USD Inflation figures released, what should we expect?

For the past few months, the USA has been subject to increasingly high inflation due to the oil supply issues caused by the Russian invasion of Ukraine and the oversupply of money due to COVID-19 fiscal policies. The rate has been steady since the record high of mid-June 2022 at 9.1 percent, yet the rate remains relatively high and signals troubling economic times ahead. The FED has tried to slow down inflation with aggressive interest rate hikes. Today we will be able to witness if the hikes have been successful at further slowing down interest rates or if the country is heading for the dreaded recession.

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USD recent inflation trends

Inflation has been a big concern in the USA recently as there have been multiple scares of a 2023 recession that are hinge on the fear of rising inflation. The FED has had to hike interest rates to unprecedented levels in an attempt to reduce money flow within he USA government however this has not seen drastic success as inflation levels rose despite these efforts.

The FED only has so many tools to fight inflation so they have been expected to keep on raising interest rates if inflation still continues.

The rate of inflation has been slowing down however and if the inflation rates are to remain on this trajectory then the interest rate hikes are expected to slow down too. Hence todays inflation announcement is of great importance because it will determine if the FED is the hike interest rates or reduce them in their next announcement. It will also add or reduce fears of a 2023 recession hence there will be a lot of eyes looking to trade this news events.

What should we expect as traders

The inflation announcement will be made at 08:30 am New York time. I highly recommend you set your relevant resistance and supports on Major USD currency pairs and indices. If the interest rate is announced to be more that 7.1 (the previous rate) then we are assured of a decline in the value of the USD and we can look to short the USD on these pairs. (e.t.c buy EURUSD, sell USDZAR). If the inflation is reported to be lower than that then we can assume that USD is now getting stronger and hence we should go long on USD (e.g sell EURUSD but USDZAR). Because of the market volatility I recommend that you wait at the important resistance and support first then enter there. Follow strict risk management otherwise you will be stopped out prematurely or you will blow your account due to volatility. Best of luck and happy trading.