January’s US PCE rates to move the markets

The USD continued to rise yesterday and during today’s Asian session, despite downbeat financial data, implying a hit on the US employment market. On the flip side the GDP rate remained unchanged implying a healthy growth for the US economy and may have been the instigator behind USD’s rise yesterday. We set the next big test on a macroeconomic level for the USD, today at the release of the US PCE rates, the Fed’s favourite inflation metric. A possible slowdown of the rates could imply an easing of inflationary pressures in the US economy and possibly clip USD’s ascent higher. Yet an unexpected acceleration of the rates could provide asymmetric support for the greenback in today’s early American session as it could harden the Fed’s hawkish stance. It’s characteristic that Fed officials yesterday stressed the need for the bank to keep rates unchanged in order to further fight inflation which could be another attribute to USD’s strengthening. Yet the main factor behind USD’s rise yesterday seems to remain fundamental as US President Trump stated that the US will be applying tariffs on Canadian and Mexican products entering the US from Tuesday (4th of March) onwards. Given also the possible tariffs on European products, the uncertainty in the market tends to intensify, which in turn may be weighing on riskier assets and supporting safe-havens.

USD/JPY rose yesterday ,reflecting the strengthening of the USD after bouncing on the 148.65 (S1) support line. We maintain our bearish outlook as the downward trendline guiding the pair remains intact and the RSI indicator remains between the readings of 50 and 30, implying the that market sentiment is still bearish, yet may have eased a bit. Should the bears maintain control over the pair as expected, we may see USD/JPY breaking the 148.65 (S1) support line and start aiming for the 145.90 (S2) support level. Should the bulls take over we may see the pair rising breaking initially the prementioned downward trendline, in a first clear signal that the downward motion has been interrupted and continue to break the 151.35 (R1) resistance line with the next resistance level being set at 154.65 (R2).            

Across the pond, we see the market sentiment weighing on the common currency as it lost ground against the USD, GBP and JPY yesterday. We are highlighting the release of the preliminary HICP rates for February of France and Germany in today’s early and late European session respectively and a possible further easing of inflationary pressures could act as a prelude for an easing of inflation in the EuroZone as  a whole, thus weighing on the EUR. Such an easing could enhance the dovish expectations of the market for the ECB, given also the release of the bank’s interest rate decision next week. On a fundamental level the market sentiment for the outlook of the EuroZone seems to remain negative, with Trump’s tariff threats leading the way.

On a technical level, EUR/USD tumbled yesterday, breaking the 1.0450 (R1) support line now turned to resistance. The pair in its downward motion broke the upward trendline, guiding the pair since the 13  of January thus we abandon our bullish outlook in favour of a  sideways motion bias for the time being, yet also note that the bearish tendencies may intensify. For a bearish outlook we would require the pair to break the 1.0330 (S1) support level and start aiming for the 1.0175. For a bullish outlook we would require the pair to break the 1.0450 (R1) level and continue to break also the 1.0600 (R2) level.

دیگر نکات مهم امروز:

Today we get UK’s nationwide house prices for February, while BoE Deputy Governor Ramsden speaks, Turkey’s, Sweden’s, France’s and the Czech Republic’s GDP rates for Q4 and Switzerland’s KOF indicator for February. In the American session, we get from the US the consumption rate for January, while from Canada we get the GDP rate for Q4. On Saturday we note the release of China’s NBS PMI figures for February, while on Monday’s Asian session, we get Australia’s, Japan’s and China’s Caixin manufacturing PMI figure for February.

نمودار چهار ساعته یورو به دلار آمریکا

• Support: 1.0330 (S1), 1.0175 (S2), 0.9950 (S3)
• Resistance: 1.0450 (R1), 1.0600 (R2), 1.0760 (R3)

USD/JPY Daily Chart

• Support: 148.65 (S1), 145.90 (S2), 141.75 (S3)
• Resistance: 151.35 (R1), 154.65 (R2), 158.45 (R3)

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