Delayed PCE Report In Focus: Better Late Than Never?

EUR/USD: Bulls Aim For Key Resistance Break. Fed Rate Cut Drags Dollar Lower

The US Dollar ended November on the defensive, with weakness triggered mostly by the market pricing in a high probability of a December cut. Data from the CME FedWatch tool shows an 86% chance of a 25 bps rate cut at the approaching Fed Meeting, which is the main reason for the dollar’s poor performance.

U.S. markets were closed on Thursday in celebration of Thanksgiving Day, which was followed by a thin trading session on Friday due to Black Friday. The lack of accurate economic data adds to the dollar bearishness; also, there are risks coming from the labor market, which are considered higher than inflation risks.

This week, we will see both inflation and jobs data, but unless some drastic changes are unveiled by the upcoming PCE Price Index release, the table is set for a quarter-point December cut.

Economic Calendar Highlights

The first release of the week will be the ISM Manufacturing PMI, which is an indicator with a medium impact, so it will not trigger a massive move on its own. The release is scheduled for Monday at 3:00 pm GMT.

The following release will be jobs data in the form of the ADP Non-Farm Employment Change, and it will likely have a heftier impact. This indicator shows changes in the number of employed people in the private sector, but it is less important than the government-issued Non-Farm Payrolls. However, the NFP will come out after the Fed Meeting, so the ADP report is the only jobs data the FOMC members will get before they make their decision. The release is scheduled for Wednesday at 1:15 pm GMT.

The main event of the week will be the release of the PCE Price Index, scheduled for Friday at 3:00 pm GMT. This is the Fed’s preferred inflation gauge, but it is usually overshadowed by the CPI, which is released earlier. However, due to the U.S. government shutdown, both the CPI and PCE were delayed. Friday’s PCE is 35 days late compared to its normal release schedule.

Technical Outlook – EUR/USD

The pair is currently trading very close to resistance and is on a bullish path, aiming to break the confluence zone at 1.1600. The dollar shows signs of weakness, but the euro is not particularly strong either (no fundamental tailwinds), so we will probably see the pair drift sideways until the U.S. labor market and inflation data come out.

There’s a confluence zone around 1.1600, created by the top of the descending channel and the horizontal line. A break of this zone with healthy volume would indicate that the euro bulls are retaking control of the pair, probably headed to 1.1700. In case of a bounce, the first support is located at the previous significant low, around 1.1480.