Tomorrow morning at 8:30 am ET, the United States Bureau of Labor Statistics is scheduled to release the latest Consumer Price Index (CPI) data for the month of November. Widely considered a proxy for inflation, the rate at which CPI increases will help the American public and the Federal Reserve discern how much of a threat high inflation continues to pose. Month-over-month CPI is forecast to slow to a 0.3% increase, while month-over-month Core CPI (which excludes volatile food and energy prices) is anticipated to clock in at 0.3% as well. If the real numbers exceed these expectations, this would be bullish news for USD and bearish news for stock market indices, whereas the inverse would be true if the numbers come in smaller. This is because hotter inflation data gives the Fed further incentive to raise interest rates to cool the economy, which strengthens the Greenback while diminishing demand for stocks. With the Fed’s next rate hike and press conference coming just two days from now, we must issue a warning: US CPI tomorrow is just the beginning for major pairs and equities.
Three Pairs to Watch
Considering that the latest Producer Price Index data released last week was quite bullish for USD, it seems plausible that tomorrow's CPI updates could yield similar results. With this in mind, for those interested in going long on USD, here are three potential pairs to watch for trade setups. While the EdgeFinder, A1 Trading’s handy market scanner, is reasonably cautious about some of them, new momentum from a fundamental catalyst could correlate with new biases being generated which are more optimistic for US Dollar bulls. They are listed below with their respective ratings, signals/biases, and corresponding charts.
1) USD/CAD - Earns a ‘6’ Rating, or a ‘Strong Buy’ Signal
2) USD/JPY - Earns a ‘1’ Rating, or a ‘Neutral’ Signal
3) AUD/USD - Earns a ‘-1’ Rating, or a ‘Neutral’ Signal
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