A1 Trading Company

January 8, 2024

CPI News Around the World

Frank Cabibi

This week, the US, Australia, Switzerland and China will report CPI numbers. Expectations of broader inflationary cooling may be fueling risk-on sentiment. Here are some setups for these assets according to CPI expectations.

EdgeFinder Analysis

AUDCHF is the most bearish score on the EdgeFinder now. A couple factors keeping score from becoming a strong bearish score (-10) are the labor market and COT data. Switzerland reported an uptick in CPI this morning which is what CHF bulls would want to see.

AUD will release their latest monthly inflation data today. However, they are expected to see a decline in the CPI y/y. If this comes to fruition, AUD demand will likely continue to dissipate. Interestingly enough, smart money is upping their long positions on Aussie and selling CHF from last week. Retail is also majority long.

On the other hand, Aussie looks like it has more of a bullish stance against the dollar. CPI news from the US is probably going to have more of an impact on this pair than CPI from Australia. Although Core CPI is expected to come down on Thursday's report, the other two (m/m and y/y) are forecasted to be higher.

Right now, the pair looks like it has caught support on the 1D timeframe on a previous top and supportive trend line. The two rejections on the day suggest that price wants to move higher, and COT shows buying of the AUD and selling USD. Perhaps smart money is betting on weaker inflationary reports for the dollar.

GBPUSD looks bullish on the EdgeFinder as well. Seasonally, the pair does well in the month of January and is one of the best performing months of the year on a 10 year average. The economy category is holding the score back from getting to a +8 or higher.

Although the UK is not reporting CPI this week, they are showing GDP numbers on Friday. The forecast of a higher GDP could be a good sign that the pound could be getting stronger. If we see a combination of weaker inflation in the US and higher GDP in UK, the pair seems likely to find more upside.

Retail Spotlight

Retail is mostly long AUD and short CHF. GU is mixed but may change if the pair continue to run higher.

Smart Money Spotlight

Smart money is showing a conitnuation of last week in the sense that institutions are buying more risk assets like US30, NAS, CAD, AUD and NZD. Seeing how the dollar is still selling is a good sign for the index bulls.

Fundamental Spotlight

In the event that CPI comes in lower for AUD, the score will not change until USD reports Thursday. And even then, the US will have to see a higher CPI number y/y. Otherwise, the score will remain at a +1 overall for the inflation study.

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