Longest U.S. Shutdown Threatens Another Major Release: CPI

Lack of U.S. data pressures the dollar, but euro momentum is fading near 1.1600 resistance.

The U.S. government shutdown is officially the longest in history, and now two jobs reports have fallen victim to it. The latest Non-Farm Payrolls report was supposed to come out last Friday, but the release was scrapped.

The main gauge of inflation, the Consumer Price Index (CPI), is also in jeopardy, with its release likely being cancelled unless the government reopens operations. But even if the shutdown ends, government officials did not gather any data during this period, so the CPI accuracy will suffer.

Officials and investors can get a feeling of what’s going on through reports on the private sector jobs market, such as the ADP Non-Farm Employment Change. However, inflation data alternatives are scarcer, so the Fed is flying blind in this regard. The December rate cut is still a hotly debated topic, but according to the CME FedWatch tool, there’s a 67% chance of a 25 bps rate cut at the December meeting.

Economic Calendar Highlights

On Wednesday at 3:20 pm GMT, FOMC Member Waller will participate in a discussion at the Federal Reserve Bank of Philadelphia Fintech Conference. Audience questions are expected, and given the lack of data, the event may be more impactful than usual.

The Consumer Price Index (CPI) and Core CPI appear on Thursday’s calendar, but these releases will likely be cancelled due to the U.S. government shutdown. The Retail Sales and Core Retail Sales are marked as Tentative on Friday’s calendar. The focus of the week will likely be the government shutdown and any clues about when it is coming to an end.

Technical Outlook – EUR/USD

The pair is respecting S/R levels thus far, and last week we saw a perfect bounce off the bearish trend line and a rejection at 1.1600 resistance. Trend lines can still act as support or resistance after they are broken, and that’s exactly what we saw last week and in mid-October. The bearish trend line rejected the price twice and acted as picture-perfect support.

The dollar remains under pressure from U.S. uncertainty, but the euro’s uptrend looks exhausted. Given this situation, the pair is likely to remain choppy and without a clear direction, at least until the U.S. government activities restart.

The main levels to watch are 1.1600 as resistance, which was already tested last week, and the bearish trend line discussed earlier. A break of the trend line will send the price closer to 1.1400; a break of 1.1400 would mean that a downtrend is building.