The market is eagerly anticipating the first government US data in a number of weeks on Friday, with traders looking for some big moves on the delayed release of key inflation numbers. The US Bureau of Labour Statistics is scheduled to release key CPI numbers this Friday despite the continued government shutdown, and with the Federal Reserve Bank’s next meeting just five days later, the impact is expected to be much larger than usual as investors look for data indicators on the health of the US economy that have been in short supply recently.
FX markets have been largely influenced by geopolitical updates in the last few weeks, as the dearth of US data has affected underlying fundamentals. However, traders are expecting big moves in the dollar, especially if the data prints substantially off expected levels. The month-on-month CPI number is expected to show an increase of 0.3%, with the Core data coming in at +0.4%. The year-on-year number is expected to push up to +3.1% from +2.9%, and anything higher could see some pullback on rate cut expectations from the Fed.
The Euro is nicely positioned for a move on the data, as it is trading close to good long-term support on the daily charts. A stronger number, which—although unlikely to change expectations of a rate cut next week—would push longer-dated expectations back, could see a break of strong support levels and a move down under the trendline support and recent lows, with the initial target at the August lows around 1.1400. However, a weaker number would lock in a more dovish Fed and see the Euro rally back into recent ranges, with the initial resistance now just under 1.1700.
Resistance 2: 1.1728 – 17 Oct High
Resistance 1: 1.1696 – Trendline Resistance
Support 1: 1.1590 – Trendline Support
Support 2: 1.1540 – October Low
