Another attempt to storm the 1.1260 resistance level (the upper Bollinger Band on D1) failed: buyers retreated again into the 1.11 area, reflecting the fragility of long positions. As last week, macroeconomic data came to the greenback's aid — this time in the form of the CPI report.

Recall that a similar situation unfolded last week. Reacting to the midterm election results, the dollar weakened across markets, including versus the euro. EUR/USD buyers managed to update a five-week price high at 1.1274. But literally two days later sellers clawed back the lost pips thanks to fairly strong October nonfarm payrolls.

On Monday buyers got another lucky break. Donald Trump's "peaceful" statements about prospects for diplomatic settlement of the Middle East conflict raised interest in risk assets. The euro once again had the upper hand and updated a local high (1.1252) versus the dollar.

But as we see, EUR/USD long positions look very shaky. Even the "truncated" CPI (without annual components) pushed the pair back into the 1.1130–1.1260 price range, where it has traded for the sixth consecutive week. However, traders' reaction was not overly emotional. Not at all. The dollar is strengthening amid rising hawkish expectations about further Federal Reserve actions. After the release, the probability of a 25-bp rate hike in December rose to 90% (plus a 10% chance of a 50-bp hike). Moreover, traders now see the chances of further tightening early next year (in January or March) as about 50/50.

In other words, the inflation report significantly strengthened the greenback. Unlike political/geopolitical news, macroeconomic data form a more stable foundation for the US currency's appreciation because they directly affect market monetary expectations. While political events can trigger fairly strong but short-lived price impulses, rising hawkish expectations about further Fed action favor the dollar over a longer horizon.

But back to October's CPI. Again, recall that this month's report was "truncated" because of last year's shutdown. In October 2025, the US Bureau of Labor Statistics did not collect data to calculate most CPI components because of a lack of funding. Accordingly, there is no statistical base for calculating year-on-year inflation indicators now. However, this statistical gap does not diminish the importance of the published monthly figures.

On the one hand, consumer inflation did not accelerate in October, although it exceeded most analysts' expectations. Headline CPI rose 0.4% after September's 0.6% (vs. a 0.3% forecast). Meanwhile, the core consumer-price index printed 0.3% for the third month in a row, while experts expected a slowdown to 0.2%. For dollar bulls, this fact is crucial: the anticipated cooling of core inflation did not occur, despite the slowdown in the headline CPI.

A closer look at the October report makes it clear why core inflation did not ease. For example, the shelter component rose 0.3%, accounting for about 30% of the month's overall CPI increase. Food prices rose 0.5% and energy by 0.7%, whereas in September the energy component jumped 5.2%. So although energy's inflationary impact has noticeably weakened, price pressure remains.

Especially telling in this context is the dynamic of core components. Price growth in recreation and entertainment accelerated from 0.5% to 0.8%, and medical care from 0.1% to 0.3%. Auto-insurance costs rose 0.7%, and hospital services 0.8%. Even a decline in used-car prices (-1.2%) did not allow core CPI to show the expected downward dynamic.

In other words, the US inflation problem clearly goes beyond the energy sector. Importantly, price pressure persists in services, where lower oil prices do not necessarily translate into slower inflation.

At the same time, the CPI report should be viewed in the context of other recent macro releases. In particular, fairly strong October nonfarm payrolls have already laid the groundwork for stronger hawkish expectations. The mix of releases suggests the US labor market remains resilient, and wage growth continues to feed consumer demand. Recent ISM indices also support further tightening: the manufacturing index rose to 55.5, while the services activity index eased slightly to 54.5 but remained in expansion. Price components of these reports stayed at high levels —75.2 and 73.0, respectively—indicating US firms still face rising costs they can pass on to consumers.

Overall, the US economy demonstrates solid growth (US GDP rose 3.4% in Q3), allowing the Fed to focus on fighting inflation.

Thus, the greenback received an additional and fairly powerful boost today. Certainly a Washington–Tehran agreement could reduce the inflationary impact of energy in the future. But diplomatic statements alone cannot cool consumer demand or slow price growth in services — and these factors (as we saw again) largely determine the persistence of inflationary pressure in the US.

As for EUR/USD trading decisions, keep in mind that despite the southward impulse, the price still trades inside the 1.1130–1.1260 range, where it has been for six consecutive weeks. Entering short positions near the lower boundary of that corridor is as risky as going long near its upper boundary. Therefore, short positions should be considered only after bears convincingly breach support at 1.1130 and close below it. Until then, the current downside impulse should be seen in the context of a prolonged sideways market rather than the start of a sustained downtrend.