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Core PCE data takes center stage today

The US stock market declined again yesterday due to concerns over economic growth, particularly as the Q1 second estimate of the GDP was revised lower. In addition, jobless claims increased, consumption decreased, the trade balance deficit reached almost $100 billion, and pending home sales saw their largest decline since 2020.

As a result, the US 10-year Treasury yield lost all of the gains it made the previous day, closing yesterday’s trading near 4.53%. The US Dollar Index also declined below 105.0, while the Nasdaq and Dow Jones indices had another 1% decline, and the S&P 500 closed 0.6% lower.

Its all about Core PCE today

Indicator Forecast Prior
PCE MoM 0.3% 0.3%
PCE YoY 2.7% 2.7%
Core PCE MoM 0.2% 0.3%
Core PCE YoY 2.8% 2.8%

During the US session today, all eyes will be on the Federal Reserve’s most trusted inflation gauge, which should confirm or deny whether inflation remains on the right track or not.

The most important indicator to monitor is the Core PCE YoY, expected to remain steady at 2.8%, with the MoM forecasted to increase by 0.2%, slightly slower than last month.

Traders should monitor for any revisions to previous data, as seen in many economic releases this year.

As long as inflation continues to slow down, the possibility of a rate cut in September remains.

EU inflation surprised higher

The inflation data from Europe was a notable surprise, as Core Inflation increased to 2.9% instead of the expected stable rate of 2.7%. This is the first increase this year, and it is likely to put more pressure on the ECB to either not cut rates in June or refrain from committing to any further cuts after June’s meeting.

As a result, EURUSD bounced back above 1.0840, while the recent stabilization above 1.08 remains a bullish indicator, higher inflation should keep the bullish outlook unchanged, especially if the ECB decided to announce a hawkish rate cut in its June’s meeting.

The next resistance area stands at 1.0860’s while a break above that resistance would pave the way for further gains towards 1.0890.

DXY below 1.05

Yesterday, the US Dollar Index lost all the gains it had made the previous day, dropping below 105.0 to reach as low as the 104.70 support area once again. Technical indicators remain bearish on most time frames.

Today’s data may lead to further declines, possibly towards 104.40 and then 104.10. A break of these levels would pave the way for further declines towards 103.75 next week.

NZDUSD could be next

The outlook for NZDUSD remains bullish across most time frames, particularly after stabilizing above 0.6080 for over two weeks. Furthermore, the price/time method indicates that the price and time are now equal, suggesting a significant move ahead.

A move above 0.6140 would open the door for further gains towards 0.6180 and then 0.6216, while any downward retracement is expected to remain limited above 0.6080.

 

Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

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