Dollar Down Early Ahead of Crucial U.S. CPI Report

In the early session today, the U.S. dollar is trading lower against major currencies. The eurodólar (EURUSD) has gained 0.3%, while the British pound (GBPUSD) has risen 0.15%. Against the Japanese yen (USDJPY), the dollar has slightly declined by -0.12%. Technical analysis of EURUSD, USDJPY and GBPUSD highlights three critical factors: market bias, risk exposure, and target levels. Traders need to identify where buyers or sellers have control and which levels could shift this bias. The U.S. CPI report will be released at 8:30 AM ET, with initial projections indicating a modest monthly increase in overall inflation while slightly easing year-over-year. Core readings remain the key focus, particularly for expectations surrounding the Fed's September meeting. Headline CPI is expected to rise by +0.1% m/m and +3.4% y/y, while core CPI is forecasted to climb by +0.2% m/m and +2.5% y/y. Lower energy prices are anticipated to contain headline inflation, but the core reading is still seen as somewhat sticky. Goldman Sachs' projections are slightly softer than consensus, forecasting a rise of +0.19% for core CPI and +0.05% for headline CPI. Bank of America (BofA) aligns with consensus expectations at +0.2% for core and +0.1% for headline CPI. Market-wise, risks are asymmetric. A hotter-than-expected report could boost September hike expectations, while a softer report might significantly reduce such expectations, pressuring the U.S. dollar and yields, and supporting equity markets.