EUR/USD: Q4 GDP and PCE prices, two major statistical events

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The Euro lost a few pips against the Dollar while the stock markets on both sides of the Atlantic, euphoric since the start of the year, are marking time a little. The wait for major American statistics (Q4 GDP this Wednesday, and PCE price tomorrow) hardly encourages currency traders to take risks in the immediate future.

PCE (personal consumption expenditures) is the Fed’s preferred measure in its assessment of inflation. “The consensus stands at +0.4% for “core” PCE inflation in monthly variation, which would be the strongest progression observed since February 2023. On the other hand, the consensus is +2.8% in annual data, which would mark a continuation of the improvement towards the Fed’s objective of 2%, knowing that the figure stood at 2.9% in January”, notes Alexandre Baradez (IG France). Note that the core PCE (excluding food and energy), due to its calculation methodology different from the CPI, is indeed the Fed’s preferred inflationary gauge, the one which influences it the most in the construction of its monetary strategy.

“The January data on inflation and employment, all released well above expectations (CPI, PPI, Non-Farm Payrolls, ISM Services Prices Paid) even if partly driven by seasonal effects, reminded us that the last step towards the 2% target could prove to be the most complicated”, for Alexandre Drabowicz, Chief investment Officer, Indosuez Wealth Management. “As a result, the markets have pushed back their expectations of the first rate cut to June 2024 and now only anticipate 90 bp of cuts in 2024, thus aligning with our scenario.”

See you at 2:30 p.m. for preliminary data on American GDP for the fourth quarter of 2023, expected at +3.3% in annualized format.

At midday on the foreign exchange market, the Euro was trading against $1.0810 approximately.

KEY GRAPHIC ELEMENTS

The 20-day moving average (in dark blue), which until now conveniently served us as a trailing stop, has been clearly exceeded. We therefore no longer offer short positions, and remain on the lookout for a new attractive entry point. If the spot were to break its 20-day moving average in a significant level of volatility, we could then speak of a false exit since February 20. This dynamic level is to be monitored, therefore.

MEDIUM TERM FORECAST

Considering the key graphical factors that we have mentioned, our opinion is neutral in the medium term on the Euro Dollar (EURUSD).

We will maintain this neutral opinion as long as Euro Dollar (EURUSD) prices are positioned between support at 1.0810 USD and resistance at 1.0940 USD.

DAILY DATA CHART