The EUR/USD pair edged higher as traders awaited the latest US inflation report, but the broader technical outlook remained bearish. Expected increases in headline and core CPI could reinforce expectations of a hawkish Federal Reserve, while technical indicators continued to point to downside risks for the euro against the US dollar.
The key levels highlighted in the analysis are 1.1151 as initial support and 1.1100 as a potential downside target if the first level breaks.
US Inflation Data Could Influence Fed Expectations
Economists surveyed by Reuters expected US headline Consumer Price Index (CPI) inflation to rise from 3.4% in August to 3.6% in September.
Core CPI, which excludes food and energy prices, was expected to increase from 2.4% to 2.5%. A rise to that level would leave core inflation further above the Federal Reserve’s 2% target and could strengthen the case for maintaining a hawkish policy stance.
The actual inflation figures could influence the dollar by changing expectations for the Fed’s next policy decisions. Stronger-than-expected inflation could support expectations of tighter monetary policy, while a softer reading could reduce that pressure.
Looking to understand currency pair movements through technical indicators and fundamental economic factors? Explore our Market Analysis section for in-depth forex analysis, market trends, and insights to support more informed trading decisions.
Rising Oil Prices Add to Inflation Concerns
Energy prices were another factor in the inflation outlook. According to the source report, Brent crude had risen to $107 per barrel, while West Texas Intermediate (WTI) was trading at $95.27.
Higher oil prices can contribute to inflationary pressure through energy costs, although the eventual impact depends on how prices evolve and how those increases pass through to the wider economy.
For EUR/USD, the important question is whether incoming inflation data and energy-market developments strengthen or weaken expectations for Federal Reserve policy.
Stay informed about inflation reports and key economic data releases that can influence currency movements and global financial markets. Explore our Macroeconomic News for the latest economic updates and developments.
Federal Reserve Speakers and US Treasury Yields
Market participants were also monitoring upcoming comments from Federal Reserve officials.
The source report highlighted a forthcoming speech by Kevin Warsh, which was expected to provide clues about the inflation outlook and the remaining policy meetings of the year. It also pointed to comments from Fed official Tom Barkin as a potential influence on EUR/USD.
Separately, the report attributed to New York Fed President John Williams the view that the Fed would leave interest rates unchanged for the remainder of the year.
These comments could affect the currency pair if they change market expectations for the future path of interest rates. Their impact would depend on the precise wording and the economic context.
US Bond Yields Pull Back
US Treasury yields had edged lower, with the 10-year yield at 5.22% and the five-year yield at 5.01%, according to the report.
Lower yields can reflect changes in interest-rate expectations, inflation concerns or demand for government bonds. However, yields alone do not determine the direction of EUR/USD, and the market response also depends on developments in the eurozone and the wider financial environment.
Stay updated on Federal Reserve decisions, interest rate policies, and officials’ latest statements to understand their potential impact on currency movements and financial markets. Explore our Central Banks section for the latest updates and insights.
EUR/USD Technical Analysis: Bears Remain in Control
On the four-hour chart, EUR/USD had recovered from Monday’s low of 1.1151 to approximately 1.1202.
Despite this rebound, the technical outlook remained bearish in the source analysis. The pair was trading below both the Supertrend indicator and the 50-period Exponential Moving Average (EMA), suggesting that the prevailing trend signals still favoured sellers.
Supertrend and the 50-Period EMA
The Supertrend indicator is commonly used to identify the prevailing market direction and potential trend changes. Trading below the indicator is often interpreted as a bearish signal.
The 50-period EMA tracks the average price over the selected number of periods while assigning greater weight to more recent prices. Remaining below this moving average can indicate that downside pressure persists.
In this case, both indicators supported the bearish interpretation, despite the pair’s short-term recovery.
RSI Shows Improving Short-Term Momentum
The Relative Strength Index (RSI) presented a somewhat different picture. According to the analysis, the RSI had formed an ascending channel and moved above the neutral 50 level.
An RSI reading above 50 can indicate improving bullish momentum. However, it does not automatically confirm a broader trend reversal, particularly when other trend-following indicators remain bearish.
The combination of a rising RSI and a price below the Supertrend and 50-period EMA suggests that short-term recovery momentum was improving while the wider technical outlook remained vulnerable.
Stay prepared for upcoming CPI releases and scheduled speeches by central bank officials that could influence market volatility and trading decisions. Explore our Economic Calendar Events to track important economic announcements and scheduled events.
EUR/USD Forecast: Key Support at 1.1151
The bearish scenario outlined in the source analysis focused on the pair’s reaction around two support levels.
| Technical level | Value | Significance |
|---|---|---|
| Recent price cited | 1.1202 | Level following the short-term recovery |
| Initial support | 1.1151 | Monday’s low and key downside level |
| Potential next target | 1.1100 | Possible target if support breaks |
Scenario 1: EUR/USD Breaks Below 1.1151
A decisive move below 1.1151 would strengthen the bearish scenario described in the report and could expose the pair to further downside towards 1.1100.
The move would still need to be assessed alongside price action, market liquidity and the reaction to US inflation data.
Scenario 2: EUR/USD Holds Support
If the pair remains above 1.1151, the immediate downside scenario could be delayed. The RSI’s recovery above 50 suggests that bullish momentum had improved in the short term, although the pair’s position below the Supertrend indicator and 50-period EMA continued to signal caution.
A sustained change in the broader technical outlook would require additional confirmation rather than relying on the RSI alone.
Conclusion: EUR/USD Remains Vulnerable Ahead of US CPI
The outlook for EUR/USD in the source analysis remains bearish ahead of the US inflation report. Expected increases in headline and core CPI could influence Federal Reserve expectations, while the Supertrend indicator and 50-period EMA point to continued downside risks.
The RSI, however, signals improving short-term momentum, creating a divergence between the recovery in momentum and the broader trend indicators.
Traders are watching 1.1151 as the key support level, with 1.1100 as a potential downside target if support breaks. These levels represent the source analysis’s technical scenario rather than a guaranteed market outcome.
Frequently Asked Questions
Why is EUR/USD bearish ahead of the US inflation report?
The source analysis points to bearish technical signals, with the pair trading below the Supertrend indicator and 50-period EMA. Expectations for higher US inflation could also support a hawkish Federal Reserve outlook.
What was the US CPI forecast in this analysis?
The report cited expectations for headline CPI to rise from 3.4% in August to 3.6% in September, while core CPI was expected to increase from 2.4% to 2.5%. These are forecasts reported in the source, not confirmed results.
What are the key support levels for EUR/USD?
The analysis identifies 1.1151 as the initial support level and 1.1100 as a potential downside target if the pair breaks below that support.
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