Biden Steps Down, Dollar Unfazed Ahead of Key PCE Data
EUR/USD Triple Top Invalidated as RSI Nears Overbought
Big news over the weekend, as President Joe Biden decided to step out of the election race, endorsing the current Vice President, Kamala Harris to take over the Democratic reins for the November head-to-head. Harris garnered support from many party members, though several prominent figures, including former House Speaker Nancy Pelosi, remained silent.
At this time, former President Trump is ahead in the race, especially after the debate that took place last month and President Biden’s less-than-stellar performance, which brought forth concerns regarding his ability to run and possibly lead the nation.
The markets were also affected over the weekend by an IT outage caused by a broken software update installed by CrowdStrike, which affected 8.5 million Windows computers. It led to significant disruptions for businesses and individuals worldwide, leaving planes grounded, and affecting hospitals and broadcasts.
According to Microsoft: “We currently estimate that CrowdStrike’s update affected 8.5 million Windows devices or less than 1 percent of all Windows machines”
A solution already exists but it will have to be implemented manually on many of the affected terminals. CrowdStrike’s client base consists of almost 30,000 companies, many on the Fortune 500 list. The bigger the company, the more reliant on software and computers – this means that if they have a limited IT staff, it will take longer for them to fix the problem.
Economic Calendar Highlights
Wednesday will be the first truly busy day of this week, with a cluster of Purchasing Managers’ Indexes (PMI) set for release. Starting at 7:15 am GMT, the French and German Services and Manufacturing PMIs come out, followed by the Eurozone PMIs and the U.K. PMIs. At 1:45 pm GMT, the same indicators but for the U.S. economy will be released. Usually, these reports have a notable impact if the actual numbers are different than the forecast by a substantial margin.
Thursday at 12:30 pm GMT traders will focus on the U.S. Advance GDP but the more important release of the week is scheduled for Friday at 12:30 pm GMT: the Core PCE Price Index. It is said that this is the Fed’s preferred inflation gauge but it is overshadowed by the CPI which comes out about 10 days earlier. The PCE is expected to show a 0.2% change, higher than the previous 0.1%.
Technical Outlook – EUR/USD
The double top formed on 1.0900 resistance was broken, so the potential triple top that we talked about is now invalidated. After the break of 1.0900, the pair returned to re-test the level, which is a usual behavior.
At the moment, the pair is trading at 1.0890, so it is not yet clear whether the level is broken or not. If the dollar bulls continue to drag the pair lower, it will prove that the initial break of 1.0900 was false and we will probably see a move closer to the 50-day Moving Average.
On the other hand, a quick move above 1.0900 would imply that the pair is set for an extended bullish move. However, it has to be noted that the RSI is approaching overbought, so we may see some pullbacks.
