US Core PCE rates due out today

The US Core PCE rates are set to be released later on today. The rates are the Fed’s favourite tool for measuring inflationary pressures in the US economy. Currently market participants are anticipating the Core CPE rates on a yoy level and on a mom level to come in at 2.8% and 0.3% respectively, which would be the same as the prior rates. Hence, should the Core PCE rates come in as expected or higher, thus implying either stubborn or an acceleration in inflationary pressures, it may increase pressure on the Fed to maintain its current interest rate policy for a prolonged period of time. Such a scenario could support the USD. On the flip side, anything lower which would imply easing inflationary pressures may have the opposite effect and thus could weigh on the USD.Over in Asia, China’s NBS Manufacturing PMI figure for May came in lower than expected at 49.5 , implying a contraction in manufacturing activity in China. The lower than expected figure, could potentially weigh on the CNY, as it may paint a worrying picture in regards to the resilience of the Chinese economy. Furthermore, given their close economic ties, the release may have also weighed on the Aussie, as a reduction in manufacturing activity could imply a reduction in demand for raw materials stemming from Australia.Over in Europe, the Eurozone’s Preliminary HICP rate for May is set to be released in today’s European session. The current market expectations are for the HICP rate to come in at 2.5% which would be higher than the previous rate of 2.4%. Such a scenario could imply an acceleration of  inflationary pressures in the Eurozone, and thus may provide support for the EUR.

On a technical level EUR/USD appears to be moving in a sideways fashion. We opt for a sideways bias for the pair, and supporting our case is the RSI indicator below our chart currently registers a figure near 50, implying a bearish market sentiment. For our sideways bias to continue, we would require the pair to remain confined within the 1.0795 (S1) support level and the 1.0845 (R1) resistance line. On the flip side for a bearish outlook we would require a clear break below 1.0795 (S1) support line, with the next possible target for the bears being the 1.0740 (S2) support line. Lastly, for a bullish outlook we would require a clear break above the 1.0845 (R1) resistance line with the next possible target for the bulls being the 1.0895 (R2) resistance level.

AUD/USD appears to be moving in a sideways fashion. We maintain a sideways bias for the pair and supporting our case is the flattening out of the 50MA and 100MA lines in addition to the narrowing of the Bollinger bands, which all imply low market volatility. However, the RSI indicator below our chart which currently registers a figure of 50, implying a neutral market sentiment. For our sideways bias to continue we would require the pair to remain confined between the 0.6590 (S1) support level and the 0.6670 (R1) resistance line. On the flip side, for a bearish outlook, we would require a clear break below the 0.6590 (S1) support level, with the next possible target for the bears being the 0.6520 (S2) support line. Lastly for a bullish outlook we would require a clear break above the 0.6670 (R1) resistance line, with the next possible target for the bulls being the 0.6735 (R2) resistance level.

Other highlights for the day:

Today we note the release of Switzerland’s GDP rates for Q1 and KOF indicator figure for May, followed by the Eurozone’s Economic sentiment and final consumer confidence figures both for May and Canada’s business barometer figure for May. During the American session, we note the 2^nd revision of the US’s GDP rate for Q1, weekly initial jobless claims figure and the US weekly crude oil inventories figure. In tomorrow’s busy Asian session, we note Japan’s Tokyo CPI rates for May, Japan’s unemployment rate for April, preliminary Industrial output rate for April and China’s NBS Manufacturing PMI figure for May.

EUR/USD H4 Chart

• Support: 1.0795 (S1), 1.0740 (S2), 1.0670 (S3)
• Resistance: 1.0845 (R1), 1.0895 (R2), 1.0955 (R3)

AUD/USD H4 Chart

• Support: 0.6590 (S1), 0.6520 (S2), 0.6460 (S3)
• Resistance: 0.6670 (R1), 0.6735 (R2), 0.6810 (R3)

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