Gold Traders Brace For US CPI

US CPI On DeckToday’s the day. After a slow week of summer trading conditions, the market prepares to receive the latest round of US inflation data. Given that expectations are a little more mixed ahead of the September FOMC, there Is plenty riding on today’s data and, as such, volatility risks are high. On the numbers front, the market is looking for headline CPI to print 3.3% YoY, up from 3%. Monthly readings are forecast at 0.2% on the headline, and core, both unchanged from the prior month.Market ImplicationsWe’ve heard some recent Fed commentary landing more on the hawkish side this week, showing that rate-hike support is still there. As such, if today’s data confirms the expected stickiness, especially if there is any unexpected upside, this should see USD trading higher on increased likelihood of a further hike in September. In this scenario, gold prices are likely to trade sharply lower. On the other hand, given the expected lift if today’s data reveals a further fall in inflation, traders are likely to price out any further hikes this year, particularly if we see a strong downside surprise. In this scenario, USD is likely to trade firmly lower allowing gold prices to recover.Technical ViewsGoldGold prices are sitting below the bullish trend line today ahead of the data as the reversal lower from 1973.51 continues to gather pace. 1905.46 is the next big test for bears which, if broken, opens the way for a move down to the 1871.04 level next with 1805.18 sitting well below market as a longer run target.