EUR/USD Forecast: Hot US CPI Puts 1.1169 Support in Focus

The euro received temporary support from September inflation data in Germany, the eurozone's largest economy. Both the Consumer Price Index and the EU-harmonised inflation measure accelerated from 2.9% to 3.3% year-on-year, while wholesale price growth increased from 6.8% to 8.7%. Thus, price pressures remain above the European Central Bank's (ECB) 2.0% target and continue to strengthen, potentially prompting officials to consider further monetary policy tightening. Nevertheless, policymakers remain cautious in their comments. Yesterday, ECB Chief Economist Philip Lane confirmed that higher energy prices have not yet generated significant second-round inflationary effects, particularly in wage growth. He also noted that the spread of artificial intelligence (AI) technologies could weaken workers' bargaining power and limit wage increases, as concerns about potential job displacement may discourage employees from demanding higher compensation.

Today, investors received the key macroeconomic release of the week — September US inflation data, published at 14:30 (GMT+2). The Consumer Price Index accelerated from 3.4% to 3.7% year-on-year, exceeding forecasts of 3.6%, while core inflation rose from 2.4% to 2.6%, also surpassing expectations. Consumer prices increased by 0.6% month-on-month, compared with 0.4% in August. The stronger-than-expected figures have reinforced expectations of further monetary policy tightening by the Federal Reserve and supported the US dollar. Earlier, Boston Federal Reserve President Susan Collins confirmed that another interest rate increase might be appropriate before the end of the year, while New York Fed President John Williams also acknowledged the possibility of additional tightening, although he emphasised that there was no need for immediate action. Meanwhile, Federal Reserve Governor Christopher Waller noted that US inflation expectations remain well anchored despite the recent rise in Treasury yields. Following today's inflation report, the probability of a 25-basis-point interest rate increase at the Fed's October meeting rose from approximately 22.1% to 43.7%, according to the CME FedWatch Tool, while expectations of further tightening by December also strengthened.

As discussed in our previous EUR/USD forecast, the euro remains under pressure from persistent European economic uncertainty and the stronger US dollar, while incoming inflation data continue to shape expectations regarding Federal Reserve and ECB monetary policy.

Support and resistance levels

The trading instrument continues to move within a long-term downward trend and is approaching 1.1169 (Murray level [–1/8]). A sustained break below this level could open the way toward 1.0986 (Murray level [–2/8], W1) and 1.0850 (61.8% Fibonacci retracement). However, if the price breaks above the middle Bollinger Band at 1.1352 (Murray level [2/8]), growth may resume toward 1.1535 (Murray level [5/8], 23.6% Fibonacci retracement), 1.1718 (Murray level [8/8], upper boundary of the descending channel) and 1.1840 (Murray level [+2/8]).

Technical indicators maintain a sell signal: Bollinger Bands are turning downward, the MACD histogram is extending further into negative territory, while Stochastic has stabilised near the oversold zone.

Resistance levels: 1.1352, 1.1535, 1.1718, 1.1840.

Support levels: 1.1169, 1.0986, 1.0850.

EUR/USD trading scenarios and exchange rate forecast

Short positions may be opened below 1.1169, with targets at 1.0986 and 1.0850 and a stop-loss at 1.1270. Estimated implementation period: 5–7 days.

Long positions may be opened above 1.1352, with targets at 1.1535, 1.1718 and 1.1840 and a stop-loss at 1.1230.