On the eve of the "data triple-hit": Euro holds 1.17, US dollar waits for the referee to blow the whistle
2025-09-10 19:54:06
On Wednesday (September 10), the Euro/Dollar (EUR/USD) fluctuated slightly around the 1.1700 level in pre-market trading. Geopolitical turmoil on Europe's eastern flank and upcoming US inflation data dampened risk appetite, leading to a "news-driven, data-driven" exchange rate pattern. Market focus on US PPI (Wednesday) and CPI (Thursday) has made traders cautious in their directional decisions. Meanwhile, news that Poland shot down a suspected Russian drone near its border with Belarus has intensified hedging demand and created additional upward pressure on the euro.
1) The latest consensus on inflation forecasts indicates that the US PPI is expected to decline significantly from 0.9% in July to 0.3% on a monthly basis, remaining at 3.3% year-on-year. The core PPI is projected to rise to 0.3% on a monthly basis and 3.5% on a year-on-year basis, down from the previous 0.9% and 3.7% respectively. Regarding the CPI, the headline price index is expected to rise from 0.2% to 0.3% on a monthly basis in August, rising from 2.7% to 2.9% year-on-year. The core CPI is projected to remain at 0.3% on a monthly basis and 3.1% year-on-year. With the Federal Reserve's interest rate meeting approaching, these two data sets are the final pieces of the puzzle in assessing the pace of monetary easing. If both producer and consumer prices strengthen, the market will rekindle the specter of stagflation, characterized by "sticky inflation and slowing demand." If both decline modestly, this would confirm the baseline for a "soft landing" and gradual rate cuts.
2) Labor Market Repricing: The U.S. Bureau of Labor Statistics (BLS) disclosed on Tuesday that nonfarm payrolls for the first 12 months of March 2025 were revised down by 911,000 from the previous estimate. This significant revision reinforces the view that the labor market is cooling more rapidly. The market has therefore almost locked in a 25 basis point rate cut next week, while leaving the possibility of a 50 basis point "step up" on the table. For the foreign exchange market, if marginal slowing inflation coincides with cooling employment, the dollar's interest rate premium will weaken, favoring a temporary rise in the euro. Conversely, if inflation rekindles, the dollar will find renewed support from both safe-haven assets and interest rates.
3) European Factors: While reports that Poland shot down a suspected Russian-made drone near its border had limited immediate market impact, concerns about escalating friction within NATO's periphery inevitably heightened risk aversion, creating a negative sentiment for the euro. On the policy front, the European Central Bank is expected to remain on hold on Thursday, keeping its main refinancing rate at 2%. The market is more concerned about the wording of Lagarde's press conference. If she explicitly states that "the end point interest rate has been reached and we are mindful of growth risks," this would align with a potential Fed rate cut, and the interest rate differential would favor a euro recovery.
4) The timeline of events and market interpretation: Wednesday's PPI, Thursday's CPI and ECB releases, and next week's Fed releases. Within this sequence, data, central bank guidance, and finalized decisions will gradually calibrate pricing for at least two rate cuts this year. Any unexpected outcome could trigger volatility increases and a rebalancing of spread trades.
As shown in the daily chart, the middle Bollinger Band is 1.1669, the upper Bollinger Band is 1.1745, and the lower Bollinger Band is 1.1593. The current K-line body is close to the upper middle Bollinger Band, and the exchange rate is retracing near the middle Bollinger Band. The recent high of 1.1779 corresponds to a multi-week high, and the previous lows of 1.1391/1.1356 provide more medium-term structural support. MACD shows DIFF 0.0019, DEA 0.0015, and histogram 0.0009. After a slight golden cross near the zero axis, the two lines tend to converge and flatten. The kinetic energy release is limited, showing a sideways trend. RSI (14) is 52.9663, slightly stronger than the neutral zone, and no overbought/oversold signals are seen. The Bollinger Bands have not opened significantly, indicating that the Bollinger Bands squeeze has not yet been lifted and volatility remains moderate.
Technically, 1.1669 is the first dynamic support level (the middle Bollinger band). A break below this level could lead to a drop to 1.1593 (the lower Bollinger band) and a test of the previously concentrated trading range. Above this, 1.1745 (the upper Bollinger band) is the primary resistance level. A further breakout would require confirmation from strong volume and a real-body bullish candlestick before challenging the current peak of 1.1779. The candlestick chart pattern over the past two weeks has resembled a consolidation pattern within a rectangular box. The direction of the trend may depend on inflation data triggering a valid breakout.
Moderate data—a "soft landing" baseline. If the PPI and CPI figures meet or fall below expectations, combined with the cooling signal from the non-farm payroll revision to 911,000, the probability of a 25bp rate cut by the Federal Reserve next week will solidify; subsequently, the sequence of "at least one more rate cut" this year will be confirmed. Under this path, the US dollar's interest rate advantage will weaken, benefiting the euro. The exchange rate is expected to rise in a step-by-step manner above 1.1669 and attempt a volume-driven breakout above 1.1745/1.1779. However, if the ECB simultaneously releases a more dovish tone on growth concerns, the positive correlation between European bond yields and the euro will remain, and the euro's upward slope will be more moderate. In the medium term, if the subsequent recovery of the Eurozone economy coincides with a decline in US inflation, an upward trend is expected to gradually take shape.
Inflation is on the rise—a "sticky inflation" scenario. If PPI/CPI unexpectedly exceed expectations, the market will reconsider whether the Fed's 50bp rate cut has been postponed. The US dollar will regain its dual driving force of interest rate expectations and safe-haven sentiment, making the Euro more likely to fall than rise. In the short term, a break below 1.1669 could lead to a move towards 1.1593. If it breaks below on large volume and retests to confirm a failure, the daily chart will shift into a descending channel to test the previous lows of 1.1391/1.1356. In this scenario, traders should be wary of false breakouts and dead cat bounces—that is, a rapid pullback after the data but with insufficient volume, which can easily be pushed back to near the middle Bollinger band.
Fundamentals: Inflation and interest rate paths become the main axis, while geopolitical and revised data provide secondary disturbances
1) The latest consensus on inflation forecasts indicates that the US PPI is expected to decline significantly from 0.9% in July to 0.3% on a monthly basis, remaining at 3.3% year-on-year. The core PPI is projected to rise to 0.3% on a monthly basis and 3.5% on a year-on-year basis, down from the previous 0.9% and 3.7% respectively. Regarding the CPI, the headline price index is expected to rise from 0.2% to 0.3% on a monthly basis in August, rising from 2.7% to 2.9% year-on-year. The core CPI is projected to remain at 0.3% on a monthly basis and 3.1% year-on-year. With the Federal Reserve's interest rate meeting approaching, these two data sets are the final pieces of the puzzle in assessing the pace of monetary easing. If both producer and consumer prices strengthen, the market will rekindle the specter of stagflation, characterized by "sticky inflation and slowing demand." If both decline modestly, this would confirm the baseline for a "soft landing" and gradual rate cuts.
2) Labor Market Repricing: The U.S. Bureau of Labor Statistics (BLS) disclosed on Tuesday that nonfarm payrolls for the first 12 months of March 2025 were revised down by 911,000 from the previous estimate. This significant revision reinforces the view that the labor market is cooling more rapidly. The market has therefore almost locked in a 25 basis point rate cut next week, while leaving the possibility of a 50 basis point "step up" on the table. For the foreign exchange market, if marginal slowing inflation coincides with cooling employment, the dollar's interest rate premium will weaken, favoring a temporary rise in the euro. Conversely, if inflation rekindles, the dollar will find renewed support from both safe-haven assets and interest rates.
3) European Factors: While reports that Poland shot down a suspected Russian-made drone near its border had limited immediate market impact, concerns about escalating friction within NATO's periphery inevitably heightened risk aversion, creating a negative sentiment for the euro. On the policy front, the European Central Bank is expected to remain on hold on Thursday, keeping its main refinancing rate at 2%. The market is more concerned about the wording of Lagarde's press conference. If she explicitly states that "the end point interest rate has been reached and we are mindful of growth risks," this would align with a potential Fed rate cut, and the interest rate differential would favor a euro recovery.
4) The timeline of events and market interpretation: Wednesday's PPI, Thursday's CPI and ECB releases, and next week's Fed releases. Within this sequence, data, central bank guidance, and finalized decisions will gradually calibrate pricing for at least two rate cuts this year. Any unexpected outcome could trigger volatility increases and a rebalancing of spread trades.
Technical aspects:
As shown in the daily chart, the middle Bollinger Band is 1.1669, the upper Bollinger Band is 1.1745, and the lower Bollinger Band is 1.1593. The current K-line body is close to the upper middle Bollinger Band, and the exchange rate is retracing near the middle Bollinger Band. The recent high of 1.1779 corresponds to a multi-week high, and the previous lows of 1.1391/1.1356 provide more medium-term structural support. MACD shows DIFF 0.0019, DEA 0.0015, and histogram 0.0009. After a slight golden cross near the zero axis, the two lines tend to converge and flatten. The kinetic energy release is limited, showing a sideways trend. RSI (14) is 52.9663, slightly stronger than the neutral zone, and no overbought/oversold signals are seen. The Bollinger Bands have not opened significantly, indicating that the Bollinger Bands squeeze has not yet been lifted and volatility remains moderate.
Technically, 1.1669 is the first dynamic support level (the middle Bollinger band). A break below this level could lead to a drop to 1.1593 (the lower Bollinger band) and a test of the previously concentrated trading range. Above this, 1.1745 (the upper Bollinger band) is the primary resistance level. A further breakout would require confirmation from strong volume and a real-body bullish candlestick before challenging the current peak of 1.1779. The candlestick chart pattern over the past two weeks has resembled a consolidation pattern within a rectangular box. The direction of the trend may depend on inflation data triggering a valid breakout.
Market Outlook
Moderate data—a "soft landing" baseline. If the PPI and CPI figures meet or fall below expectations, combined with the cooling signal from the non-farm payroll revision to 911,000, the probability of a 25bp rate cut by the Federal Reserve next week will solidify; subsequently, the sequence of "at least one more rate cut" this year will be confirmed. Under this path, the US dollar's interest rate advantage will weaken, benefiting the euro. The exchange rate is expected to rise in a step-by-step manner above 1.1669 and attempt a volume-driven breakout above 1.1745/1.1779. However, if the ECB simultaneously releases a more dovish tone on growth concerns, the positive correlation between European bond yields and the euro will remain, and the euro's upward slope will be more moderate. In the medium term, if the subsequent recovery of the Eurozone economy coincides with a decline in US inflation, an upward trend is expected to gradually take shape.
Inflation is on the rise—a "sticky inflation" scenario. If PPI/CPI unexpectedly exceed expectations, the market will reconsider whether the Fed's 50bp rate cut has been postponed. The US dollar will regain its dual driving force of interest rate expectations and safe-haven sentiment, making the Euro more likely to fall than rise. In the short term, a break below 1.1669 could lead to a move towards 1.1593. If it breaks below on large volume and retests to confirm a failure, the daily chart will shift into a descending channel to test the previous lows of 1.1391/1.1356. In this scenario, traders should be wary of false breakouts and dead cat bounces—that is, a rapid pullback after the data but with insufficient volume, which can easily be pushed back to near the middle Bollinger band.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
