When is US CPI report and how could it affect EUR/USD?

US CPI Overview

Wednesday's US economic docket highlights the release of the US consumer inflation figures for December, scheduled later during the early North American session at 13:30 GMT. The headline CPI is expected to rise by 0.4% during the reported month, up from 0.2% in November. The yearly rate is also anticipated to have edged higher to 1.3% from the previous month's reading of 1.2%. Conversely, the core CPI (excluding energy and food costs) is anticipated to have risen 0.1% MoM in December as against 0.2% previous and hold steady at 1.6% on yearly basis.

How could it affect EUR/USD?

The recent US dollar recovery from the lowest level in nearly three-year was exclusively sponsored by a strong rally in the US Treasury bond yields. Given that Democrats now have a majority in the House of Representatives and the Senate, hopes that President-elect Joe Biden would push for a multi-trillion-dollar stimulus package sparked a bond-market selloff. Hence, any market reaction to the data is more likely to be short-lived.

Ahead of the key release, the USD was back in demand and dragged the EUR/USD pair back closer to multi-week lows set earlier this week. A stronger-than-expected reading – though is unlikely to be a major game-changer – might provide an additional boost to the greenback. Conversely, a weaker reading should reinforce expectations that the Fed will keep interest rates lower for a longer period and force the USD bulls to take a brief pause. Nevertheless, the path of least resistance for the pair remains on the downside.

Meanwhile, Yohay Elam, FXStreet's own Analyst offered a brief technical outlook for the EUR/USD pair: “Euro/dollar continues suffering from downside momentum on the four-hour chart and remains capped by the 100 and 200 Simple Moving Averages. It is still holding onto the 200 SMA and more importantly, the critical support line at 1.2125. That level is a triple bottom after cushioning EUR/USD twice in December and now in early January as well.”

Yohay also provided important technical levels to trade the major: “Below 1.2125, the next levels to watch are 1.21, 1.2075, and 1.2160. Resistance awaits at the daily high of 1.225, followed by 1.2240, which is where the 50 SMA hits the price. Further above, 1.2275 and 1.2310 await the currency pair.”

Key Notes

  •  US CPI December Preview: Markets take the Fed's cue and look away

  •  EUR/USD Forecast: Euro set to resume falls after short-lived bond boost, critical support at risk

  •  EUR/USD Price Analysis: Decent support lines up near 1.2130

About the US CPI

The Consumer Price Index released by the US Bureau of Labor Statistics is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The purchasing power of USD is dragged down by inflation. The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally speaking, a high reading is seen as positive (or bullish) for the USD, while a low reading is seen as negative (or Bearish).