Inflation and retail sales: the most important macroeconomic reports for EUR/USD next week will be released in the US. On Wednesday, we will learn the September Consumer Price Index, and the next day, the Producer Price Index. In addition, Retail Sales data will be published on Thursday and could also provoke volatility in the pair, especially if it deviates from forecast levels.

And yet the main market focus will be on the inflation releases. Against the backdrop of weak Nonfarm Payrolls, the CPI and PPI could play a key role in shaping expectations about the Federal Reserve's future actions. Retail Sales data may amplify or weaken the impact of the inflation reports.

CPI

So, on Wednesday, October 14, the US will publish the September Consumer Price Index. According to preliminary forecasts, headline CPI will accelerate in September to 3.7% after August's 3.4%. At the same time, the core index, excluding food and energy, is expected to show a more modest dynamic, accelerating to 2.5% (up from 2.4% in August).

The September report should show how persistent the inflationary pressure is and whether the rising energy prices are "bleeding into" core inflation. As is known, rising fuel costs gradually increase transportation, production, and logistics expenses, which companies typically pass on to end consumers. This process occurs with a time lag, so the September report should pay particular attention to the dynamics of prices for services and goods not directly related to the energy sector—to assess how much the rise in energy costs has already been reflected in other components of inflation.

If headline CPI accelerates while the core measure remains at August's level (or shows only modest growth), the dollar may receive only very limited support. Such a result would signal that the inflation spike is driven primarily by energy.

Conversely, a more pronounced acceleration of core CPI would weigh heavily in favor of the greenback, as it would increase concerns about persistent price pressure and raise the likelihood of further tightening of Fed monetary policy after the expected 25 basis point rate hike in December.

PPI

The next day — Thursday — the Producer Price Index will take up the baton. The previous August report proved fairly strong: headline PPI rose by 0.4% month-on-month after July's 0.1% increase. On an annual basis, the indicator reached 5.4%, accelerating after two months of declines. The core index, excluding food and energy, rose from 4.3% to 4.6%.

At the same time, the structure of the August release was uneven. Goods prices rose by 1.1%, while services prices added only 0.1%. Energy was the main driver, jumping 4.2%.

Again, September's PPI, like the CPI, will help assess whether the energy shock is spreading to other production costs. If the core index continues to accelerate, that would be a very worrying signal for the Fed. It would mean producers are gradually passing additional costs into goods and services prices, creating conditions for further growth in consumer inflation.

However, if headline PPI accelerates solely due to the energy component while the core measure shows restrained dynamics, dollar bulls are unlikely to count on a sustainable strengthening of their positions.

Overall, CPI and PPI could play a decisive role in determining the medium-term trajectory of the greenback. Against the backdrop of weak September Nonfarm Payrolls, a sharp rise in the core (emphasis on core!) indices could literally "rescue" the US currency, bringing inflation risks back to the forefront. If core inflation proves weaker than forecasts, then fears about a slowdown in the US economy would again come to the fore, increasing pressure on the greenback.

Retail Sales

The September retail sales report will be published on Thursday. The previous release was unexpectedly strong: total retail sales in August rose by 1.2% month-on-month versus a forecast of 0.8%. Excluding autos, the indicator rose 1.4%. Gasoline station sales jumped 3.1%, while the auto segment rose 0.6%.

According to the consensus forecast, total retail sales increased by just 0.3% in September. In other words, analysts expect a significant slowdown in consumer activity following August's (partly seasonal) surge.

Pay special attention to measures excluding autos and fuel, as well as the retail sales control group used to calculate the consumer component of GDP. High nominal sales amid rising gasoline prices do not always indicate sustainable consumer demand.

If the September report reflects a sharp cooling of US consumer spending, it will complement weak Nonfarm Payrolls and heighten concerns about the US economic outlook (especially if core CPI and PPI also disappoint dollar bulls). However, the opposite scenario is possible. If retail sales come in stronger than forecasts and inflation reports point to persistent core price pressure, the market will get more arguments for further Fed tightening and a stronger "hawkish" stance.

In other words, if Retail Sales "resonate" with CPI and PPI and reinforce their inflationary or disinflationary signal, EUR/USD volatility could rise materially. The key releases could determine the pair's direction not only for the coming week but also through the Fed meeting scheduled for October 27–28.

"Technicals"

On all higher timeframes (from H4 and above), the EUR/USD pair is either on the lower line of the Bollinger Bands or between the middle and lower lines of that indicator. On the four-hour, daily, and weekly charts, price is below all the Ichimoku indicator lines, and on D1 it formed a bearish "Parade of Lines" signal. All of this points to a priority for short positions. The nearest target of the downward move is at 1.1180 (the lower Bollinger Bands line on the H4 timeframe). The main medium-term target is located 30 pips lower, at 1.1150 (the lower Bollinger Bands line on the D1 timeframe).