Get Ready For a Fun Week: PCE, NFP, and Interest Rate
EUR/USD: Bullish Pressure Subsides, Support Under Attack
The week ahead will be governed by U.S. data, with all the Big Three in focus: inflation, jobs, and the interest rate announcement. Unless there are major surprises, the rate won’t budge from the current 4.50% and Trump’s disappointment with Fed Chair Powell will continue. According to the CME FedWatch tool, there is now a 95.9% possibility the rate will remain unchanged.
As the tariff deadline is approaching fast, the Trump administration is looking to finalize deals with major trade partners such as India, Canada, and the European Union. Regarding the latter, President Trump expressed his views by saying, “I would say that we have a 50-50 chance, maybe less than that, but a 50-50 chance of making a deal with the EU”.
Regarding Canada, he was even less enthusiastic, saying that the U.S. has not had the best of luck and threatened to impose 35% tariffs on certain goods. The China deal is still a work in progress, and a meeting is scheduled for this week.
Economic Calendar Highlights
On Wednesday at 12:15 pm GMT, we will take a first look at the U.S. labor market with the release of the ADP Non-Farm Employment Change. This is not the government-released report, but it tries to mimic the NFP, which will be released 2 days later. It usually has a medium impact on the market.
Also Wednesday, the Fed will announce the interest rate, but as already mentioned, a cut would be a major surprise and not likely to happen. The rate will be announced at 6:00 pm GMT and will be followed at 6:30 pm GMT by the usual press conference held by Fed Chair Powell. Usually, this event creates the most volatility, especially if the Chair drops any hints about the timing of the cut.
Thursday will be all about inflation, with the release of the Core PCE Price Index scheduled at 12:30 pm GMT. This is the Fed’s preferred inflation gauge and has a big impact on the market, but it is often overshadowed by the Consumer Price Index (CPI), which was already released. The PCE is expected to grow 0.3% from the previous 0.2%.
Last but not least, we have the Non-Farm Payrolls (NFP) report, set for release on Friday at 12:30 pm GMT alongside the Average Hourly Earnings and Unemployment Rate. The Fed carefully watches inflation and job creation when setting the interest rate, and the NFP is the main health gauge for the job market, so the impact is always high. New jobs are expected to drop to 108K from the previous 147K.
Technical Outlook – EUR/USD
It looks like the uptrend has reached a top at 1.1830 because after breaking the long-term bullish trend line, the pair failed to return above it. We saw some strong bullish candles last week, but that bullish pressure seems to have dissipated.
If the trend line holds and the price bounces off it, we will likely see a descent below 1.1700 and possibly a move into the next support, located in the 1.1575 area. Alternatively, a break of the previous top would open the door for a move into 1.1900.
Price action on all pairs where USD is involved will be heavily influenced by the macroeconomic scene, including inflation, the NFP, and Powell’s press conference.
