US CPI Up Next

The upcoming September US inflation report today holds the potential to be a catalyst for big directional movement across the FX space. While the upside USD risks on strong data are well signalled, it is always worth considering the outside scenario which in this case would be a downside miss. Given the recent hawkish shift in Fed commentary and the plenty of focus being but on tapering, a downside surprise would surely be met with strong disappointment.

Where to Trade US Inflation?

USDNOK

USDNOK is worth paying attention to in this case. The market is sitting on a big ledge of support at current levels, following the grind lower over recent months. With oil prices soaring and NOK appreciating firmly there is room for a break below the 8.5260 level today on any USD downside. With the market holding between 60% and 70% longs, there is room for downside momentum to build if this position increases, putting focus on 8.4140 next.