Inflation in Europe was released better than the forecast. The preliminary fact was published at 4.3%. What's happening in the markets?
Key Data for USD: US Inflation Rate
What will happen?
The US Inflation Rate (CPI) will be released on Wednesday, November 10, at 15:30 MT (GMT+2). This indicator measures the month-over-month change in the price of goods and services. The inflation report will affect the US dollar and thus almost the entire Forex market.
Why is it important?
The Federal Reserve makes policy decisions based on the Inflation Rate data, that’s why not only the actual report but also traders’ expectations for the Inflation Rate release increase volatility in the Forex market.
The last report showed that inflation was 0.4%, which was better than the expected 0.3%. As a result, EUR/USD dropped by 140 points. Pay attention that EUR/USD falls when the USD rises, and vice versa, EUR/USD rises when the USD falls. Besides, take into consideration the trend and strong support levels. On the day of the release, the pair was trending up and when it met the 50-day moving average (the red line) it reversed up.
How to trade on US inflation?
Compare the actual Inflation Rate with the market forecast. The forecast tends to appear a few days before the release in the economic calendar. The strong Inflation Rate report can force the Fed to raise rates earlier than expected. It should push the USD up. Here’s the rule below, but remember that every rule has exceptions sometimes!
- If the US inflation rate is greater than the forecasts, the USD will rise.
- Otherwise – drop.
Instruments to trade: EUR/USD, USD/JPY, all other majors, and also gold (XAU/USD).
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Welcome to the first week of October! As usual, at the start of the week, we are looking for valuable insights that will bring us profits in trading. Let’s observe the main events.