Bank of America has identified EUR/USD and USD/JPY as particularly exposed to the U.S. CPI release this week, saying the two pairs face opposite vulnerabilities depending on whether inflation surprises to the upside or downside.
In a note dated July 6, 2026, the bank said the dollar needs a new catalyst to define its next directional move. For EUR/USD, Bank of America pointed to recent option flow and skew that shifted toward puts last week, together with its technical matrix showing momentum turning against the euro. The firm concluded that with both sentiment and momentum worsening, a stronger-than-expected CPI print could open the way for the existing EUR/USD downtrend to extend.
Conversely, the bank flagged USD/JPY as susceptible if U.S. inflation comes in soft. Bank of America’s technical matrix produced a bearish reversal signal for the pair, suggesting the USD/JPY uptrend is becoming more vulnerable. The firm’s valuation indicators also point to potential mean reversion for the pair, making a bearish reversal an attractive scenario in the event of a weak CPI number.
Taken together, the observations emphasize that incoming U.S. inflation data could act as the trigger that determines whether the euro continues to weaken versus the dollar or whether the dollar gives ground against the yen. The bank’s analysis relies on a combination of option-market cues, technical momentum measures, and valuation signals to frame these conditional risks.
Bank of America’s note did not assert a definitive outcome but highlighted how different CPI surprises would mechanically affect each currency pair: a hot print increasing downside pressure on EUR/USD, and a soft print raising the odds of a bearish turn in USD/JPY. The firm’s emphasis on option skew, momentum, sentiment and valuation indicates it is assessing near-term directional risk rather than longer-term fundamental shifts.
Market participants will therefore be watching the CPI release closely, as the report could supply the catalyst the dollar lacks and thereby clarify the next phase of movement in both EUR/USD and USD/JPY.