Sticky Inflation May Push Rate Cuts Further Down the Road

Non-Farm Payrolls in the Spotlight: A Week of Critical Economic Updates.

The Core PCE (personal consumption expenditures) Price Index surpassed analysts’ expectations, rising 3.7% in the first quarter, while the forecast was 3.4%. Some have even suggested that further tightening might be in order but there’s probably a very slim chance of that happening.

What is rather certain is that the Fed will not cut the interest rate at this week’s meeting. Currently, there’s a 2.8% probability of a cut, while the overwhelming majority of 97.2% is allotted to the “no cut” camp.

The Asian markets have been shaken by a possible BOJ intervention on early Monday morning. The yen moved past 160 per dollar for the first time in 34 years and then it quickly rebounded to around 155, sparking speculation that the BOJ had something to do with it.

Economic Calendar Highlights

Tuesday at 9:00 am GMT we will take a look at European inflation with the release of the CPI Flash Estimate and the Core version of the same indicator. There are two versions: Flash and Final but the first one released usually has the most impact.

Wednesday’s main event will be the FOMC rate meeting and Statement, scheduled for 6:00 pm GMT. Although there’s almost no chance to see a rate cut, it will be interesting to see what the Statement contains and how Fed Chair Powell chooses to tackle the press conference that is scheduled at 6:30 pm GMT. Any hints about the date of the first cut will surely send shockwaves throughout the US Dollar pairs.

The economic week will end with the release of the always-important U.S. jobs data. The Non-Farm Employment Change, the Average Hourly Earnings, and the Unemployment rate will all come out Friday at 12:30 pm GMT. The job data combined with the FOMC Meeting almost guarantees that we will have an interesting week in terms of price action.

Technical Outlook – EUR/USD

The pair rebounded at 1.0635 support, which combined with the RSI touching its 30 level, acted like a springboard that sent the price higher. At the moment, EUR/USD is trading at 1.0720 and seems to be headed towards the next barrier, located at 1.0775.

When and if the pair reaches 1.0775, the 50-day MA will also descend to reach the same zone. This will make 1.0775 a confluence zone (a place where 2 or more technical elements meet) that will act as a very strong resistance (the bearish trend line is in very close vicinity as well).

This week’s price movement will be heavily influenced by the European Inflation numbers, the U.S. Rate announcement, and the NFP release, so buckle up for an interesting ride.