**U.S. Dollar Surges After CPI Report: Key Levels Across EUR/USD, USD/JPY, GBP/USD, and USD/CAD**
*By Matt Weller, FOREX.com Analyst — Adapted and Expanded*
The U.S. dollar experienced a significant breakout movement following the release of the latest Consumer Price Index (CPI) report, which showed higher-than-expected inflation data. This strong inflation reading has fueled market speculation that the Federal Reserve may keep interest rates elevated for a longer period than previously anticipated. In turn, the U.S. dollar has benefited, recording notable gains across major currency pairs including EUR/USD, USD/JPY, GBP/USD, and USD/CAD.
Below is an in-depth analysis of the CPI data’s release, the market reaction, and key technical levels across four major dollar pairs. This article builds on the original insights from Matt Weller at FOREX.com while also incorporating supporting information from additional sources.
## U.S. CPI: Key Takeaways
The latest U.S. Consumer Price Index data revealed the following:
– **Headline CPI for April** rose 0.4% month-over-month, beating estimates of 0.3%
– **Core CPI**, which excludes food and energy, also increased by 0.4% on a monthly basis
– On a yearly basis, **headline inflation stood at 3.4%**, while **core inflation came in at 3.6%**
– Persistent inflation pressures, particularly in service sectors and shelter costs, were key drivers
The readings indicate resilient inflation, raising questions about when and if the Federal Reserve will initiate its much-anticipated interest rate cuts. According to CME FedWatch data, prior to the CPI release, traders were pricing in a September rate cut. Afterward, those expectations decreased noticeably, with markets now projecting fewer reductions in 2024.
## U.S. Dollar Breakout: Driving Forces
The U.S. dollar rally post-CPI was underpinned by:
– **Shifting Federal Reserve Expectations**: Higher inflation may delay rate cuts; traders now expect the Fed to stay on hold longer.
– **Strong U.S. Economic Data**: Beyond inflation, the U.S. economy continues to show strength in consumer spending and the labor market.
– **Comparative Central Bank Divergence**: While other central banks such as the European Central Bank (ECB) may already be pivoting toward easing, the Fed remains hawkish by comparison.
As a result, the U.S. Dollar Index (DXY) broke above its 200-day moving average, a critical technical level indicating a possible bullish shift in the medium-term trend.
## Technical Analysis and Outlook: Major USD Pairs
Let’s look at how the post-CPI action impacted several key currency pairs. Technical levels, trend behaviors, and chart patterns offer insight into where these pairs might head next.
### EUR/USD: Targeting New Lows
One of the biggest casualties of the USD surge was the euro.
– **EUR/USD dipped below 1.0800**, breaking previous support levels around 1.0830
– The move signaled a resumption of the bearish trend that started in late December
– The pair is now targeting the psychological level at **1.0700**, followed by **1.0650** as the next major support
**Bearish Technical Signals:**
– The 50-day and 100-day moving averages are sloping downward
– The MACD histogram has crossed into negative territory
– RSI (Relative Strength Index) also broke below 50, signaling waning bullish momentum
**Key Resistance Levels:**
– 1.0830 (previous support turned resistance)
– 1.0900 (psychological barrier and recent high)
Unless upcoming Eurozone data surprises to the upside or the Fed shifts its rhetoric, EUR/USD remains poised to test lower support zones.
### USD/JPY: Multi-Decade Highs Revisited
The yen
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