HOW US /CPI REPORT COULD AFFECT EUR/USD.

Friday’s US economic docket highlights the release of the critical US consumer inflation figures for November, scheduled later during the early North American session at 13:30 GMT. The headline CPI is anticipated to edge lower 0.7% during the reported month from the 0.9% rise recorded in October. Conversely, the yearly rate is expected to show prices rising at their fastest pace since 1982 and accelerate to 6.8% in November from 6.2% previous. 

Meanwhile, core inflation, which excludes food and energy prices, is projected to rise 4.9% from a year ago as against 4.6% in October.

 Analyst at How Could it Affect EUR/USD?

Ahead of the key release, the US dollar remained well supported by the prospects for an early policy tightening by the Fed amid rising inflationary pressures. A stronger print will reinforce expectations that the Fed would adopt a more aggressive policy response to contain stubbornly high inflation. This should result in higher US Treasury bond yields and a stronger USD.

Conversely, a softer print – though seems unlikely – might do little to prompt any aggressive USD selling heading into the FOMC monetary policy meeting on December 14-15. This, in turn, suggests that the path of least resistance for the EUR/USD pair is to the downside. Nevertheless, the data is set to infuse a fresh bout of volatility in the markets and produce some meaningful trading opportunities.

From current levels, the weekly swing low, around the 1.1230-25 region, might protect the immediate downside for the EUR/USD pair ahead of the YTD low – levels just below the 1.1200 mark. Some follow-through selling will be seen as a fresh trigger for bearish traders and turn the pair vulnerable to accelerate the slide to the 1.1145 intermediate support en-route the 1.1100 round figure.

On the flip side, momentum back above the 1.1300 mark might continue to confront some resistance near mid-1.1300s. This is followed by the recent swing high, around the 1.1380-85 area touched on November 30, which if cleared decisively could prompt some short-covering move. The EUR/USD pair might then surpass the 1.1400 mark and aim to test the next relevant hurdle near the 1.1440 region.