US CPI DATA PREVIEW: INDICATING THE CONCLUSION OF THE TIGHTENING CYCLE

· November's YoY growth in the US Consumer Price Index is predicted to be 3.1%, which is less than the 3.2% increase seen in October.

· In November, annual Core CPI inflation is predicted at 4%.

· The Fed's policy statements, the US CPI inflation report may have an effect on the value of the US dollar.

The Bureau of Labor Statistics (BLS) will release the much-awaited US Consumer Price Index (CPI) inflation figures for November at 13:30 GMT. Ahead of its final meeting of the year, inflation will continue to decline, supporting the idea that the Federal Reserve (Fed) interest rates.

The US Dollar (USD) stabilized in December following a sharp loss in November, with the USD Index falling by almost 3%.

Even while Fed dedicated the data-dependent approach, the Fed hold the 5.25–5.5% meeting of the year. However, markets started shift labor market started to cool and inflation started to gradually decline.

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The Fed making announcements and releasing the updated Summary of Economic Projections (SEP) on Wednesday, US CPI inflation data may have an impact on the timing of a policy shift and cause the USD's valuation.

Whats in store for the upcoming CPI data report？

On an annual basis, the US Consumer Price Index is predicted to increase by 3.1%, which would be increase than the 3.2% increase seen in October. Forecasts for the same Core does not include volatile food and energy prices, at 4%.

There is a 0.1% increase in the monthly CPI and a 0.3% increase in the core CPI. November saw a further 7% drop in oil prices, with the price of a barrel of West Texas Intermediate having dropped almost 10% in October. In Manheim, Used Vehicle Index reports that used automobile prices dropped 2.1% in November, bringing the decline to 5.8% during that time.

A preview of the US inflation report for November from TD, “We look for core CPI inflation to rebound to 0.3% m/m from 0.2% to 0.1%.”

The analysis indicates that the core goods category is expected to have contributed to inflation. Our unrounded core CPI inflation estimate for November, which stands at 0.29% m/m, suggests set of risks.

Meanwhile, the Manufacturing PMI's Price Index increased to 49.9 from 43.8, while the ISM Services PMI survey's Prices Paid in October from 58.6. These although made the deflation of manufacturing input costs slowed down in November, input price pressures in the service sector persisted strongly. What Consumer Price Index report have on EUR/USD and when will it be released？

At 13:30 GMT on November 1, the Consumer Price Index inflation statistics will be released. A monthly core inflation reading of 0.5% or more may deter investors from placing bets on a change in policy during the first half of 2024, which would immediately strengthen the USD. Conversely, the Core CPI of 0.2% or less can have the opposite effect on the value of the USD. The updated Summary of Economic Projections, which will be released by the Fed on Wednesday, will include the so-called dot plot, which hints about the timing.

A quick technical view for EUR/USD is provided by European Session Lead Analyst Eren Sengezer, who explains:

The short-term forecast for EUR/USD seems to be of little interest to buyers. However, the pair hasn't seen a lot of bearish. The Relative Strength Index (RSI) indicator on the daily chart, slightly below 50. The pair was fluctuating near the 100-day Simple Moving Average (SMA), which is now at 1.0750, at the time of writing.

However, the EUR/USD pair needs to rise above 1.0820, or the 200-day SMA, and validate that in order to entice technical buyers. This implies that 1.1000, the psychological level and the peak of the last rally, may act as short-term resistance ahead of 1.0870, the Fibonacci 23.6% retracement of the most recent upswing. The initial support before 1.0650 (the Fibonacci 61.8% retracement) and 1.0600 (the psychological level, static level) is located in the 1.0700–1.0720 region (the Fibonacci 50% retracement and the 50-day SMA).