Key Points
- Hot PPI fails to help Dollar.
- US Inflation to tick higher again?
- Dollar scenarios for today.
- EURUSD to keep gaining?
Powell Shrugs Off PPI Data
Yesterday seemed like somewhat of a warm-up before the main event, the release of the Producer Price Index data. The figure, to most people out there, seemed hot. The Core Producer Price Index m/m came in at 0.5%, which beat the forecasted and previous reading by 0.3%. The Producer Price Index m/m also came in at 0.5%, exceeding an expectation of 0.3%.
As you would expect, the dollar surged, but this was only short-lived. Jerome Powell was completely unfazed by the reading, dismissing it as “hot” and calling it “sort of mixed.” As a result, the dollar ended the day in the red, with a strong bearish close. It is safe to say all eyes are now on the main event today.
US Inflation Possible Scenarios
Today, the US Consumer Price Index is the primary gauge for measuring inflation in any economy. The event itself is likely to cause significant volatility in the markets, so traders must always navigate the markets carefully around times like this. The reaction is primarily felt in the US markets, such as the dollar, gold, and stock indices. Here are the possible scenarios today for the CPI m/m figure and what they could mean for the markets:
| CPI M/M | Probability ref: JP Morgan | Market reaction |
| Above 0.4% | 10% | Dollar strength, stocks 2% lower |
| 0.35% – 0.4% | 30% | Mild dollar strength, stocks 1% lower |
| 0.3% – 0.35% | 40% | Mild dollar weakness, stocks 0.5% higher |
| 0.25% – 0.3% | 10% | Dollar weakness, stocks 1% higher |
| 0.2% – 0.25% | 7.5% | Dollar weakness, stocks 2% higher |
EURUSD To Keep Gaining?
EURUSD has gained 1.7% in May so far, and on the hourly chart, it has been in a clear bullish trend, with continual higher highs and higher lows and bullish breaks of structure (BOS). Today’s inflation will go a long way in determining whether this trend is coming to a halt.
If inflation were to be on the hotter side, then EURUSD could fall around 90 pips. This would represent filling the fair value gap (FVG) indicated by the orange box and testing the hourly order block at 1.07368. From here, there could be a wave of support for the price.
Alternatively, if inflation were softer, EURUSD would likely continue its higher trend. Traders may target the critical psychological level of 1.09000, around 75 pips away.
Either way, EURUSD will be volatile today as the report is released at 1:30 p.m. (UK time). Good luck to all traders.
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Risk Disclosure: The information provided in this article is not intended to give financial advice, recommend investments, guarantee profits, or shield you from losses. Our content is only for informational purposes and to help you understand the risks and complexity of these markets by providing objective analysis. Before trading, carefully consider your experience, financial goals, and risk tolerance. Trading involves significant potential for financial loss and isn't suitable for everyone.
