US PCE Price Index Overview
Friday's US economic docket highlights the release of the September Personal Consumption Expenditure (PCE) Price Index, scheduled later during the early North American session at 12:30 GMT. The headline gauge is expected to ease from 0.4% to 0.3% during the reported month, while the yearly rate is seen rising to 4.7% from 4.3% in August. The core reading is forecast to rise 0.2% in September, down from 0.3% previous, and edge higher to 3.7% YoY from 3.6% in August.
According to Joseph Trevisani, Senior Analyst at FXStreet: “Inflationary pressures in the United States economy have not abated with the heat. Continuing supply-chain restrictions, labor shortages and commodity price increases are set to make the fall and winter as uncomfortable for consumers as the summer.”
How Could it Affect EUR/USD?
Against the backdrop of Thursday's dismal US GDP print, a stronger reading will further fuel worries about the risk of stagflation. This, however, will validate expectations for an early policy tightening by the Fed and result in higher US bond yields/a stronger US dollar. Conversely, a softer print is likely to be overshadowed by the prevalent cautious mood in the financial markets. This, in turn, should act as a tailwind for the safe-haven greenback, suggesting 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: “With Thursday's upsurge, EUR/USD broke above 1.1670 resistance but lost its momentum before reaching 1.1700. The Relative Strength Index (RSI) indicator on the four-hour chart is edging lower after reaching 70, suggesting that the pair is now making a technical correction.”
Eren also outlined important technical levels to trade the EUR/USD pair: “Currently, the pair is trying to flip 1.1670 into support and buyers could try to test 1.1700 as long as this level holds. Above 1.1700 (psychological level), the next resistance aligns at 1.1720 (Fibonacci 50% retracement of September downtrend) before 1.1770 (Fibonacci 61.8% retracement). On the downside, 1.1670 (Fibonacci 38.2% retracement, former resistance) is the first support ahead of 1.1635 (50-period SMA) 1.1600 (psychological level, 100-period SMA).”
Key Notes
• Personal Consumption Expenditure Price Index September Preview: Transitory inflation becomes permanent
• EUR/USD Forecast: Can euro crack 1.1700 ahead of the weekend?
• EUR/USD Price Analysis: 50-DMA, monthly trend line check heaviest daily jump since May
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.
