Ticker tape by TradingView

January 13, 2022

CPI Climbs 7%, USD Could Be Bearish Now

Frank Cabibi

CPI numbers came in yesterday indicating a 7% climb in inflation from last month. This is some bad news for the Fed, USD, and stock market which could lead to a short term bearish trend until the Fed raises rates. This report should be bullish for the USD in the longer term since investors can be more certain that rate hikes are coming, but the dollar is still dropping. Here's why the USD could be bearish.

Why USD Could Be Bearish

There are a couple reasons to why the dollar could still be bearish right now. That is probably because the three 25 bp hikes the Fed wants to do might not be enough to offset the rapid rise in inflation. According to TradingEconomics, the inflation rate is expected to trend upward to 1.90% by 2023, so even the 0.9% interest hike the Fed plans to do might not be enough to a big enough policy to keep inflation under control.

We also don't know for sure whether or not the Fed will pursue this plan to go from near-zero percent interest to nearly 1% by the end of the year. The original plan was a 0.3% hike, now it's 0.9%. We may have to see a larger hike for investors to feel comfortable with the USD's strength. So, in the meantime, the USD could be bearish.

According to COT data, institutional interest is on the short side of the trade which means it's more likely we see a downtrend than a rally. The way CPI is trending seems like the 7% rise is not the top for the inflation index.

DXY (Dollar Index)

USD Could Be Bearish
DXY crossed under a major supportive trend line and is testing support at 94.500s. This is a key level the dollar is testing as a break under could lead to further downside to possibly the 200 DMA which is another 1.6% below.

A1 Edgefinder

Try for FREE!
or get 20% off the full version using code "READER"
GET FREE VERSION

want to see what we're trading?

Join The VIP Community!
Our entries, exits & analysis
Live Webinar Coaching
Trading Chatrooms
Strategy Library 
Exclusive Trading Guides
Use Code "READER" for 10% OFF!
JOIN NOWJoin FREE Discord
How To Trade FOMC Today

The FOMC meeting is scheduled for 2:00 pm EST today as the USD is stronger on the day. The stock market remains uncertain as volatility picks up hours before the meeting. We are going to hear sentiment towards monetary policy and thoughts on rate hikes going forward after the latest 50 bp hike. What To […]

Read More
Sterling Suffers Sharp Decline Right After This

The British Pound fell sharply after an unexpected report on PMI data missed expectations by way more than what was forecasted. Most pound pairs are down as GBP/USD dropped -0.62% today. The sterling suffers one of the hardest drops in a long time. Higher Costs, Slower Growth, and Shaky Economy Purchasing managers lost momentum for […]

Read More
How to Trade EURUSD Now

EURUSD saw a breakout to the upside of a four month long bearish trendline on Monday, as bullish momentum caused it to close over 120 pips higher on big monetary policy news from the European Central Bank (ECB). Christine Lagarde, the ECB’s President, announced they will be pivoting away from net asset purchases, and subsequently […]

Read More
DISCLAIMER: All comments made by TraderNick’s Forex Group, LLC are for educational and informational purposes only. All comments should not be construed as investment advice regarding the purchase or sale of any securities or financial instrument of any kind. Please consult with your financial adviser before making an investment decision regarding any securities or financial instruments mentioned by TraderNick’s Forex Group, LLC. TraderNick’s Forex Group, LLC assumes no responsibility for your trading and investment results. All information on any of the platforms utilized by TraderNick’s Forex Group, LLC was obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. TraderNick’s Forex Group, LLC, its employees, representatives, and affiliated individuals may have a position or effect transactions in the securities and financial instruments herein and or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies. Trading of any type involves very high risk and may not be suitable for all investors. TraderNick’s Forex Group, LLC, its subsidiaries and all affiliated individuals assume no responsibility for your trading and investment result. Read our full disclaimer here
homescreensmartphone linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram