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
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
For further details see our full non-independent research disclaimer and quarterly summary.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.
City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.
City Index is a trademark of StoneX Financial Ltd.
The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.
© City Index 2024