US CPI Data Remains Relatively Stable

On the 13th, many traders had high anticipation for the CPI release, as this usually sets the tone for where the US Dollar is heading the next couple of weeks until the next release comes out.

Here are the results - Previous: 0.3%, Expected: 0.3%, Actual: 0.3%.

When the “previous”, “expected” and “actual” are the same, this usually indicates that there is stability because inflation did not rise Lets take a look at what happened in the market post-CPI:

On the DXY (US Dollar Index) we can clearly see the strength from this added stability with it gaining roughly 0.28% on the day of CPI release. This wasnt the strongest of days as the Core CPI data was different and actually dropped.

The pair with the most volume, EUR/USD, naturally then expected a drop with dollar strengthening, which did happen and this drop was supported by a current bear market that has been underway since EUR/USD broke market structure on the 6th of January and had bears take control. CPI strengthened this trend and indicated it is very likely that the pair will continue for the next 4 weeks.

Another interesting pair after CPI is XAU/USD (Gold), which did see a spike up in price on CPI release, but afterwards, there was not really any continuation or strength at all, and as a matter of fact, the pair FAILED to make new highs. This is likely due to an overstimulation in market sentiment and buyers might not be as interested as they were just a few weeks ago. With Gold seeing a good result on CPI, it is an indication that gold will likely also continue within the next few weeks, with the very slight chance of seeing a bearish month after this failed high on the 13th.

Silver also followed the same pattern as gold. Many other FX pairs also followed the same path of EUR/USD, setting a tone for the next few weeks as most pairs seem to have USD coming out as stronger.

However, we do have Unemployment rates/claims, PMI & GDP still incoming in January; these releases could certainly shift the sentiment when they are released, especially because some of them are not delayed like CPI, which released December data on the 13th because of the delay that the government shutdown caused. Some news releases still had to happen, and they might contradict the good outcome that CPI showed.