Where is the U.S. Rate Going? CPI Data Ahead

EUR/USD: Bears Still in Charge Amid Signs of Bullish Pressure

The U.S. interest rate remains the hottest topic in the Forex markets and although just a few weeks ago, its path was somewhat certain, now things are looking blurry again.

The majority of market participants expected a rate cut at the March meeting but it turns out that the probability of that happening now is a mere 16%, according to CME’s FedWatch tool. A major role in this shift was played by the U.S. jobs data: at the beginning of the month, the U.S. Non-Farm Payrolls exceeded expectations by almost double, showing that employment is still red hot.

This takes us to the next major indicator, which is due for release this week: the Consumer Price Index (CPI), which is a direct measure of inflation and the main gauge the Fed uses when deciding whether to raise, cut, or hold the rates.

Economic Calendar Highlights

Last week was a very slow one in terms of economic releases but that is not the case for this week. The first release of the week is also the most important: the CPI mentioned above. It is set for release Tuesday at 1:30 pm GMT and is expected to show 2.9% for the year-on-year change. This would be a hefty drop from the previous of 3.4%. The monthly numbers are not expected to move much, with the headline figure dropping from 0.3% to 0.2% and the Core version remaining unchanged at 0.3%.

Thursday at 8:00 am GMT, ECB President Lagarde will testify before the Committee on Economic and Monetary Affairs, and later in the day, at 1:30 pm GMT we will take a look at the U.S. Retail Sales and the Empire State Manufacturing Index.

The U.S. PPI and Core PPI will come out Friday at 1:30 pm GMT, followed at 3:00 pm GMT by the UoM Consumer Sentiment survey. These are not known to be major market movers unless there’s a big difference between forecast and actual.

Technical Outlook – EUR/USD

The pair is currently trading at 1.0790 after a brief drop below the support at 1.0775. It looks like the Relative Strength Index is starting to rally, indicating that bullish pressure is starting to rise. The first barrier in front of rising prices is represented by the bearish trend line seen on the chart below. A break would probably bring in additional buyers, sending the price even higher.

If the mentioned hurdle is surpassed, the next barrier will be the 50-day Moving Average but we must take into consideration the key economic indicators released throughout the week as they could easily influence the trajectory of US Dollar pairs.