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USD Downside Risks
Today’s US CPI release will be pivot for FX markets near-term. While a further .25% hike from the Fed is widely expected as the base case scenario for the July FOMC, expectations have shifted beyond this month. With a less dovish outlook voiced by some Fed members recently and with jobs data cooling, the market is anticipating that the Fed will likely return to a pause after this next hike. With that in mind, today’s inflation reading will be used as a key barometer for assessing this likelihood. If CPI is seen falling further, this should reinforce the view that the Fed will pause after hiking in July, leading USD lower near-term.
Today’s Forecasts
Looking at the data forecasts for today. The market is looking for headline CPI at 3.1% YoY down from 4% prior. In terms of monthly numbers, headline is forecast at 0.3%, up from 0.1% while core is forecast at 0.3% down from 0.4%. If confirmed, these readings should keep USD under pressure, allowing EUR room to break higher near-term. Alternatively, any unexpected upside today might well upset current projections leading to sharp short covering in USD.
Technical Views
EURUSD
Following plenty of sideways action over recent weeks, EURUSD is now making a more defined move and looks likely to test the 1.1126 level in coming sessions along with the retest of the underside of the broken bull channel. This is a key pivot for the market and a break higher here will open the way for a move up to 1.1503 longer-term.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.