August inflation rate above 1% sends U.S. Dollar soaring

The U.S. Consumer Price Index rose to 1.1% on a year-to-year basis in August, 2016 up from 0.8% in the month before. This marks the highest inflation rate seen in four months boosted by rising shelter and medical costs.

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The last time we’ve seen an inflation rate above 1% was in April, 2016. That figure was released in May, 2016. January’s 1.4% figure was released in February of 2016.

 

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Dollar Index (DXY) – 1 Month

Taking a look at the last time inflation results posted an above 1.0% figure, the U.S. Dollar Index rose 2.15% in May following April’s figures. With that said, of course, the U.S. Dollar performed very well against all major pairs for the rest of that month. This is to be expected for the month of September  as well.

Speaking of a bullish month ahead, I am currently monitoring several potential trades to continue longing the U.S. Dollar.

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AUDUSD 4-Hour

I established these zones last week and the Australian Dollar continues to test the second zone at the 0.746~ price level. While I was bullish on this pair last week, I remain indecisive especially at how price reacted to these two zones. Friday’s better than expected inflation figure sent the Australia Dollar lower, but not by much. In fact, the short sellers were less than the buyers entering in the second support zone.

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USDJPY 4-Hour

Another indecisive, but yet leaning bullish trade is on the USDJPY pair as it consolidates in a wedge after a bullish move up originating from the 26th of August. Given the obvious signs that Japan is suffering a deflation problem and subjected to further stimulus, I would even considering entering a long position before price reacts to the breakout.

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NZDUSD 1-Day

Is NZDUSD’s bull run over? I would think so in the latest price behavior. I suspect major stops were hit and the sell-offers were just as quick the buy-ups. With this movement, I can only suspect traders are looking to gain a more favorable price before taking on a short position. Nevertheless, I am looking forward to shorting this pair and see how it plays out.

 

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