EURUSD, DXY Forecast: CPI Results to Test DXY Strength

Key Events

US CPI (Core, m/m, y/y)
FOMC Minutes Meeting indicate no major concerns for US economy
Technical Analysis DXY, EURUSD

Source: CME Fed Watch Tool

The latest FOMC minutes reflected confidence in the US economy, with no significant concerns about its health. Recent non-farm payroll data further alleviated fears about the labor market, reinforcing the market's expectation of a 25 bps rate cut in November. This, along with geopolitical tensions and the upcoming US elections, has kept the DXY on stable ground, supported by safe-haven demand.

Technical Analysis

DXY Forecast: 3Day Time Frame – Log Scale

Source: Tradingview

The DXY has rebounded strongly from its Dec 2023-July 2023 lows, thanks to the resilience of the US economy. Within the parallel channel connecting the declining highs and lows from 2023 to 2024, the DXY’s rebound remains solid near the mid-channel level ahead of the US CPI results.

The RSI on the 3-day chart is holding steady at 53, above the neutral 50 level, indicating that there’s still room for upward momentum. The DXY is currently hovering just below the 103 mark, and safe-haven demand could push it towards 104 and 105, especially with geopolitical tensions and the expectation of a more cautious easing approach from the Fed.

On the downside, the consolidation zone between 101.50 and 100.50, which extended through August and September, is expected to provide strong support before confirming any bearish scenario for the DXY.

EURUSD Forecast: 3Day Time Frame - Log Scale

Source: Tradingview

As the DXY eyes the 103 zone, the EURUSD is approaching critical support at 1.09-1.0870, sitting on the upper edge of the pair’s consolidation range. Both the DXY and EURUSD are nearing pivotal levels ahead of the US CPI report.

From a technical standpoint, the EURUSD is nearing a significant support level, both in terms of the chart and the RSI. A drop below 1.0870 could invalidate the bullish outlook, leading to a potential retest of the 1.0780 and 1.0680 levels before confirming a deeper downtrend for the pair.

On the upside, resistance at 1.10 and 1.12 will be crucial to confirm a sustained bullish reversal. Following the CPI results, attention will shift towards next week’s ECB Monetary Policy meeting, with expectations of a rate cut increasing due to cooling inflation figures in Europe, adding a bearish tone to the EURUSD.

--- Written by Razan Hilal, CMT on X: @Rh_waves

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.