Dollar Strengthens Ahead of US CPI Report Amid Rising Oil Prices
The EUR/USD edged lower on Friday ahead of the US CPI report, marking its second day of decline. The pair has been consolidating in a tight range following the ECB's hawkish rate hike, which failed to deliver the expected breakout.
From a technical analysis perspective, the balance of risks remains tilted to the downside due to the energy situation. Key support levels come in between 1.1560 and 1.1580, while resistance is around 1.1635/40 area where the triangle pattern meets the 200-day average.
The dollar has found renewed support in recent days, driven by rising oil prices, firmer inflation expectations, and increased pressure on bond yields. The US Treasury's latest buyback programme suggests that investors do not expect aggressive suppression of borrowing costs from Washington.
The upcoming CPI report is expected to show a 0.4% month-on-month increase in headline inflation, taking the annual rate to 3.4%, while core CPI is forecasted to ease slightly to 2.4%. A benign CPI reading would provide relief to investors, but a meaningful upside surprise could have a larger market impact.