Today's trading is all back to front
"Expectations" is a key word in trading. 95% of the time we are trading markets moving on what might happen. Today's US CPI and retail sales numbers are a big deal. They're a big deal for the economy and thus the Fed.
The problem is that the near-term Fed trade can't get any more expectant. The FFR futures are pointing to a 100% chance of rates rising next month. There literally is nowhere else to go but down.
That same thought can be applied to the dollar in the interest rate trade. Good numbers today and the market has very little reason to run the buck higher on rate expectations, again, as we're already at the top.
In the bigger picture, the dollar might move higher if retail sales show and extremely strong consumer but it will need more than one report. Inflation rocketing too might mean the market starts pricing in another quick hike after June.
We've got the potential to see a battle between short-term and longer-term expectations, and that's going to drive the price. The majority of traders tend to focus on the short-term so that might win out today.
The long and short of what I'm saying is this, the biggest price move won't come on good number, they'll come on bad numbers.
Use your levels properly and pick your points. For me, if this week's highs around 114.30/35 are tested after good data and don't break, that will be a big warning sign that there's not much gas in the expectation tank, which could mean a swift reverse.
USDJPY H1 chart
