EURUSD and DXY Consolidate Near Key Levels Ahead of CPI Report

Key Events

• U.S. CPI expectations remain steady at 3.1% y/y, and are unlikely to shift rate-cut sentiment, keeping DXY and EURUSD consolidating near key technical levels.
• Haven sentiment remains supported amid U.S.–China trade uncertainty and the ongoing U.S. government shutdown.

Earlier this week, Canadian inflation came in slightly higher, stabilizing USDCAD below the 1.4080 resistance. Now, attention shifts to the U.S. CPI data, where markets are also anticipating a sticky print. Expectations for weak labor market data have also kept traders cautious, maintaining both EURUSD and DXY in consolidation near critical breakout zones that could define the next directional move.

Potential catalysts include CPI results, Fed remarks, updates on the U.S. government shutdown, and tariff developments.

Technical Analysis: Quantifying Uncertainties

EURUSD & DXY Charts : 4-Hour Time Frames – Log Scale

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Source: Tradingview

On the 4-hour chart, both DXY and EURUSD are consolidating near key levels, with DXY leaning bullish and EURUSD leaning bearish.

DXY Outlook
A breakout above 99.15 could redirect gains toward 99.50, setting up another test before confirming a move higher toward 100.20, 101, and 103.
On the downside, a hold below 98.80 could extend losses toward 98.60 and 98.40.

EURUSD Outlook
A breakout below 1.1600–1.1560 could extend the decline toward 1.1520, with deeper losses possible toward 1.1480 and 1.1380.
From the upside, holding above 1.1620 may allow a rebound toward 1.1680 and 1.1730, before targeting yearly highs if momentum builds further.

Now let’s zoom out for the higher time frame analysis

DXY Outlook: Weekly Time Frame – Log Scale​

Source: Tradingview

From a weekly perspective, the DXY appears to be forming a potential inverted head and shoulders pattern, supported by a positive divergence on the weekly RSI from oversold levels last seen in August 2024.

Price action is attempting to confirm a neckline breakout, which coincides with the consolidation area seen on the 4-hour chart. A breakout above that neckline could trigger a rally toward the 103-target of the pattern. However, the 100.20 level remains a critical resistance — a region that previously acted as strong support between July 2023 and September 2024.

On the downside, the 2025 lows align with a 17-year support trendline connecting higher lows since 2008, near 96. A break below that level could expose a drop towards the 2021 lows aligning with the lower 90s price range.

EURUSD Outlook: Daily Time Frame – Log Scale
​Source: Tradingview

For EURUSD, the structure mirrors an inverse scenario, with a head and shoulders pattern forming just above the 4-hour consolidation zone, alongside a negative RSI divergence from overbought levels last seen in August 2024.

A clean break below the neckline could confirm a deeper drop, targeting the previous resistance zone from January 2023 to September 2024 around 1.12, if 1.1480 and 1.1380 fail to hold.

Conversely, a recovery above the neckline and key levels 1.1680, 1.1730, and 1.1840 would be needed to shift bias back toward 2021 highs and 2025 records at 1.20 and 1.23.

Written by Razan Hilal, CMT

Follow on X: @Rh_waves