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The  United States  CPI, also known as inflation, measures the change in the price of goods and services charged to consumers. Core CPI excludes eight volatile components, notably food and energy. Core CPI readings  which exceed the market forecast are bullish for the dollar.

Here are all the details, and 5 possible outcomes for EUR/USD.

Published on Friday at 1:30 GMT.

Indicator Background

The Core CPI indicator is important to currency traders, as the  Federal Reserve carefully monitors inflation, and  may  intervene and raise interest rates if inflation is on the rise.  In turn,  an interest rate hike  would make  the dollar more attractive to investors and traders.

The index rose by 0.1%, exactly as  predicted by the markets. The forecast for February is for a jump to 0.3%, which would be the sharpest rise since July 2011. If the index does climb by 0.3% or more, this could well indicate an upward inflationary trend, and  the Fed will have to  consider the possibility of an interest rate hike.

Sentiments and levels

Although  an agreement has been  finally hammered  out on the Greek  bailout, there is serious unrest  in Greece, and  other eurozone countries, notably  Portugal, are in deep trouble as well. There is  increasing concern about the future viability of the euro, and traders may seek safer and more secure havens for their money,  notably the US dollar.  Thus, the overall sentiment is bearish on EUR/USD towards this release.

Technical levels, from top to bottom: 1.3145, 1.3060, 1.30, 1.2945,  1.2873, 1.2760  and 1.2660.

5 Scenarios

  1. Within expectations: 0.0% to 0.6%: In this scenario, EUR/USD could show some slight fluctuation, but it is likely to remain within range,  without breaking any levels.
  2. Above expectations: 0.7% to 1.1%: A reading above expectations could  push the pair  below one  support level.
  3. Well above expectations: Above 1.1%: This scenario is unlikely. An unexpectedly sharp rise in inflation could push EUR/USD downwards, breaking two or more levels of support.
  4. Below expectations: -0.4% to -0.1%: A reading in negative territory could push the Euro upwards, with one resistance level at risk.
  5. Well below expectations: Below -0.4%: Such a deflationary reading would hurt the dollar, and the  pair could break two  or more resistance levels.

For more on the euro, see the EUR/USD forecast.