Bank of America has flagged EUR/USD and USD/JPY as the two currency pairs most exposed to this week's U.S. CPI release. The bank sees EUR/USD vulnerable to a hot inflation print and USD/JPY at risk if the data comes in soft.
Bank of America named EUR/USD as exposed to a hot print and USD/JPY at risk if inflation comes in soft ahead of this week's U.S. consumer price data.
The bank had already noted that the dollar needed a new catalyst to determine its next directional move. This week's inflation figures are the event now in focus.
Why the euro looks exposed
Bank of America pointed to option flow and skew moving in favor of puts last week, with its technical matrix showing momentum turning against the euro. The pair looks vulnerable to a stronger-than-expected reading as a result.
With both sentiment and momentum deteriorating, the bank said a stronger-than-expected print could open the door for the EUR/USD downtrend to extend.
The yen trade if inflation cools
A soft inflation reading flips the focus to the yen. Bank of America sees a bearish USD/JPY position as attractive in that scenario.
The firm's technical matrix flagged a bearish reversal signal that leaves the USD/JPY uptrend increasingly vulnerable. Its valuation signals suggest the pair may be due for some mean reversion.
Source: Investing.com
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