A1 Trading Company

April 11, 2024

Hotter CPI Shakes Markets

Frank Cabibi

Yesterday's CPI numbers in the US caused considerable doubt in the expectations of a June rate cut. This morning's PPI came in lower than expected. But, it might not be enough to convince investors of a summer rate cut.

EdgeFinder Analysis

EURUSD is a -8 now on the EdgeFinder indicating dollar strength after the higher CPI numbers yesterday. The score changed by 4 points to the downside today. COT shows selling of the dollar and euro while retail sentiment switched to being majority long at 69%.

What investors are probably seeing now is a dovish ECB which are already expected to cut before the US. Meanwhile, the Fed may have to take another look at inflation and decide whether or not they want to still cut this year.

I'm not usually a fan of USDCAD, but the EdgeFinder has scored it as a +10. After 4 months of limited upside, the pair finally broke above a significant resistance level on the 1D timeframe. Closing above that level was pivotal in the direction of this pair.

PPI seems to not be doing much for dollar bearishness now that the market is looking towards a longer term high interest rate monetary policy in the US. Canada was also argued to be one of the first to cut rates this year.

Gold is now a neutral score on the EdgeFinder at -2. Yesterday's fundamentals did not check the bullish boxes that investors were looking for. Although gold likes higher inflation rates, this more so helps the dollar due to Fed uncertainty around rate cuts.

Cutting rates would weaken the dollar, but in the short term, higher rates for longer is likely going to help USD and hurt gold. The metal may be due for a pullback if it breaks support underneath $2,300.

Retail Spotlight

Not much has changed for retail. They are still long metals, Russell, and short dollar. Oil is mixed along with gold and US30. The majority short positions are NAS, SPX, UK100, GER30 and USDJPY.

Smart Money Spotlight

COT has kind of flatlined on bullish sentiment while retail has gone heavily long in the past week. This is an indication that EURUSD will probably experience continued weakness as a result.

Fundamental Spotlight

EURUSD still has a negative 2 inflation score after Europe announced lower inflation and the US reported higher inflation. This means that the ECB is likely going to take a less restrictive monetary stance than the Fed.

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