The initial reaction to the CPI is for the dollar to move lower, yields moved lower and the NASDAQ is higher all suggesting a “happy” number for the market. The core/services component is still elevated at 5.3%. But the headline number at 4.0% is likely to be moving down toward 3% next month due to the falling out of another elevated number from one year ago next month. After that, the expectation from the YoY math (i.e., the 12 month cumulative gains) is for a flattening of the rate on the year on year basis, unless we start to see a string of 0.0% to 0.1% numbers MoM.
EURUSD: The EURUSD which stalled just ahead of the 38.2% retracement of the move down from the April 26 high at 1.08108 earlier today, has now broken through that level and currently trades at 1.0820. The 100-day moving average is also in play at 1.0806 and was broken. The next target area comes between 1.0842 and 1.08485. Risk is now the 100-day moving average 1.0806. Stay above is more bullish.
USDJPY: The USDJPY has traded above and below its 100 and 200-hour moving averages which are both converged near 139.49 (see blue and green lines on the chart below) . The low price reached 139.02. The swing area between 138.73 and 138.897 is the next downside target area (see green numbered circles on the chart below). Risk is the ubiquitous 100/200 hour MAs. Stay below is more bearish.
GBPUSD: The GBPUSD traded to the highest level since May 11, extending briefly above the high from yesterday at 1.2596. The high reached 1.26053. The current price trades at 1.2593. Yesterday, the price moved briefly below the 100-hour moving average (blue line in the chart below), but climbed back above the level into the close. In the Asian session today, the price based against that moving average level before moving higher. In the late Asian session, the price extended above the swing area between 1.2537 and 1.25474. That opened the door for further gains. That swing area will now be a risk-defining level for buyers looking for more upside. The rising 100-hour moving average is also moving toward that area and will be a level to eye for support going forward.
Looking at the yield curve:
- 2-year yield 4.5 to 6% -6.5 basis points
- 5-year yield 3.842% -7.3 basis points
- 10-year yield 3.704% -6.0 basis points
- 30-year yield 3.864% -4.4 basis points
Looking at the stock market:
- Dow Industrial Average posted 27.67 points
- S&P index is up 12.6 point
- NASDAQ index of and another 96 point
WTI crude oil is up 2.26%