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11.11.202407:11 Forex Analysis & Reviews: EUR/USD Weekly Preview: A Marathon of Inflation Reports Ahead

Following the "election week" in the U.S., it is a "week of inflation reports." Key indicators such as the Consumer Price Index (CPI), Producer Price Index (PPI), Import Price Index, and Retail Sales data will provide insights into consumer demand.

These releases can heavily influence the U.S. dollar, especially since the initial excitement surrounding Donald Trump's election victory has already subsided. The future head of the White House will still excite the markets with his statements, but the initial wow effect has exhausted itself. Traders will gradually shift their focus to "classic" fundamental factors, where inflation is critical. These reports will be viewed through the lens of the November Federal Reserve meeting, during which Jerome Powell mentioned the possibility of a pause in rate cuts if macroeconomic conditions warrant it. October's CPI and PPI figures could be decisive in shaping expectations for the Fed's December meeting.

Exchange Rates 11.11.2024 analysis

The EUR/USD monthly chart shows that the pair has been steadily declining since early October. After reaching its 2024 high of 1.1214 in September, the euro has faced consistent selling pressure for six consecutive weeks, recently testing the 1.06 range. The next immediate target is 1.0670 (the lower Bollinger Band line on the D1 time frame), with a primary target at 1.0550 (the lower Bollinger Band line on the MN time frame). If traders consolidate within the 1.06 range, reaching 1.0550 may only be a matter of time. However, a catalyst—an informational impulse—is needed to strengthen bearish momentum. Inflation data could serve as this driving force.

So, the "inflation report marathon" will begin on Wednesday, November 13. On this day, the U.S. will release one of its key inflation indicators, the CPI. Projections suggest the headline CPI will remain at September's level of 2.4% YoY, while the core CPI (excluding food and energy) is expected to hold steady at 3.3% YoY.

Stagnation in the CPI could signal concerns for the Fed. If inflation unexpectedly accelerates, the likelihood of a rate-cut pause in December will increase significantly.

The US will publish the PPI on November 14, another important inflation measure that may provoke increased volatility among dollar pairs. Analysts forecast an uptick in annual PPI growth to 2.2% YoY from September's 1.8%. This acceleration would mark a reversal from the previous three months of declines. The core PPI in October should remain at the September level. Most analysts say the indicator will come out at 2.8% y/y.

The Import Price Index, published on Friday, November 15, is of secondary importance but can complement the broader inflation picture. According to forecasts, Import Prices will demonstrate an upward trend in annual terms, reaching the 0.2% mark after two months of decline (in September, the indicator was in the negative zone, at -0.1%).

Preliminary projections indicate that inflation indicators will either stagnate or accelerate, supporting the greenback. If key releases such as the CPI and PPI exceed expectations, another dollar rally may be on the horizon.

Retail Sales data for October, also set for release on Friday, could bolster the dollar if results exceed forecasts. Analysts anticipate a 0.3% increase in overall sales and a 0.2% rise excluding transportation.

According to the CME FedWatch Tool, the probability of a December rate-cut pause currently stands at 36%. Should inflation show signs of acceleration, this probability could climb to 50-60% by week's end. Core inflation rose in September, strengthening the dollar before the U.S. presidential elections. If October data confirm growth in both core and headline CPI and PPI, demand for the dollar will likely surge again.

On the H4, D1, and W1 time frames, EUR/USD trades either along the lower Bollinger Band or between the middle and lower bands, remaining below all Ichimoku indicator lines, including the Kumo cloud. The first bearish target is 1.0670 (the lower Bollinger Band on W1). Breaking below this level will pave the way toward the 1.06 range and, eventually, the primary target of 1.0550 (lower Bollinger Band on the MN time frame).

*El análisis de mercado publicado aquí tiene la finalidad de incrementar su conocimiento, más no darle instrucciones para realizar una operación.

Irina Manzenko,
Analytical expert of InstaSpot
© 2007-2024
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