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Trading the News: U.S. Core Personal Consumption Expenditure (PCE)

Updates to the U.S. Core Personal Consumption Expenditure (PCE) may keep the EUR/USD exchange rate under pressure as the Federal Reserve’s preferred gauge for inflation is anticipated to hold steady at 1.9% per annum for the third consecutive month in January.

Image of DailyFX economic calendar

Signs of sticky price growth may heighten the appeal of the U.S. dollar as it puts pressure on the Federal Open Market Committee (FOMC) to further normalize monetary policy, and the central bank may keep the door open to implement a rate-hike in 2019 as Chairman Jerome Powell and Co. project a longer-run interest rate of 2.50% to 2.75%.

In turn, a 1.9% print or higher may spark a bullish reaction in the greenback, but an unexpected downtick in the core PCE may curb the recent decline in EUR/USD as it encourages the FOMC to abandon the hiking-cycle. Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups.

Impact that the U.S. Core PCE report had on EUR/USD during the last release

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

JAN

2019

03/01/2019 13:30:00 GMT

1.9%

1.9%

+6

-18

January 2019 U.S. Core Personal Consumption Expenditure (PCE)

EUR/USD 5-Minute Chart

Image of eurusd 5-minute chart

Fresh data prints coming out of the U.S. economy showed the core Personal Consumption Expenditure (PCE), the Fed’s preferred gauge for inflation, holding steady at 1.9% per annum for the second consecutive month in December. At the same time, the measure for Personal Spending slipped 0.5% amid forecasts for a 0.3% decline, while the index for Personal Income slipped 0.1% in January after rising 1.0% during the last month of 2018.

The U.S. dollar faced a lackluster reaction following the mixed data prints, with EUR/USD struggling to hold above the 1.1400 handle as the exchange rate closed the day at 1.1363. Review the DailyFX Advanced Guide for Trading the News to learn our 8 step strategy.

EUR/USD Daily Chart

Image of eurusd daily chart
  • Keep in mind, the broader outlook for EUR/USD is clouded with mixed signals following the FOMC meeting as both price and the Relative Strength Index (RSI) break out of the bearish formations from earlier this year after trading to a fresh 2019-low (1.1176).
  • However, the advance from the monthly-low (1.1176) has stalled following the failed attempt to break/close above the Fibonacci overlap around 1.1430 (23.6% expansion) to 1.1450 (50% retracement), with the recent string of lower highs & lows bringing the 1.1190 (38.2% retracement) to 1.1220 (7.86% retracement) area back on the radar.
  • Need a break/close below the stated region to opening up the 1.1140 (78.6% expansion) region, with the next area of interest coming in around the 1.1100 (78.6% expansion) handle.

For more in-depth analysis, check out the 1Q 2019 Forecast for EUR/USD

Additional Trading Resources

New to the currency market? Want a better understanding of the different approaches for trading? Start by downloading and reviewing the DailyFX Beginners Guide.

Are you looking to improve your trading approach? Review the ‘Traits of a Successful Trader series on how to effectively use leverage along with other best practices that any trader can follow.

--- Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.