How to Profit From US Inflation: Investment Options

US inflation is expected to soften slightly – as markets have positioned themselves for it to do so. But that also presents opportunities for traders. The inflation prints as a proxy for Fed policy. Another hot report decreases the odds of a slower pace of Fed tightening, likely boosting the dollar whilst weighing on Wall Street, commodities and all other currencies. Whilst a softer inflation report keeps hopes alive that the big hikes are behind us and send dollar lower.

The US dollar index has held above a key support zone around 109.96, which comprises of the October 2002 high, October 2022 low and bullish trendline. A bar bullish reversal has also formed to suggest a swing low is in place, and with it comes the potential to head back to the monthly pivot point just beneath 112. At this stage it is equally open for it to top out, roll over and break trend support as it is breaking back above 112. But for now, the near term bias remains bullish whilst prices hold above this week’s low.

AUD/USD has more than handed back this week’s earlier gains, having found resistance around 65c. And that could mark the weekly high with a hotter-than-like US inflation report and send it back towards 63c. And likely quicker, should the Dems retain the Senate.

USD/JPY is holding nicely above the 145.1 and looks ripe for a bounce, given its -4.5% retracement from its intervention high. That said, prices are currently pulling back from the 146.50 area – which markets last week’s area of heaviest trading volume – but that could allow some savvy bulls to enter at a more favorable price, in anticipation for its next leg higher. It may not take much of an inflation beat to lift USD/JPY back to 148.