US CPI in Focus Today

Another week and another round of key US data looms. This time, the market is awaiting the release of the August CPI data due later today. On the headline reading, the consensus forecast is for 0.4%, marking a decline on the prior month’s 0.5%. On the core reading, the market is looking for 0.3%, marking no change on the prior month.

Given the recent data disappointment suffered by USD bulls and the consequent dialling back of Fed tapering expectations, today’s data is attracting plenty of attention and holds the potential to create a lot of volatility if we see any surprises either way. A strong reading today could put Fed tapering back into sharper focus, sending USD higher while a downside surprise would likely sending USD sinking lower in the near term.

Where to Trade US CPI?

NZDUSD

The biggest retail skew is currently in NZDUSD where almost 90% of the community are short. With this in mind, a downside break from USD today (on any data miss) could send NZDUSD sharply higher. Price is currently hemmed in against the top of the bear channel and the .7110 level. A topside break here would open the way for a run up to the .7251 level first and .7315 level in the medium term, supported by bullish indicator readings.