(Eren Sengezer – FXStreet)
– EUR/USD has been moving in a very narrow range since the beginning of the week.
– Core CPI in the US is expected to rise by 0.5% in September.
– The pair could break out of its trading range after the US inflation data.
EUR/USD has been having a difficult time making a decisive move in either direction as investors refrain from committing to large positions ahead of the September inflation report from the US.
On Wednesday, European Central Bank President Christine Lagarde acknowledged that they have started discussions on quantitative tightening. Meanwhile, “I have no indication that with steps up to 75 basis points we will not be able to achieve our price stability mandates 2% inflation over the medium term,” said ECB policymaker Klaas Knot. These remarks, however, failed to help the shared currency gather strength.
The US Bureau of Labor Statistics will release the Consumer Price Index (CPI) figures for September at 1230 GMT. Market participants will pay close attention to the monthly Core CPI reading, which excludes volatile food and energy prices and is not distorted by base effects.
The market expectation points to a 0.5% increase in monthly Core CPI in September. On Wednesday, Neel Kashkari said that it will be a judgement call on whether they hike the policy rates by 50 or 75 basis points increments in upcoming meetings. Hence, it would probably take a significant upside surprise for markets to start considering a 100 bps Fed rate hike in November. Nevertheless, a hot inflation report is likely to allow the greenback to stay resilient against its major rivals. According to the CME Group FedWatch Tool, there is now an 81% probability of a 75 bps rate hike in November.
On the other hand, a reading at or below 0.4% is likely to trigger a relief rally in US stocks and cause the dollar to weaken with the initial reaction.
EUR/USD Technical Analysis
The near-term technical outlook doesn’t point to a directional bias with the Relative Strength Index (RSI) indicator on the four-hour chart continuing to move sideways slightly below 50. Additionally, EUR/USD continue to trade near the 20-period SMA, reflecting the pair’s indecisiveness.
0.9680 (static level, lower limit of the trading range) aligns as interim support ahead of 0.9650 (static level). With a four-hour close below the latter, EUR/USD could continue to push lower toward 0.9600.
On the upside, 0.9720 (Fibonacci 61.8% retracement of the latest uptrend) forms immediate resistance before 0.9760 (100-period SMA) and 0.9780 (Fibonacci 50% retracement).
It’s EUR/USD likely to move to the 0.9750 level?
Looking at EURUSD’s chart, we can see that in the past days, the FX pair was tradable in a range around the rate of 0.97. Today, if it manages to hold the rate above the level 0.97, then we could see it climbing towards the first resistance level at around 0.9740-0.9750. However, if it failed to hold it above that support level, then we could see it dropping towards the next support level of around 0.9640-0.9650.