Dollar steady after mixed PCE report and hawkish Lacker
Dollar remains steady against euro and yen in early US session. US Sept. personal income is the positive surprise today which rose 0.5% comparing to expectation of 0.3% and prior 0.4%. However, the impact was undermined by below expectation personal spending data which increased 0.1% only versus consensus of 0.3%. Core PCE meets expectation of 2.4% yoy growth with August growth revised upward from 0.3% mom to 0.4% mom. However, headline PCE came in below expectation and increased 2.0% only.
Richmond Fed’s Lacker, the lone dissenter to hold rates unchanged called inflation discomforting. He said that labor market conditions remain “fairly tight” and he’s not surprised to see the acceleration in income growth. Also, he describes the economy as durable enough to withstand additional firming in monetary conditions. He already sees signs of a stabilizing housing market. However, impact on market is short lived as Lacker is already a known hawk.
Technically speaking, though further sideway consolidation cannot be ruled out, we’re not seeing any sign of reversal in dollar’s weakness. Further decline is still likely to follow after finishing the current consolidation.
EUR/USD
Daily Pivots: (S1) 1.2684; (P) 1.2717; (R1) 1.2772;
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As discussed earlier, with bearish divergence condition in hourly MACD and RSI, a short term top might be around the corner, if not formed yet. Touching of 1.2701 minor support has turned outlook consolidative first. But still, consolidation should be brief as long as downside is contained by 1.2661 support.
On the upside, above 1.2749 will indicate rally has resumed
for 1.2765 cluster resistance but firm break is needed to confirm underlying short term strength. Otherwise, based on current overbought and divergence conditions, risk of consolidation remains. On the downside, below 1.2661 will indicate lengthier consolidation will follow first before another rise and could bring further retreat to 4 hours 55 EMA (now at 1.2625).
In the bigger picture, firm break above 1.2765 cluster resistance will confirm completion of whole fall from 1.2937, which has likely marked the completion of whole consolidation from 1.2978 too, as supported by daily RSI’s break of its own falling trend line. Next upside target will be 1.2978 high. firm break above 1.2978 and psychological resistance of 1.3000 will indicate medium term rally from 1.1639 has resumed and bring further rise to next upside target of 78.6% retracement of 1.3668 (04 high) to 1.1639 (05 low) at 1.3234.
However, strong bounce off from 1.2978/00 level will indicate the consolidation from 1.2978 will extend further sideway. Meanwhile, on the downside, it will take a break below 1.2523 (to be adjusted later) to reconsider short term bearishness.
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