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Sep 12 - 11:55 AM

EUR/USD - COMMENT-US Inflation Data Key To EUR/USD Clearing Key Impediments

By Christopher Romano  —  Sep 12 - 10:55 AM

EUR/USD surged up to a one-month peak on Monday, helped by hawkish ECB comments and other bullish influences nL1N30J0OE, but it will probably need soft U.S. inflation data this week to extend the rise.

Economists expect Tuesday's report to show August headline month-on-month CPI USCPI=ECI fell 0.1%, versus 0.0% in July, with core month-on-month USCPF=ECI matching July's 0.30% result.

A downward CPI surprise would reinforce investors' recent tendency to position for a moderation in U.S. inflation through inflation-linked swaps USIL5YF5Y=R -- where a head-and-shoulders top has formed on the daily chart -- while driving U.S. yields US2YT=RR and terminal Fed rate expectations lower EDH3.

Falling U.S. interest rates could erode the dollar's yield advantage over the euro and help extend the recent trend of tighter German-U.S.
spreads US2DE2=RR, potentially driving EUR/USD above the daily cloud base and August 17 daily high, which sit just above 1.0200.

Technicals currently highlight upward risks, with daily and monthly RSIs rising and a monthly bull hammer in place for September.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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