Insights 
VT 
The EURUSD pair has retreated into a crucial support area as traders anticipate the US CPI report. The market recently adjusted its stance after weaker than expected NFP data, now anticipating 57 bps of easing by year-end compared to 35 bps before the report. Possible benign data could lead Fed Chair Powell to consider a rate cut in September.
Anticipation On US CPI
Attention is on the US CPI report to potentially influence Fed decisions. Some dollar strength was observed, possibly as traders took positions before the risk event. Current Fedspeak suggests a likely rate cut unless inflation data is unusually high and the September NFP is favourable.
On the euro side, the US-EU trade deal set tariffs at 15%, with ECB members now neutral on rate cuts. The market expects only an 11 bps easing by year-end, suggesting a rate cut is improbable.
On the daily chart, a key resistance level at 1.1575 was breached but has pulled back, awaiting CPI direction. Buyers aim for a rally towards 1.1750, while sellers target a drop to new lows. On the 4-hour chart, 1.1590 support is crucial, with buyers and sellers poised strategically. The 1-hour adds little beyond this.
Key upcoming data includes the US CPI report, followed by PPI, Jobless Claims, Retail Sales, and Consumer Sentiment. Fedspeak will be influential, especially following CPI data.
Current Market Sentiment
As of today, August 12, 2025, we are positioned at a critical support zone around 1.1590 ahead of the US inflation data. The market’s elevated anticipation has driven implied volatility on one-week EURUSD options up by over 15% in the last few days. This suggests traders should be prepared for a significant price swing, making strategies like straddles or strangles potentially useful for playing a breakout in either direction.
The weak US jobs report we saw for July 2025, which added just 155,000 jobs against expectations of 190,000, has strongly shifted sentiment. This data reinforces the market’s pricing of over 50 basis points in Fed cuts by the end of the year. A US CPI reading today that comes in at or below the consensus of 0.2% month-over-month would likely solidify expectations for a September rate cut and could trigger a sharp rally towards the 1.1750 resistance.
On the other hand, a surprisingly hot inflation number would challenge the dovish narrative that has been building since early August. We would need to see a significant beat on expectations for the market to reconsider a September cut, but traders should still manage this risk. Purchasing protective put options with a strike price below the 1.1575 support level offers a defined-risk way to hedge long positions against a sudden dollar rebound.
Looking past today’s report, the key event will be the Jackson Hole Symposium in late August. This is where we expect Fed Chair Powell to officially signal his intentions for the September meeting. This timeline suggests that options expiring in late September could capture sustained volatility as the market digests this week’s data and repositions for the Fed’s formal announcement.
The European Central Bank’s neutral stance, with members showing little desire to cut rates again after their move back in June 2025, creates a clear policy divergence with the Fed. This situation is reminiscent of what we observed in 2019, when a proactive Fed and a hesitant ECB led to a sustained period of dollar weakness. This historical parallel supports the view that any dip in EURUSD on a temporary dollar scare could be a buying opportunity for a longer-term trend.
