US Core PCE comes in stronger than expected; US Dollar bid
With strong inflation data lately and Fed speakers remaining hawkish, many traders were expecting the Fed’s favorite measure of inflation, Core PCE, to come in hotter than expected. They weren’t disappointed. The MoM Core PCE jumped to 0.6% vs an expectation of 0.4% and a higher revised print for December from 0.3% to 0.4%. The January print was the highest reading for the MoM Core PCE since August. In addition, the YoY Core PCE Price Index rose to 4.7% YoY vs 4.3% YoY expected and a revised December print from 4.4% to 4.6%. This data helps to back the Fed’s thinking that rates need to continue to rise and then be held for a longer period of time. Recall from the FOMC Minutes released on Wednesday that most of the participants at the December meeting thought it was appropriate to raise rates by 25bps, and some even felt that 50bps was a possibility.
On a daily timeframe, the US Dollar Index had bottomed on February 2nd at 100.85 after peaking on September 29th, 2022, at 114.79. Price has been moving higher since then, breaking above the 50 Day Moving Average as well as a long term trendline dating to March 2021 (red line). With price up nearly 60 pips today, the DXY is approaching the 38.2% Fibonacci retracement from the highs of November 3rd, 2022 to the lows of February 2nd at 105.53. The 200 Day Moving Average and a downward sloping trendline converge above there near 106.47, then the 50% retracement of the above-mentioned timeframe at 106.98. First support is at today’s low and the long-term trendline at 104.42. Below there, horizontal support crosses at the lows of February 20th at 103.76, then the 50 Day Moving Average at 103.33.
Source: Tradingview, Stone X
Trade the DXY now: Login or Open a new account!
• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
EUR/USD makes up nearly 57% of the US Dollar Index. Therefore, when the DXY moves in one direction, EUR/USD usually moves in the opposite direction. The pair had been moving higher since making lows on September 28th, 2022, at 0.9536. EUR/USD then moved higher, reaching a near-term peak at 1.1033 on February 2nd. Since then, the pair has pulled back, breaking through the 50 Day Moving Average and the bottom trendline of an upward sloping channel near 1.0720. With price down nearly 50 pips today, EUR/USD is approaching the 38.2% Fibonacci retracement from the low of November 3rd, 2022 to the high of February 2nd, at 1.0535. If price continues lower, the next support is the lows from January 6th at 1.0482, then the 50% retracement level from the above-mentioned timeframe at 1.0382.
Source: Tradingview, Stone X
Trade EUR/USD now: Login or Open a new account!
• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
With the US Core PCE for January hotter than expected, the US Dollar is continuing its recent rise. The print confirms the Fed’s thinking that rates need to continue to be raised and will be held steady for a longer period of time. EUR/USD makes up a large percentage of the DXY, and therefore, moves in the opposite direction of the US Dollar. Watch to see if it can hold the key support levels just below.
Learn more about forex trading opportunities.
--- Written by Joe Perry, Senior Market Strategist
Follow me on Twitter at @JoeP_FOREXcom
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.
ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.
City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.
The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.
The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.
The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.
StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.
This advertisement has not been reviewed by the Monetary Authority of Singapore.
© City Index 2024