US PCE Price Index Overview
Wednesday's US economic docket highlights the release of the October Personal Consumption Expenditure (PCE) Price Index, scheduled later during the early North American session at 15:00 GMT. The headline gauge is expected to edge higher to 0.4% from 0.3% in September, while the yearly rate is seen rising to 4.6% during the reported month from 4.4% previous. The core reading is forecast to come in at 0.4% in October, up from 0.2% previous, and jump to a 4.1% YoY rate from 3.6% in September.
According to Michael Hewson, Chief Market Analyst at CMC Markets: There are increasingly strident voices urging the central bank to taper faster than the current $15bn a month which is due to start this month. If this week’s core PCE similarly surges to 31-year highs in the same way that the recent headline CPI numbers did earlier this month we can expect these voices to get louder. With the latest Fed minutes also due out a few hours later the debates around the pace of tapering are likely to become a little clearer.
How Could it Affect EUR/USD?
A stronger than expected print will reaffirm market expectations for an early policy tightening by the Fed and provide an additional boost to the already stronger US dollar. Conversely, a softer reading – though seems unlikely – is likely to be overshadowed by concerns about the rising number of COVID-19 cases and the imposition of fresh lockdown measures in Europe. This, in turn, suggests that the path of least resistance for the EUR/USD pair is to the downside.
Meanwhile, Eren Sengezer, Editor at FXStreet, offered a brief technical outlook for the major: “On the four-hour chart, the Relative Strength Index (RSI) indicator holds near 40, suggesting that the pair is struggling to gather bullish momentum. In the meantime, EUR/USD is trading near the upper line of the descending trading channel while staying below the 20-period SMA.”
Eren also outlined important technical levels to trade the EUR/USD pair: “1.1270 (20-period SMA) aligns as initial resistance ahead of 1.1300 (psychological level) and 1.1330 (50-period SMA). Supports are located at 1.1240 (upper-line of the descending channel), 1.1200 (psychological level) and 1.1140 (static level, former resistance).”
Key Notes
• EUR/USD Forecast: Growth and inflation under the spotlight
• EUR/USD Price Analysis: Next on the downside comes 1.1185
• EUR/USD to extend its move lower towards 1.1019/02 – Credit Suisse
About the US PCE Price Index
The Personal Spending released by the Bureau of Economic Analysis, Department of Commerce is an indicator that measures the total expenditure by individuals. The level of spending can be used as an indicator of consumer optimism. It is also considered as a measure of economic growth: While the Personal spending stimulates inflationary pressures, it could lead to rise interest rates. A high reading is positive (or Bullish) for the USD.
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