Forex Market: EUR/USD at a fresh one-week low ahead of US CPI data, job growth supports outlook for higher rates

EUR/USD retreated for a fourth straight day on Monday, as rising energy prices and geopolitical tension continued weighing on the single currency, while robust US job growth and high CPI inflation forecast added to the case for higher interest rates, underpinning the greenback.

Friday’s data string revealed solid growth in US Non-Farm Payrolls and an unexpected drop in unemployment rate in September.

Meanwhile, US CPI inflation numbers due out on Thursday are now on market players’ radar. Annual CPI inflation is expected to come in at a red-hot 8.1%, while core CPI inflation – at 6.5%.

Benchmark US 10-year Treasury yields increased for a 10th consecutive period last week.

According to Westpac strategist Sean Callow, the macro data and higher bond yields is a “robust combination for the dollar.”

“It’s further evidence that the U.S. economy is not cratering. It just feeds into the notion that the Fed is going to spend the next three weeks saying the same thing about interest rates,” Callow said.

Markets have now priced in an almost 90% chance of a 75 basis point rate hike by the Federal Reserve at its policy meeting in October.

As of 7:49 GMT on Monday EUR/USD was edging down 0.38% to trade at 0.9703. Earlier in the European session, the major Forex pair slipped as low as 0.9702, which has been its weakest level since September 29th (0.9635).

Daily Pivot Levels (traditional method of calculation)

Central Pivot – 0.9761
R1 – 0.9796
R2 – 0.9852
R3 – 0.9886
R4 – 0.9921

S1 – 0.9705
S2 – 0.9670
S3 – 0.9614
S4 – 0.9559