The last big data point before the FOMC

Here’s what’s expected from the November 2017 US CPI report;

  • CPI 2.2% exp vs 2.0% prior y/y
  • Core 1.8% exp vs 1.8% prior y/y
  • Real average weekly earnings 0.0% vs -0.1% prior m/m
  • 0.4% prior y/y
  • Real average hourly earnings 0.4% prior y/y

We’re still in a trading situation where the market will likely do nothing unless the numbers are bad. If CPI comes in between 2.0% & 2.2% I can’t see the dollar doing much. Over 2.2% and we could see a minor rally as the market will judge that that will keep the Fed on the hiking path, and might mean they hike sooner than expected (it’s a big beat). A number below 2.0% won’t likely derail the expected hike today but it could mean expectations are lowered for another hike, and thus the dollar will drop.

I still believe that there might be a trade on picking up a bad number dip to run into the Fed but it depends on the move we may get. Other than that, I’ll keep my powder dry until tonight and see what happens. I suspect the market will do the same.

After the data we’ll have to keep an eye on the option expiries. I shouldn’t think liquidity will be at its greatest today ahead of the Fed, so that may mean it will take less money from options players to push prices around.

For trading, and barring any big shocks, USDJPY support and resistance looks solid enough at 113.00 & 113.80. EURUSD at 1.1700/15 & 1.1760/70. GBPUSD 1.3300 & 1.3370/80.

Ryan Littlestone

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