Fed Minutes Reveal Hawkish Tone as PCE Comes Into Focus

EUR/USD challenges 1.1700 as overbought RSI points to pullback risk

The Federal Open Market Committee (FOMC) Meeting Minutes landed on Wednesday last week and revealed a slightly hawkish Fed stance. This was to be expected considering that three of the FOMC members voted to hike the rate by 25 basis points.

The Minutes revealed that risks to employment and growth are “skewed to the downside”, but inflation risks are “skewed to the upside”. However, it must be noted that these Minutes reflect the views of the policymakers at the latest rate meeting, before the terrible Non-Farm Payrolls (NFP) report, which showed that the US economy lost 23K jobs instead of adding 85K as analysts had predicted.

Also, since then, the CPI came out mostly in line with expectations, diminishing inflation worries. The Producer Price Index (PPI) was lower, and Retail Sales disappointed. The information that was added after the Fed Meeting makes the case for a rate hold, while a hike is less probable.

Economic Calendar Highlights

The US Consumer Confidence survey will be released on Monday at 2:00 am GMT, showing the opinions of about 3,000 surveyed households about the economic conditions, employment availability, and the overall situation of the economy. Its impact is medium, but consumer confidence is a leading indicator of consumer spending, which is the main part of the overall economic activity of the country.

The Core PCE Price Index (PCE) will be released on Wednesday at 12:30 pm GMT, showing the change in the price that consumers pay for goods and services, excluding food and energy. This is the Fed’s preferred inflation gauge, but it is slightly outshined by the CPI, which is released about 10 days earlier. The US Gross Domestic Product (GDP) will be released at the same time as the PCE.

The Jackson Hole Symposium will start on Thursday and will be attended by central bankers, finance ministers, and major figures from the financial markets. Their comments and speeches can create volatility in both the traditional and crypto markets. The symposium will continue on Friday and Saturday. Fed Chair Kevin Warsh will deliver a speech at the Jackson Hole Symposium on Friday at 2:00 pm GMT.

Technical Outlook – EUR/USD

The pair rallied following an improving economic situation in Europe, while the US Treasury’s decision to increase its bond buyback programme weighed on the dollar. Currently, the bulls are trying to break the resistance at 1.1700 after an extended rally that started at 1.1350.

The price is now trading above all three moving averages (50-day, 100-day, and 200-day MA), but the RSI is indicating overbought conditions, and the last 2 daily candles were pin bars (long upper wicks, small bodies). This increases the probability of a pullback, which may find support at the 200-day MA (red line).