HOT US CPI: EUR/USD 1.1215 IN FOCUS AS FED HIKE ODDS RISE
EUR/USD trades near 1.1215 in Thursday’s Asian session after US September inflation came in stronger than expected on an annual and core basis. The pair’s upside may be limited by lingering concerns about France’s fiscal health, while markets now turn to US PPI and Retail Sales data later Thursday.
The US headline CPI rose 0.6% month-on-month and 3.7% year-on-year in September, compared with expectations of 0.6% and 3.6%. Core CPI increased 0.3% month-on-month and 2.6% year-on-year, above forecasts of 0.2% and 2.5%.
The stronger inflation report increased the probability of a 25-basis-point Fed rate hike at the October 27–28 meeting to around 31.6%, according to CME FedWatch. San Francisco Fed President Mary Daly said further rate increases may be needed to bring inflation lower, while also signaling that there is no need to raise rates at the October meeting.
TD Securities also said the CPI report makes the October policy decision more complex. The bank still expects the Fed to hold in October and opt for December, while noting that the decision has become a closer call following inflation data.
For the Euro, concerns over France’s fiscal health remain an important factor. ECB President Christine Lagarde said France should address its debt situation through fiscal consolidation, reducing speculation about potential ECB purchases of French bonds.
From a technical perspective, EUR/USD maintains a bearish near-term tone below the 100-day SMA at 1.1475 and the Bollinger middle band at 1.1295. The RSI (14) at 36.1 is recovering from oversold territory but remains relatively weak.
On the other hand, initial resistance is at 1.1295, followed by the 100-day SMA at 1.1475 and the Bollinger upper band near 1.1500. On the downside, the next notable support is the Bollinger lower band at 1.1090.
For market participants, the key factors remain EUR/USD near 1.1215, September US CPI at 3.7%, core CPI at 2.6%, the 31.6% October Fed hike probability, US PPI and Retail Sales, French fiscal conditions, the 1.1295–1.1500 resistance zone and 1.1090 support, which may provide further context for the pair’s near-term direction.
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