EUR/USD testing key resistance as US Dollar slides ahead of US CPI

The EUR/USD has run up high in a short squeeze as traders look ahead to US CPI for clues concerning the future path of the US economy.

The EUR/USD has been testing a critical high in the midday session on Wall Street following what had been a positive start for the day for the US dollar. At the time of writing, the EUR/USD pair is trading up high for the day at 1.0719 and has gained 0.4% so far following a rally from the Asian lows of 1.0655 within a 93 pip.

Fundamentally, it’s all about the Fed and positing in front of the key data event for the week ahead in the United States of America’s Consumer Price Index with Retail Sales as a sideshow the following day. There are mixed outlooks for the CPI data with some analysts anticipating a hawkish outcome while others a dovish one.

Federal Reserve speakers have already been out of the gate this week with hawkish rhetoric. Fed Governor Michelle Bowman said the following:

“I expect we’ll continue to increase the federal funds rate because we have to bring inflation back down to our 2% goal and in order to do that we need to bring demand and supply into better balance,” Bowman said during an American Bankers Association conference in Florida.

Once at a sufficiently restrictive level, interest rates will then need to be held for “some time” to restore price stability, she added.

Bowman rounded off by saying that a very strong labour market alongside moderating inflation meant a so-called economic ‘soft landing’ remains possible.