It may be the last trading day of the week but USD bulls are just getting started!
Will today’s US core PCE release boost the Greenback against its major counterparts?
Before moving on, ICYMI, yesterday’s watchlist checked out Fibonacci retracement numbers that USD/CHF may hit in case of USD buying. Be sure to check out if it’s still a valid play!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
Tokyo CPI hits 33-year high of 3.4% y/y in October
Japan’s unemployment rate surprisingly rose from 2.5% to 2.6% in SeptemberBOJ raised inflation forecasts, maintained ultra-low rates and dovish guidance
Stocks in Asia slide as focus shifts to Fed
Iron ore crashes on supply pressures, lower steel demand expectations
German economy posts unexpected Q3 growth, up by 0.3% q/q vs. -0.2% q/q expected
France’s inflation rate hits new 37-year high of 6.2% y/y in October
Upcoming Potential Catalysts on the Forex Economic Calendar:
US PCE core price index at 12:30 pm GMT
Canada’s monthly GDP at 12:30 pm GMT
U.S. personal income and spending at 12:30 pm GMT
U.S. pending home sales at 2:00 pm GMT
Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! 🔥 🗺️
What to Watch: EUR/USD
Now that major central banks like the Bank of Canada (BOC), European Central Bank (ECB), and Bank of Japan (BOJ) have shared their latest plans, market focus may turn back to the Fed and its tightening schedule.
We won’t hear from Chairman Powell today but Uncle Sam is printing the U.S. PCE core price index – the Fed’s preferred inflation measure. Duhn duhn duhn.Markets see the monthly index slowing down from 0.6% to 0.5% in September.
If we see a more aggressive slowdown in prices, then the Fed may consider lower interest rate hikes in December or in 2023.
But if prices run much hotter than markets expected, then the Fed will be more motivated to raise rates even higher.
The prospect of higher interest rates could push the dollar higher against its major counterparts.
EUR/USD, which already fell below parity even after ECB’s 75bps rate hike, might complete its Head and Shoulders reversal pattern on the 1-hour time frame.
Watch how EUR/USD reacts to the .9950 minor psychological level and early October resistance.
Momentum below the 1-hour chart’s 100 SMA could drag EUR/USD to areas of interest like .9900 or .9850 before the week ends.
On the other hand, a fresh bout of risk taking could inspire a bounce and take EUR/USD back above the big 1.0000 or even the 1.0100 weekly highs.