When will be the Consumer Price Index report and how could it affect EUR/USD?

The CPI inflation data is slated for release at 12:30 GMT, on May 10. A below-forecast reading, especially in the monthly core inflation, could push back against the market expectations that the Fed could return to tightening later this year after skipping at the June meeting.

Last week’s mixed US Nonfarm Payrolls (NFP) and wage inflation data left markets scouting for more cues on the Fed’s interest rates outlook. The US economy added 339K jobs in May vs. 190K expected and the upwardly revised previous reading of 294K. The Average Hourly Earnings, the wage inflation component in the jobs report, softened to 4.3%, while the Unemployment Rate ticked higher to 3.7% last month, compared with expectations of 3.5%.

Softer-than-expected CPI inflation data will reinforce dovish Fed expectations, adding extra legs to the ongoing correction in the US Dollar. The EUR/USD pair should therefore extend its renewed upside toward the 1.0800 level and beyond. Conversely, surprisingly hot inflation data from the United States could rescue the US Dollar bulls, as it will bring Fed rate hike bets back on the table. Irrespective of the outcome, the US CPI data is likely to generate intense volatility around the US Dollar, eventually impacting the main currency pair.

Meanwhile, Dhwani Mehta, Asian Session Lead Analyst at FXStreet, offers a brief technical outlook for the major and explains: “EUR/USD is approaching the horizontal 100-Daily Moving Average (DMA) at 1.0806. Meanwhile, the 14-day Relative Strength Index (RSI) is looking to pierce the midline from below, suggesting that the tide could turn against Euro bears.” 

Dhwani also outlines important technical levels to trade the EUR/USD pair: “On the upside, EUR/USD buyers need a sustained break above the 100 DMA at 1.0806, above which the May 22 high of 1.0831 could be put to test. Further up, doors will open toward the 1.0900 barrier. Alternatively, acceptance below the 21 DMA at 1.0752 will trigger a fresh downswing toward the 1.0700 round figure. The last line of defense for Euro bulls is seen at the previous week’s low of 1.0667. “