Euro Braces for HICP Showdown With NFP Set to Amplify the Reaction

Key Takeaways:

*Preliminary September HICP data will shape near-term ECB expectations after major eurozone economies reported stronger-than-expected inflation.

*Headline HICP is forecast to rise to 3.6%, with core inflation edging up to 2.5%, largely driven by higher energy costs. Treasury yields, cautious BoJ guidance, higher oil prices and broad dollar strength continue to pressure the yen.

* Hotter inflation could strengthen the euro by boosting rate-hike expectations, while a softer print and robust U.S. payrolls may favour the dollar.

Market Summary:

The euro faces heightened volatility today as the eurozone releases its preliminary September Harmonised Index of Consumer Prices (HICP) figures, the key inflation reading that will shape near-term expectations for European Central Bank policy. Recent national data from the region’s largest economies have already signalled upward pressure: Germany, France, Spain and Italy all reported September inflation readings above forecasts, driven primarily by elevated energy costs linked to ongoing Middle East tensions. These developments have raised the prospect of a firmer eurozone print and increased scrutiny of the ECB’s next steps.

Market consensus currently points to headline HICP rising to approximately 3.6 percent year-over-year from the previous 3.2 percent, with the core measure (excluding energy and food) expected to edge higher to around 2.5 percent from 2.4 percent. Such an outcome would mark a clear acceleration and leave inflation well above the ECB’s 2 percent target, reinforcing the upside risks already flagged in the central bank’s September projections. The energy-driven nature of the rise, however, may temper interpretations of underlying demand-pull pressures, especially given lingering concerns over eurozone growth momentum and the impact of higher borrowing costs on households and firms.

For the euro, a hotter-than-expected reading would likely lift market pricing for further ECB tightening—particularly the probability of a December rate increase from the current deposit facility level of 2.50 percent—and provide near-term support against the U.S. dollar. Conversely, a softer print that falls short of the elevated consensus could reduce those expectations and weigh on the currency, especially while U.S. yields remain high and the Federal Reserve’s policy path continues to favour the greenback. With both the inflation data and the U.S. Nonfarm Payrolls report arriving on the same day, the euro’s reaction is likely to reflect the relative strength of these competing signals rather than the CPI figure in isolation. Traders will also watch for any shift in ECB communication in the coming weeks as policymakers assess whether the energy shock is becoming more persistent.

Technical Analysis

EURUSD, H4: 

EUR/USD remains under intense selling pressure, with the pair falling to its lowest level since May. The latest decline reinforces the prevailing bearish structure and suggests that sellers continue to maintain firm control over price action.

Momentum indicators support the negative technical outlook. The MACD continues to trend lower, signalling a further strengthening of downside momentum, while the Relative Strength Index remains close to oversold territory, reflecting persistent selling pressure.

The near-term bias remains firmly bearish, with further losses possible if the pair fails to establish a stable support base. However, as the RSI approaches oversold levels, the risk of a temporary technical rebound may increase. Any recovery is likely to remain corrective unless EUR/USD can break above its recent lower highs and demonstrate a meaningful improvement in momentum.

Resistance Levels:1.1267, 1.1370

Support Levels:1.1138, 1.1000