Trading the News: U.S. Consumer Price Index (MoM)

Trading the News: U.S. Consumer Price Index (MoM)
[B]What is Expected
Time of release: 08:30 EDT; 12:30 GMT 3/16/2007
Consensus expectation: 0.3%
Prior reading : 0.2%
Primary Pair Impact : EUR/USD

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How To Trade This?
The US Consumer Price Index report produces relatively straightforward reactions, with material surprises in either direction providing consistent price extension and profit potential. For the upcoming report, traders will likely pounce on any disappointments and challenge stiff resistance in the EURUSD pair. If both headline and Core CPI print below consensus forecasts, it may provide just the catalyst needed to send the EURUSD above 2-month highs at 1.3262. To trade such a result, it is best to wait five minutes to confirm direction in USD-denominated currency pairs. After five minutes, the trader can go long the EURUSD with a stop-loss below the post-news price low.
If, on the other hand, Core and Headline price growth comes in higher than forecast, we could see the EURUSD test an intraday trendline at approximately 1.3220, and ultimately congestion levels just below 1.3200. In this case, the trader would wait five minutes to place a short order with a stop-loss above post-news highs.
An upward surprise in Headline inflation may not produce a sustained rally if Core measures do not follow suit, providing a potential fade-trade on US CPI. If this occurs and the EURUSD posts immediate declines, the trader may wait for signs of reversal and enter a long position with a stop-loss below the post-CPI lows.