US CPI preview - a major volatility event risk in the making

Chris Weston
Head of Research
12 July 2022
The big event of the week looms large.

See our US CPI playbook for more intel on how this may go down -

Commodities continue to get savaged on the perception of falling demand – crude especially has seen increased attention as it tests last week’s low of 96.16, where a convincing break puts the 200-day MA in play. We watch the weekly DoE crude inventories (00:30 AEST) with the market expecting some drawdown here of 468k barrels, with gasoline inventories expected to fall by over 1m barrels – depending on the outcome, this could set off some volatility in energy markets.


We wait with bated breath on the re-opening of Nord Stream 1 (on 21 July) and there must be some premium priced into energy prices and the EUR that the Russians will simply not restart the flow back up, at least initially. For those trading energy or Petro-currencies headlines and positioning around Nord Stream will get more attention as we head into the 21st, so have this on the radar.


XAUUSD gets the lion’s share of client flow as we head ever closer to $1700 - the net position from clients is now long and eyeing a bounce here, with 72% of open positions held long – in a similar playbook to the NAS100 and crypto, the risk bulls will need to see a weaker CPI print and I’d argue the market goes into today’s US CPI print positioned for a print of 8.9%, maybe 9%. A CPI print below 8.5% would get the rates bulls fired up, with bond yields down hard, subsequently, I’d imagine (in this scenario) the USD drops universally, crypto goes up 5%+, NAS100 +2.5% to 3% and XAUUSD +1.5%

Conversely, a number above 9% could validate the market's long USD position and reinforce the notion that inflation is going to be high for the rest of the calendar year. It should take USDJPY firmly back above 137, EURUSD below parity (see my colleague Luke Suddards take on EURUSD - and see commodities under pressure.

Watching AUDJPY here as it feels heavy and ready to close through the range lows – let's see how the market digests US CPI – one for the radar, as the flow isn’t there yet but it's coming.

The material provided here has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research we will not seek to take any advantage before providing it to our clients.

Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.