EUR/USD Price Analysis: Dollar Holds Steady Before CPI Data

• Headline US CPI is expected to rise by 0.6%.

• Investors are uncertain about the Fed’s policy move in November.

• There’s uncertainty between the possibility of a pause and another 25-basis-point ECB hike.

Today’s EUR/USD price analysis is slightly bearish as the dollar remained stable ahead of Wednesday’s crucial US inflation report. Moreover, this report for August’s US Consumer Price Index comes just before Fed officials convene to decide on interest rates next week. Projections indicate that the headline CPI is expected to rise by 0.6%, up from the 0.2% increase recorded last month, with an annual increase of 3.6%.

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There is a widespread expectation that the central bank will maintain current interest rates at the upcoming meeting. However, uncertainty surrounds the Fed’s actions in November. 

Meanwhile, the European Central Bank anticipates inflation in the 20-nation Eurozone will remain above 3% next year. This strengthens the argument for a tenth consecutive interest rate hike on Thursday.

The ECB commences a two-day meeting on Wednesday. Persistently high inflation and mounting recession concerns have caused policymakers differing opinions. Consequently, it has led to divided market expectations. There’s uncertainty between the possibility of a pause and another 25-basis-point rate increase. 

Notably, the ECB has raised its deposit rate from minus 0.50% to 3.75% in 14 months, marking the fastest rate of tightening on record. This move was made in the hope of curbing runaway price increases. However, headline and core inflation remain above 5%, heightening the risk of workers demanding larger wage hikes, particularly given the exceptionally tight labor market.

EUR/USD key events today

It will be a busy day for EUR/USD as the US will release its August inflation report containing the following:

• Core CPI (MoM)
• CPI (YoY)
• CPI (MoM)

EUR/USD technical price analysis: Price pulls back toward the 30-SMA support.

The EUR/USD pair is bullish on the charts as the price sits above the 30-SMA. At the same time, the RSI sits slightly above 50 in bullish territory. However, the price is currently pulling back to retest the SMA. 

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If bulls are ready to start a bullish trend, the price will bounce off the 30-SMA to retest the nearest resistance at the 1.0775 level. However, if bears are still as strong as bulls, the price will likely break below the SMA to retest 1.0701.

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