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US500US

All eyes on US CPI as commodities rip

Chris Weston
Head of Research
Feb 10, 2022
We’ve been treated to another solid rally in US and EU equities and there's clearly been limited worry about the US CPI print (due in the session ahead).

In fact, one could argue that despite the White House telling us to expect a multi-decade high in price pressures, the market does not want to be short risk should we see a below-consensus print play out.

Now also consider there's been re-weightings in the US CPI basket to account for the changes and distortions created during the pandemic. This may throw the calculation out and make it somewhat more troublesome to price risk around, but the fact remains if we get a CPI print (on headline) at 7% the USD should sell off and equities and commodities should rip. A hot number and the opposite may be true.

1.1484 remains front and centre for me in EURUSD and if the USD does find sellers, I expect this level to come up on most clients’ radars – a break could be very significant for markets. AUD is outperforming and has done for the past 5 days – I quite like the feel of AUDCAD and look for this breakout to kick on in the near term. AUDUSD is squeezing higher too and has a target of 0.7250, although that is for another day and on the day 43-pips is the implied move (higher or lower).

Commodities are ripping – trend-followers need to be all over this space right now. Copper has found some love after it broke the Jan highs – will the breakout hold and start a trend? Crude has found a better tone, while Gold continues its stealth climb towards the Aug 2020 downtrend at 1847, and then should focus on the 1853 swing high. A weak CPI print and we could see XAUUSD moving – while XAUJPY has now broken out.

Coffee is flying, as are oats, soymeal, beans, and cattle – the move is mature, but once again we are reminded why this space trends like few others and why systematic trend-followers are all over this scene.

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