U.S. CPI Comes Out With 9-Day Delay. Better Late Than Never?


EUR/USD in Limbo. Inflation Data to Provide Some Clarity

The US Dollar is feeling the effects of the government shutdown that choked the economic data stream, leaving the market in the dark. Some pundits see the shutdown extending into November, and if the forecast becomes reality, this will become the longest government shutdown. In 2018, the government halted operations for 34 days. The current shutdown will surpass the 2018 shutdown if operations do not resume by November 4.

The US Dollar Index (DXY), which measures the dollar’s performance against a basket of 6 major counterparts, closed last week at 98.54 after reaching a high of 99.35 during the week. Fed Chair Jerome Powell gave strong hints that another rate cut is in the books. According to the CME FedWatch tool, currently there is a 99.0% probability of a 25-bps cut at the October 29 meeting, and a 94.0% probability of another cut of the same size at the December 10 meeting.

The trade war is still making headlines, but there was a shift in President Trump’s stance as he signalled that the 100% tariffs on Chinese goods would not be sustainable. A meeting between Trump and Xi Jinping is scheduled in two weeks’ time in South Korea, but the situation is still volatile, and a lot can happen until the meeting.

Economic Calendar Highlights

The first few days of the week will be uneventful in terms of macroeconomic data, but ECB president Lagarde will speak on two occasions, once on Tuesday at 11:00 am GMT and again on Wednesday at 12:25 pm GMT. The speeches may create volatility due to the lack of other releases.

Friday, we will finally get some insights into the U.S. inflation with the release of the U.S. Consumer Price Index (CPI) and Core CPI. The release was postponed for 9 days due to the government shutdown. The Core CPI is expected to increase 0.3% (month-over-month data), while the headline figure is expected to show a 0.4% increase. The releases are scheduled for Friday at 12:30 pm GMT. Also on Friday, we will get the German Manufacturing and Services PMIs at 7:30 am GMT, followed an hour later by the same PMIs for the British economy, and at 1:45 pm GMT by the United States PMIs.

Technical Outlook – EUR/USD

The pair went as low as 1.1550 last week but then recovered and moved into the resistance at 1.1700. The US Dollar showed some resilience during Friday’s trading session, but overall, the pair is range-bound. The uptrend is exhausted after hitting a ceiling at 1.1900, but on the other hand, the US Dollar is weakened by the lack of macroeconomic data and the trade war jitters. The result is a choppy trading environment without a clear bias.

A move above the recent resistance at 1.1700 would open the door for a climb to the upper Bollinger Band. However, since we already saw a failed attempt to break 1.1700, maybe a test of the bearish trend line is next. Expect choppy price action, at least until the U.S. inflation data comes out.