Markets are expecting to see a very busy New York session on Wednesday as investor focus switches back from geopolitics to fundamentals with key US inflation data due out. The September CPI data is due out early in the session and traders are expecting plenty of volatility around the update as it is one of the last pieces of key data due out before the Fed’s next meeting on October 28th.
The market has seen huge volatility in Fed rate expectations since the last meeting with odds originally driving up to over a 70% chance of another 25-basis point hike before weaker data prints and much less hawkish rhetoric has brought expectations down to around 20% at the moment. Market expectation is for the headline numbers to show a 0.6% month-on-month and a 3.6% year-on-year gain while the Core data is expected to show a 0.2% month-on-month increase and a 2.5% year-on-year number. Anything lower than these prints will likely lock in the ‘hold’ at the October meeting and may take out expectations of another hike this year altogether, while higher numbers would see a more hawkish jump in expectations to take the next meeting back to a very ‘live’ event.
The EURUSD has been under significant pressure over the last few weeks and is now trading at vulnerable levels on the Daily chart near annual lows and any significant deviation from expectations in this data should see some big moves in the pair. A stronger result will see the dollar push higher to greater levels and push the Euro down towards the key psychological level of 1.1000, while a weaker number could see a sharp correction of recent moves and push it back into recent ranges.
Resistance 2: 1.1545 – Long Term Trendline Resistance
Resistance 1: 1.1355 – Trendline Resistance
Support 1: 1.1551 – 2026 Low
Support 2: 1.1064 – May 25 Low
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