EURUSD sell-off comes into play as US inflation runs hot

The official US Consumer Price Index (CPI) report for September lands today, and the market is holding its breath. With the numbers still up in the air, EURUSD has been confined to a narrow range, as traders refuse to make commitments ahead of the release. Analysts predict that headline inflation will accelerate to 3.6% (up from 3.4% in August), while the core reading will likely hit 2.4%–2.5%. So, what's fueling the uptick? Energy prices, plain and simple. Oil is now marching steadily toward $100 per barrel, driven by simmering geopolitical tensions in the Middle East. This directly feeds into higher US automotive fuel costs. Retail gasoline prices are expected to surge by about 9.6% from August to September—a hefty jump that could ripple through the broader inflation basket.

This read on the Federal Reserve's (Fed) next move is keeping 10-year US Treasury yields propped up near 5.22%. Traders are on edge that any upside surprise in the data could force the American regulator to scrap its planned pause at the October 28 meeting and pull the trigger on a 25‑basis‑point rate hike in December.

But what happens if the figures overshoot? If the headline CPI tops 3.6% and the core one lands at 2.5% or higher, expect a wave of dollar buying to wash over the market. The odds of the Fed holding interest rates steady in October would crumble fast. Treasury yields would surge to new local peaks, further widening the monetary gap with the European Central Bank (ECB). On top of that, France's unresolved fiscal issues will continue to drag the single currency down, adding another layer of pressure. 

In this scenario, EURUSD would slice through the 1.1150 support almost immediately. By the end of the week (October 16–17), the pair would test deeper medium-term floors near 1.1060.

The ultimate recommendation is to sell EURUSD from 1.1150 if US inflation runs hot. Place Take Profit at 1.1060. Set Stop Loss at 1.1250. The potential gain is 900 points.

Calculate your open position so that a potential loss (protected by a Stop Loss order) is limited to 1% of your deposit. If your account balance does not allow you to enter a position of this size, it is better to skip the trade and wait for other market signals that meet low-risk criteria.