Can EURUSD Breakout On US CPI?

USD Downside RisksToday’s US CPI release will be pivot for FX markets near-term. While a further .25% hike from the Fed is widely expected as the base case scenario for the July FOMC, expectations have shifted beyond this month. With a less dovish outlook voiced by some Fed members recently and with jobs data cooling, the market is anticipating that the Fed will likely return to a pause after this next hike. With that in mind, today’s inflation reading will be used as a key barometer for assessing this likelihood. If CPI is seen falling further, this should reinforce the view that the Fed will pause after hiking in July, leading USD lower near-term.Today’s ForecastsLooking at the data forecasts for today. The market is looking for headline CPI at 3.1% YoY down from 4% prior. In terms of monthly numbers, headline is forecast at 0.3%, up from 0.1% while core is forecast at 0.3% down from 0.4%. If confirmed, these readings should keep USD under pressure, allowing EUR room to break higher near-term. Alternatively, any unexpected upside today might well upset current projections leading to sharp short covering in USD.Technical ViewsEURUSDFollowing plenty of sideways action over recent weeks, EURUSD is now making a more defined move and looks likely to test the 1.1126 level in coming sessions along with the retest of the underside of the broken bull channel. This is a key pivot for the market and a break higher here will open the way for a move up to 1.1503 longer-term.