Market Watch: All Eyes on US Core PCE

As we wrap up for the week, market participants are bracing for potential volatility, with all eyes on the release of the U.S Core PCE data scheduled for today, Friday, 26th of July 2024 at 4:30 PM GMT +4 (Dubai time). Traders are preparing for potential shifts in the currency markets as this key economic indicator is expected to have a significant impact on market sentiment.

The anticipation surrounding the U.S Core PCE data is high, as it is a crucial measure of inflation that the Federal Reserve closely monitors to gauge the health of the economy. Any surprises in the data could lead to sharp movements in the forex market, presenting both risks and opportunities for traders.

It is essential for traders to stay vigilant and closely monitor the developments during the New York session to navigate any potential market turbulence effectively. As we head into the weekend, the outcome of the U.S Core PCE data release will likely set the tone for the currency markets in the coming week.

U.S Core PCE is an index that measures the changes in price of goods and services purchased by or for consumers for the purpose of consumption, excluding food and energy. Core PCE is used as a gauge to measure inflation rate in the United States.

Frequency of data and the significant of today’s reading on the U.S economy

Today’s Core PCE data is forecasted at 0.2%, while previous data was 0.1%. A reading that is stronger than forecasted would likely make the USD to be attractive, while a weaker than forecast would likely make the USD less attractive, according to analysts.

NB: As traders anticipate a Fed rate cut, it’s important to note that this inflation data is a major determinant to the Fed’s decision on the 31st of July and 18th of Sept. 2024. Recall that the U.S inflation target is 2% while it’s currently seated at 3.0%. Meanwhile interest rate is at 5.50%. At the time of writing, we have an 89.6% projection as per analyst view for rate cut by of at least 25bps by September.

TECHNICAL VIEW

Figure 1: EURUSD

Technically, EURUSD is currently following a bearish trend overall, respecting the trading channel. With the upper channel serving as resistance and the lower channel serving as support. At the time of print, the price is currently at 1.08435. According to analysts, if the data release favors the USD, we may witness a further decline in the pair with prices expected to take out the preceding low of 1.08281 and head to 1.08088, potentially continuing to tank. On the other hand, if the reading is lower than expected, analysts expect a surge on the pair, potentially heading to 1.08697.

Figure 2: USDJPY

USDJPY found support around 151.960 on Thursday during the Asian session and is currently trading around 154.399. This area (151.960) was broken on the 10th of April (where it served as resistance). The last time price reached 151.960 was on the 3rd of May 2024 and it was supported. If today’s reading is less than forecast, analysts expect USDJPY to potentially decline and find support around the same zone of 151.960. If broken, it could tank further to 150.746. On the other hand, if the data favors the USD, the place of retracement to the upside won’t be ruled out and price may test 154.774.