US PCE Data Due

We’ve seen rather muted action across FX markets this week with most pairs simply treading water within recent ranges. However, today’s headline US core PCE data holds the power to inject some momentum back into markets. On the back of a slew of hawkish Fed commentary recently, traders will today be looking to PCE data for the next signal as to whether the Fed is moving closer to easing in September or if such action is likely to be later in the year. Given its use by the Fed in calculating true inflation, the data has a high volatility risk-factor. 

Shifting Fed View

Current pricing has shifted away from Q3 towards the November date. If today’s data shows inflationary pressure remains sticky, or has increased, this should cement that shift, driving USD higher near-term. On the other hand, if we see any fresh drop in today’s data, this will likely see pricing shifting back in favour of a September cut, weighing on USD near-term.

ECB Easing Expectations

EURUSD will be an interesting vehicle for any USD shift today given the broad expectation that the ECB will front-run the Fed and cut rates at the upcoming June meeting. With that consensus in mind, a bullish-USD outcome would be the most tradable outcome today with EURUSD likely to drop sharply if we see a hawkish PCE release.

Technical Views

EURUSD

The pair is essentially caught mid-channel for now. The breakout above the recent triangle pattern has seen little follow through with price now retesting the broken structure from above. While this area holds, focus is on a fresh push higher with 1.0937 the next resistance to note. To the downside, 1.0724 is the next support to watch. 

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