Dollar Extends Winning Streak as CPI Takes Center Stage

EUR/USD holds near 1.1200 as bearish momentum meets oversold conditions.

The US Dollar Index (DXY), which measures the dollar’s strength against a basket of six other major peers, ended its fourth consecutive week of gains, marking the longest streak since 2025. US Treasury yields remained elevated, providing fuel for the dollar’s rally, but momentum was tempered by President Trump’s pledge to stop military attacks on Iran until the midterm elections.

Oil prices eased after Trump’s announcement, but the market consensus is still that the Federal Reserve (Fed) will have to keep interest rates elevated. However, a rate hike at the October meeting is not expected, as the CME FedWatch tool shows only a 17% probability for that to happen. For December, the chances of a 25 bps hike are 67%, according to the same source.

This week’s Consumer Price Index (CPI), which is the main gauge of inflation in the US, will provide clues regarding the Fed’s interest rate trajectory. However, a December rate hike is almost fully priced in, so the CPI would have to deliver a massive surprise for the odds to change significantly.

Economic Calendar Highlights

The US Consumer Price Index will be released on Wednesday at 12:30 pm GMT, showing the changes in the price that consumers pay for a basket of goods and services. The month-on-month Core CPI is expected to show a change of 0.2% from the previous 0.3%, but this is the only version with a possible drop. All other versions (yearly Core CPI, monthly CPI, and yearly CPI) are expected to show that inflation is accelerating.

On Thursday at 12:30 pm GMT, traders will focus on the US Producer Price Index (PPI), which has inflationary implications because a higher producer price will eventually be passed on to the consumer. The US Core Retail Sales will be released at the same time, showing the change in the total value of sales made at the retail level, excluding automobiles.

Technical Outlook – EUR/USD

The pair is treading water near the support level at 1.1200, and it looks like momentum is starting to fade. After breaking below 1.1600, the price moved straight down, without any significant pullback. Now the RSI is moving up after visiting the oversold area, which increases the probability of a pullback.

The 50-day MA (blue line) is about to cross below the 100-day MA (yellow line), and if that happens, all three moving averages will be positioned for a downtrend. The US Dollar strength is likely to continue, unless something changes on the macro scene; however, this does not exclude a potential move up in the form of a pullback.