EUR/USD at a crossroads as traders await the US CPI for the next major move

FUNDAMENTAL OVERVIEW USD:The US dollar spiked to the upside on Friday after the US NFP report showed job growth in August almost tripling the consensus estimate of 56K. The dollar gains didn’t last long, though, as most of the NFP-driven moves got faded thereafter. This happened because the market focus was not on the NFP report, but on the CPI. The market pays attention to the data that the central bank is focused on, and the Federal Reserve is currently focused on inflation. In fact, just a day before the NFP report, Fed’s Waller mentioned that he would support keeping interest rates unchanged at the upcoming FOMC meeting, but a hot CPI would make him consider a rate hike. This week is all about the US CPI data. Unless, we get some surprising breakthrough in US-Iran relations, the price action will likely remain mostly rangebound or a bit positive for the greenback as traders at some point might start hedging into the CPI release. A soft or in-line CPI will likely weaken the dollar as Fed’s Waller mentioned that he won’t consider a rate hike unless we get a hot CPI. Conversely, an upside surprise in core monthly inflation data will likely trigger another rally on a hawkish repricing.  EUR:On the EUR side, the ECB is widely expected to hike interest rates by 25 bps at the upcoming meeting, bringing the policy rate to 2.50%. This was also confirmed by "ECB sources" which reported that the central bank is ready to raise interest rates in September but added that there's little appetite to signal further tightening afterwards.This means that the current market pricing of 44 bps of tightening by year-end might be mispriced and the euro could suffer a little if the economic data starts weakening. Nevertheless, the EUR/USD pair will be driven mainly by the US dollar side for now, as that’s where we are seeing more volatility in expectations. EURUSD TECHNICAL ANALYSIS – DAILY TIMEFRAMEOn the daily chart, we can see that EURUSDis consolidating above the support zone around the 1.1560 level. If we get another pullback into the support, we can expect the buyers to step in with a defined risk below the support to keep targeting the 1.18 handle. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the major 1.14 support next.EURUSD TECHNICAL ANALYSIS – 4 HOUR TIMEFRAMEOn the 4 hour chart, we can see the price action has been mostly rangebound after the hawkish Warsh speech and we got a couple of spikes due to Fed’s Waller comments and the strong NFP report. The 1.1660 level might therefore act as resistance and define the 1.1560-1.1660 range. The buyers will want to see the price breaking above the resistance to pile in for a rally into the 1.18 handle. The sellers, on the other hand, will look for a break below the support to position for a drop into the 1.14 support next. EURUSD TECHNICAL ANALYSIS – 1 HOUR TIMEFRAMEOn the 1 hour chart, there’s not much we can add here as the choppy price action will likely persist until the US CPI release. The red lines define the average daily range for today.UPCOMING CATALYSTSOn Thursday, we get the US PPI report and the US Jobless Claims figures. On Friday, we conclude the week with the US CPI report. This article was written by Giuseppe Dellamotta at investinglive.com.