The article “Pre-CPI USD Price Action Setups: EUR/USD, GBP/USD, USD/JPY” was originally authored by Matt Weller, CFA, CMT, and published on Forex.com. The original piece presented a detailed technical outlook on three major currency pairs—EUR/USD, GBP/USD, and USD/JPY—leading into the release of the US Consumer Price Index (CPI) data. Below is an expanded and rewritten version that maintains the essence of Weller’s insights while offering deeper analysis and market context.
Title: Comprehensive Technical Outlook on USD-Based Pairs Ahead of Key US CPI Release
Author: Adapted from Matt Weller, CFA, CMT | Forex.com
As the financial markets gear up for the latest US Consumer Price Index (CPI) release, the US Dollar (USD) is under intense scrutiny. Over the past few trading sessions, risk-sensitive currency pairs have shown heightened sensitivity to any cues that could point to either sticky inflation or further softening. The US Federal Reserve remains data-dependent in its monetary policy outlook, and the CPI print will be a critical component in determining interest rate trajectory and timing.
This report focuses on technical setups for three high-impact USD pairs: EUR/USD, GBP/USD, and USD/JPY. The article provides traders with key levels to watch, a breakdown of actionable chart patterns, trend dynamics, and the likely price paths contingent on the CPI data’s implications.
Macro Backdrop Ahead of CPI
Markets are currently split on expectations as to when the Fed might pivot or pause its rate hike cycle. While inflation has shown signs of deceleration, it’s still above the Fed’s comfort threshold.
Key considerations include:
– The headline CPI year-over-year is expected to hold around 3.4 percent
– Core CPI—a key measure excluding food and energy—is forecast at about 3.5 percent
– Market pricing for a Fed rate cut remains fluid, with expectations shifting between Q3 and Q4 of 2024
– Labor market data has shown ongoing resilience, which may reinforce a ‘higher for longer’ rate stance
In this environment, the CPI print has the power to catalyze decisive moves in the USD and major currencies. Traders should be prepared for volatility, especially given recent tight trading ranges.
EUR/USD Technical Setup
The EUR/USD pair has been consolidating underneath key technical barriers, showing resilience amid broader USD strength.
Key technical observations:
– Pair has found interim support near the 1.0700 handle multiple times in recent weeks
– Resistance is seen around 1.0785, corresponding to the 38.2% Fibonacci retracement of the January to April decline
– The price continues to oscillate around the 50-day simple moving average (SMA), indicating indecision
Possible Scenarios:
1. Bullish Break:
– A break and close above 1.0785 would open the door to higher levels, potentially targeting the 1.0900 psychological level
– Momentum indicators such as RSI and MACD are neutral to slightly bullish, suggesting potential room for upside
– A dovish CPI print could serve as a fundamental catalyst, weakening the USD and reinforcing gains in EUR/USD
2. Bearish Rejection:
– Failure to break through resistance followed by a move below 1.0700 would indicate sellers are regaining control
– Next downside targets include the 1.0635 area, which coincides with recent swing lows
– A surprise uptick in CPI would confirm sticky inflation and harden expectations of “higher for longer” Fed policy, strengthening the USD
Additional Technical Levels:
– Immediate resistance: 1.0785
– Major resistance zone: 1.0850–1.0900
– Immediate support: 1.0700
– Next support level: 1.0635
GBP/USD Technical Setup
Sterling has been a relative outperformer among G10 currencies against the USD for much of 2024.
Explore this further here: USD/JPY trading.