’t come out extremely Dovish then we may see GBPUSD higher.
But it’s all speculation and that means higher volatility than normal and a higher risk environment. The trend is down on Sterling so to me you’ve got to be looking to get short either on rallies or on a break back down through 1.3500.
I’ll be especially focusing on the change in the Vote count. If there is a shift to ‘Vote Cut’ then GBPUSD will get belted.
It’s going to be loose so give yourself greater flexibility by decreasing your trade size and have a bigger stop… that way you can at least try to get into a move without worrying about getting whipped out!
Unlike the BOE Meeting, this is clear-cut. It’s either going to be stronger, as expected or weaker. That’s 3 clear results making this the opportunity of the day, & the week for that matter.
Stronger – the USD should rally. How far will depend on the level of variance? But if it’s a really strong number (say around 0.5%) then the USD should rally aggressively. Get long, pin your ears back and hang on!
As Expected – no major moves and I suspect the USD will bang around a little bit but then continue on the uptrend it’s currently on, over the course of the next few days.
Weaker – the USD should fall. How far will depend on the level of variance? But if it’s a really bad number then we could see a really big fall in the USD.
This is by far and away the best trading opportunity of the weak. Tune up all of your major currencies as they will all be in play.
Left Field Scenario – Dovish BOE & Strong US CPI
We could potentially see GBPUSD around 1.3200 if all the ducks line up. Hopefully, GBPUSD has settled down enough after the BOE for us to trade, otherwise, I’d suggest leaving it off your ‘hit list’.
There are easier pairs to trade, like EURUSD which is sitting there with a really gorgeous trend.
Don’t make today harder than it needs to be. Focus on your capital management and entry levels and let the market do the rest!
Check our Next Best Trades Watchlist for full details as to which specific pairs we are focusing on.
We’ve got another batch of Chinese Inflation data coming out, namely PPI & CPI.
This Chinese data will be important for both AUD & NZXD so if you’re in the Asian time zone give yourself a chance to get involved.
Just be aware we had the RBNZ earlier today and they were somewhat Dovish on inflation and that’s seen NZDUSD drop 60 pips, sop be careful which side you hit!
The AUDUSD, on the other hand, is sitting in limbo and should go where the data takes it!
It’s all been said above, today is all about GBPUSD & GBP crosses. The best trade may be at the start of the day with the UK Manufacturing Output.
The BOE meeting will be hectic for sure. One easier thing to focus on will be the change in the Vote count.
If there is a shift to ‘Vote Cut’ then GBPUSD will get belted. That’s what I’ll be watching for.
North American Session
The US CPI will dominate the session for sure. Hopefully, the result is ‘variant’ and by some margin, that will give us and all traders a clear signal as to what to do.
An ‘as expected’ number will be a major disappointment, to say the least.
Don’t forget Trump is out there somewhere trying to pick a fight, so that’s always on our radar.
Technical Set Up – What’s Happening with the Majors
Check our Daily Analysis for detailed analysis of the Major currency pairs.
Today’s Fundamental Drivers
Plan the Trade, Trade the Plan!
The idea of our “Market Insight” is to give you some guidance with your daily preparation.
Your Daily Analysis needs to become habitual – For full guidance on our daily routine click here.
Make sure you don’t waste unnecessary time in front of the screens.
Remember you need to be fresh, confident and ready to trade and by sitting aimlessly in front of your screens you will become stale and uncertain.
The key to your success: Isolate the opportunities that work for you and focus on them.
Don’t worry about things that you can’t make…..chasing them will only cause problems (tiredness & irrational behavior will take over).
Tune up your charts & get ready to trade…..