Markets Eye U.S. PCE Data Amid Thanksgiving Volatility
Greenback Surge Sends EUR/USD to Multi-Year Low Despite Oversold RSI.
The dollar is on a run since the U.S. elections and last week it continued to batter the Euro, despite what looked to be a bounce at support. Friday’s PMI releases showed that the Eurozone’s economy is stagnating or even cooling off, while the U.S. showed improvement in the Services sector.
The US Dollar Index (DXY), which tracks the strength of the US Dollar against a basket of currencies, reached a high of 108.07 before retreating slightly. It is currently trading at 107.06. This week’s main event will be the U.S. inflation data, which will influence the Fed’s rate decision. Currently, the chance of a 25 bps cut is 56.1%, according to CME’s FedWatch tool. There’s a 43.9% probability that the Fed will keep the rate unchanged.
Economic Calendar Highlights
The U.S. Consumer Confidence survey is the week’s first notable release, scheduled for Tuesday at 3:00 pm GMT. The FOMC Meeting Minutes will also come out the same day at 7:00 pm GMT. The Minutes contain a detailed record of the latest FOMC Meeting and often provide clues regarding the next rate move.
The week’s main event will be the U.S. Core PCE Price Index release, scheduled for Wednesday at 3:00 pm GMT. It is the Fed’s preferred inflation gauge but it is sometimes overshadowed by the CPI which is released about 10 days earlier. The expected change is 0.3%, the same as the previous.
The German Prelim CPI will be released Thursday at 12:00 pm GMT and U.S. banks will be closed in observance of Thanksgiving Day. We can expect to see irregular volatility and possibly, low liquidity.
The last release of the week comes Friday at 10:00 am GMT in the form of the Eurozone CPI. Many European countries release their respective CPIs earlier, so the importance of this release is lower.
Technical Outlook – EUR/USD
The dollar bulls were in control ever since the U.S. Presidential election and the pair went through support levels like a hot knife through butter. There was a small bounce at 1.0500 but it was short-lived and followed by another push lower.
Currently, EUR/USD is trading at levels last seen in December 2022, after reaching a low of 1.0330. The RSI is oversold and showing divergence but this just goes to show how an asset can disregard most technical signs and indicators if the fundamental landscape supports a certain direction.
That being said, the pair is likely to move higher due to profit-taking and the exhaustion of the bearish move. Rejection was shown by Friday’s candle, which touched 1.0350 support and then closed higher. It’s still a bearish candle but the bulls showed some strength. The most important level to watch is 1.0500, as a daily close above it could spur more buying.
