Danske Research discusses EUR/USD outlook ahead of net week's US CPI report.
" EUR/USD has trended higher the past 1-2 month with some brief setbacks. The strong ISM service release yesterday led to another set back from close to 1.06 and down below 1.05. The question now remains whether the market discounted too much negativity with respect to the US economy in EUR/USD or whether this set back proves to be short lived before the trend higher continues," Danske notes.
"If inflation expectations are high in the University of Michigan survey due on Friday and if CPI inflation next week surprise, then we think the market would be willing to extend the drop in EUR/USD heading into the FOMC meeting," Danske adds.