EUR/USD: 1.15 the figure at risk, but US CPI will be key

EUR/USD has dropped as the dollar continues to pick up a bid ahead of the key CPI release on Friday in US markets - currently, the DXY is up the highest levels for the day, within the range of 95.0250-95.6110 for a fresh 2018 high close, while US 10-years are dropping from 2.96%-to 2.92%. EUR/USD is currently trading at 1.1532, but recently posted a fresh low of 1.1525.

The dollar is well bid despite the Treasury yields slumping after a soft PPI and easy T-bond auction while the Atlanta Fed trimmed the U.S. Q3 GDP growth forecast to 4.3 pct. There has been a sharp bearish turn for emerging market currencies lead by the Turkish Lira (no rate hike yet) and US/Turkish relations hitting record lows over the detained US pastor on espionage charges, (and now Russian US sanction noise), which are propelling the dollar ahead and along its northerly trajectory which picked up the pace in April earlier this year after a sluggish prior few months. At the same time, the EZ asset classes are being pressured by Italian doom and gloom which is weighing on the single currency. In the European session today, there was chatter that the ECB is speculating intensifying risk from tariffs and protectionism.

Fed-dove-Evans turns hawkish, boosting the dollar

The key driver for the dollar stays with the US monetary and fiscal policy advantage that it holds and Fed's (-dove-) Evans was more hawkish today seeing one or two more rate hikes in 2018 as reasonable. The Chicago Fed chief said that fiscal stimulus was reducing unemployment and argued that higher rates may be needed to restrict economic growth and to combat the effects of recent fiscal stimulus on the U.S. economy.

As Bloomberg wrote, "Evans, who has long been considered one of the most dovish officials at the U.S. central bank, said “it would not surprise me at all if we make a judgment to move to a somewhat restrictive setting,” citing roughly half a percentage point above his 2.75 percent estimate of neutral."

Eyes will now turn to the US CPI - here is how to trade it

Yohay Elam, analyst and contributor for FXStreet, offered a Buy/Sell scenario that can be read in full here: How to trade the US Inflation data with EUR/USD.

Selling EUR/USD Scenario:

• Tradable Negative Trigger: +1.581 deviation (2.4183 %) [BUY Pair]

• Key Support Level: 1.1508

Buying EUR/USD Scenario:

• Tradable Positive Trigger: -1.3363 deviation (2.2%) [BUY Pair]

• Key Resistance Level: 1.1750

EUR/USD levels

Valeria Bednarik, chief analyst at FXStreet explained that 

the EUR/USD pair is now at risk of re-testing its yearly low, (1.1508 20th June), and even fell further:

"The 4 hours chart shows that the pair broke below its 20 SMA, accelerating its decline afterward, while technical indicators head south almost vertically, with the RSI now nearing oversold readings. Should the 1.1500 level give up, the pair could extend its decline down to the 1.1440/60 region, the next relevant static support area."