CPI Data Release: A Potential Game-Changer for the US Dollar
Dollar Gains Erased: 1.1000 in Play Again.
The latest job statistics from the United States, unveiled this past Friday, suggest a restrained potential for the US dollar to gain value. And considering the critical inflation figures expected to be announced this coming Wednesday, we might be in for a volatile week.
On Friday, the US Dollar took a significant dive, almost entirely wiping out the earnings from the rest of the week, following a mixed jobs report. The NFP showed a less-than-anticipated increase, but the unemployment rate saw a decrease and average hourly earnings unexpectedly rose. While it’s clear that the pace of job demand is slowing down, the labor market remains quite competitive for the time being.
The market’s reaction to this mixed bag of data is in line with its past behaviour: when the data comes below expectations, the reaction is big and on the other hand, when the numbers are positive, it appears that the impact is less profound and doesn’t have the staying power one might expect.
Key Data for the Week Ahead
To kick off the week, Tuesday at 6:00 AM GMT brings us the release of the German Final Consumer Price Index (CPI). This is an important indicator of inflation and economic health but the Final version tends to have the lowest impact. The forecast is 0.3%, mirroring the previous month’s figure.
Shifting the focus to the U.S., on Thursday at 12:30 PM GMT, both the U.S. CPI and Core CPI figures will be announced. These are key indicators of inflation and are even more important now, given the uncertainty surrounding the Fed’s next move. Analysts are expecting these figures to remain consistent with the previous month’s data, each showing a 0.2% increase.
Friday brings two more significant data releases: at 12:30 PM GMT, the U.S. PPI and Core PPI numbers will come out. Both of these are anticipated to reflect a slight uptick from the previous month, with an expected 0.2% increase compared to the previous 0.1%.
Finally, at 2:00 PM GMT on Friday, keep your eyes peeled for the Preliminary University of Michigan Consumer Sentiment Survey. This survey is a widely respected barometer of consumer confidence in the U.S., which can significantly impact the USD.
Technical Outlook – EUR/USD
The pair is currently trading at 1.0975 after Friday’s data erased some of the greenback’s gains. The bullish trend line that we spoke about last week is broken but the bears couldn’t move past the 50-day Moving Average, which paints a mixed picture.
One form of support is broken (the trend line) but the other one is holding (50 MA). Of course, then there’s the 1.1000 “problem” – once again the pair is trying to break away from this important level, which looks to be resistance at the moment.
If the bulls don’t manage to break 1.1000, the price could travel towards 1.0775, otherwise, the uptrend may be revived. As always, keep an eye on the economic data released throughout the week, especially the CPI.
