US CPI a Non-Event, Powell Up Next
Joe Perry November 13, 2019 9:52 AM
The Question and Answer to follow will be just as important as the text itself!
US CPI was released earlier today as the headline number MoM for October came in stronger than expected at 0.4% vs 0.3% expected and 0.0 in September. However, the more important component of the data was the release of US Core CPI YoY. This is one of the major data points which the Fed watches to get a better gauge of true inflation as it excludes food and energy prices. The US Core CPI YoY for October was slightly weaker at 2.3% vs 2.4% expected and 2.4% last. Note that this figure is still above the Fed’s target rate for inflation of 2.0%.
Speaking of the Fed, today Fed Chairman Powell is set to speak today at 11:00am EST in front of the Joint Economic Committee (JEC) to give the Fed’s updated views of the US Economy. Chairman Powell stated recently that the economy “is in a good place”. Markets will be looking to see if he echoes these comments today. If so, this will confirm the FOMC’s sentiment that interest rates are on hold for the time being. The CME FedWatch Tool is currently pricing in a 96% chance of the FOMC leaving rates unchanged at its December 11th meeting.
The US Dollar Index (DXY), in particular, will be paying attention to any signs from Powell of a change an expected change in inflation and employment. On a weekly chart, price as been trading in an upward sloping channel since May 2018. Price tried to break lower out of the channel a few weeks ago, however ran into support and was rejected at the upward sloping bottom trendline of the channel and the 50-week moving average.
Source: Tradingview, FOREX.com
On a daily timeframe, we can see clearly that the DXY formed a flag near the lows and tried to break lower through the channel support and the 200-day moving average, only to fail as bulls gained control and turned it higher back into the channel range.
On a 240-minute chart, price put in a double bottom at the lows near 97.15. The target for a double bottom is the height of the pattern added to the breakout point. This level of 98.60 coincides with previous support (which now acts as resistance) as well as the 61.8% Fibonacci retracement of the highs on October 1st to the lows on November 1st. Price has currently stalked near 98.38, near the 50% retracement of the previously mentioned timeframe. Horizonal support below near the breakout point at 97.87.
Source: Tradingview, FOREX.com
Watch for the text of Powell’s statement to be released before the actual testimony. The Question and Answer session to follow will most likely be just as important as the text itself!
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.