Will the U.S. core PCE price index spur big moves among dollar pairs?
I’m keeping close tabs on this range on Cable in case we see any surprises.
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
- Tokyo core CPI slid another 0.2% as expected
- Japanese unemployment rate rose from 2.6% to 2.8% vs. 2.7% forecast
- BOJ considering six-month extension of its pandemic aid program
- German import prices rose 1.4% vs. 1.0% consensus
- French consumer spending slid 8.3% vs. projected 4.1% drop
- French preliminary CPI at 0.3% as expected
- French economy contracted 0.1% in Q1 2021 vs. estimated 0.4% growth figure
- ECB board member Schnabel: Eurozone passed a turning point but stimulus still needed
Upcoming Potential Catalysts on the Economic Calendar:
- U.S. core PCE price index at 12:30 pm GMT
- U.S. personal income and spending data at 12:30 pm GMT
- Chicago PMI at 1:45 pm GMT
- U.S. revised consumer sentiment and inflation expectations at 2:00 pm GMT
What to Watch: GBP/USD
Cable is hanging out at the top of its range on the 1-hour time frame, still deciding whether to make a bounce or a break.
Which way would it go?Technical indicators are hinting at a continuation of the downside move back to the range bottom around 1.4100.
The 100 SMA is below the 200 SMA to indicate that the path of least resistance is to the downside while Stochastic is already heading south.
Of course the upcoming U.S. core PCE price index might still be a gamechanger, as this could set the tone for Fed policy expectations.
Recall that the FOMC minutes hinted that some policymakers are leaning towards tapering asset purchases soon since inflationary pressures have been building up. This could put the Fed closer to hiking interest rates, and these potentially higher borrowing costs could dampen business and consumer activity.In short, stronger than expected results for the Fed’s preferred inflation measure could drive up the U.S. dollar on account of tightening prospects and safe-haven demand.
On the other hand, weaker than expected data could bring a relief rally for its counterparts like the pound. A break past the range resistance might set off a climb that’s at least the same height as the rectangle pattern, so watch out!