EUR/USD testing critical $1.10 support after US CPI upside surprise

The US dollar is trying to push higher through critical technical resistance levels after the US consumer price index registered its strongest showing in seven months.

The US dollar is trying to push through key resistance levels against the euro after news that US consumer prices jumped at a higher pace than expected last month, rising the most in seven months. Higher inflation bolsters the case for the US Federal Reserve to continue standing pat on interest rates, a policy the central bank ennunciated last week after initiating a series of interest rate cuts earlier this year.

The US consumer price index (CPI) climbed by 0.4% in October, a stronger pace than the 0.3% expected generally by the market. However, CPI is only climbing at a 1.8% annual rate, below the Federal Reserve target of 2%, and well below last year's peak annual rate of 3%.

EUR/USD $1.10 level still key

Just after the CPI report hit in early New York trading,EUR/USD pushed just a few pips below the $1.10 level after trading slightly higher than $1.10 in late Tuesday trade.

Technical analysts say that a meaningful breach of the $1.10 level will be critical is the US dollar is to resume its nearly two-year rise against the euro and push to new highs. Conversely, if the euro bulls can succesfully defend the $1.10 level, the case for a reversal of the two-year greenback rally gets stronger.

Since early October, EUR/USD has traded in a broad range of $1.12 to $110, and the longer the pair stays in that channel the more the euro consolidates its strong October gains and the greater the chance of another euro break to the upside.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

Start trading forex today

Trade the largest and most volatile financial market in the world.

  • Spreads start at just 0.6 points on EUR/USD
  • Analyse market movements with our essential selection of charts
  • Speculate from a range of platforms, including on mobile

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. All share prices are delayed by at least 20 minutes. Prices are indicative only.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.