April’s US PCE rates in focus

The USD edged lower yesterday as doubts for the final outcome of Trump’s sweeping tariffs surface. As noted yesterday a US court deemed Trump’s tariff policy as largely illegal supporting the USD in the past days, yet the market seemed to expect Trump’s tariffs to get ultimately a green light by US courts. weighing on the US Dollar. Today we highlight the release of the US PCE rates for April. The release gains attention as the indicator is the Fed’s favorite inflation metric and should we see the rates slowing down, we may see them weighing on the USD as it would be adding more pressure on the Fed to restart with its rate-cutting path. Should the rates imply that inflationary pressures in the US economy are persistent or even accelerate we may see the USD getting some support as the Fed’s doubts for more rate cuts may intensify.

North of the US border, we highlight the release of Canada’s GDP rate for Q1. The rate is expected to slow down considerably and if actually so, could weigh on the Loonie, especially if it lands lower than what the market expects as it could darken Canada’s economic outlook. On the flip side an unexpected acceleration of the rates, or a narrower slowdown than what is expected, could provide support for the Loonie.

USD/CAD edged lower yesterday yet the pair seems to remain stable revolving around the 1.3815 (S1) support line. The RSI indicator flattened, being slightly below the reading of 50, which may imply some slight bearish tendencies yet currently is unconvincing. For a bearish outlook, we would require the pair to drop to the 1.3645 (S2) support level with the next possible target for the bears being set at the 1.3420 (S3) level, marking the lowest trough in our chart reaching in September last year. For a bullish outlook, we would require the pair to rise breaching the 1.3975 (R1) line, thus paving the way for the 1.4100 (R2) level.

Across the pond, we highlight for EUR traders the release of Germany’s preliminary HICP rate for May. A possible further easing of inflationary pressures could weigh on the common currency given the size of the German economy and also that the ECB is expected to cut rates in the coming week.

On a technical level, EUR/USD seems to maintain a sideways motion with its boundaries being set by the 1.1425 (R1) resistance line and the 1.1210 (S1) support line. The sideways motion of the pair seems to have broken the upward trendline that has been guiding since the 13th of May, while at the same time the RSI indicator remains close to the reading for 50, implying a rather indecisive market for the pair’s direction. Hence we adopt a bias for a sideways motion for the time being. Should the bulls take over we may see the pair breaking the 1.1425 (R1) resistance line and start aiming for the 1.1690 (R2) level. Should the bears lead, we may see EUR/USD breaking the 1.1210 (S1) line clearly and start aiming for the 1.0940 (S2) support level.

In the Far East, we note the JPY got some support yesterday and during today’s Asian session, as Tokyo’s CPI rates sent out mixed signals as the headline rate edged lower, yet the core rate accelerated, implying a persistence of underlying inflation. Such tendencies tend to set a difficult choice for the BoJ as on the one hand, the bank has to raise rates to inflation yet risks at the same time a fragile growth which now has also to face US President Trump’s tariff intentions.

その他の注目材料

Today we get in the European session, Sweden’s, Turkey’s and the Czech Republic’s GDP rates for Q1 and Switzerland’s KOF indicator for May while ECB policymaker Panetta speaks. In the American session, we get from the US the consumption rate for April and the University of Michigan consumer sentiment for May. On a monetary level, we note that Atlanta Fed President Bostic and San Francisco Fed President Daly are scheduled to speak. On Saturday, despite the markets being closed, we note the release of China’s NBS PMI figures for May while Chicago Fed President Goolsbee speaks. On Monday, we get Australia’s and Japan’s final manufacturing PMI figures for May.