Weekly Technical Analysis – USDJPY, EURUSD, AUDUSD
- US inflation could ease; will USD/JPY extend uptrend above 150?
- Eurozone inflation to soften too; EUR/USD at a make-or-break point
- Australian inflation to reverse higher; AUD/USD looks for a rebound
US core PCE inflation –> USD/JPY
The Fed’s favourite core PCE inflation index is expected to ease significantly to a new two-year low of 3.9% y/y on Friday at 12:30 GMT, erasing July’s moderate pickup to 4.3% y/y. If this turns out to be the case, the news could sound music to policymakers’ ears, endorsing the central bank’s decision to pause rate hikes last week. But given the latest resurgence in oil and gas prices, investors might take the data with a pinch of salt in fear inflation could rebound or stay high for longer in the coming months.
Personal consumption and income stats will be under the limelight at the same time, showing how resilient consumers are against elevated interest rates. House data will be closely watched for the same reason throughout the week.
Overall, stronger-than-expected readings out of the US could add extra fuel to USD/JPY. Still, whether the pair will find enough buyers to rally above the 150.00 psychological mark, and more importantly, above the 2022 top of 151.93 remains to be seen.
Eurozone flash CPI –> EUR/USD
Eurozone’s flash CPI readings for September will hit the headlines early on Friday at 09:00 GMT. Unlike the Fed, the ECB is facing a double whammy of a stagnant economy and persistent inflation pressures. Hence, an upside surprise in the CPI data may not immediately call for higher interest rates as long as growth jitters lay in the background.
In the meantime, forecasts point to a weaker headline CPI of 4.5% y/y from 5.2% previously. The core measure, which excludes food, energy and tobacco prices, is expected to follow suit, sliding from 5.3% y/y to 4.8%.
From a technical perspective, EUR/USD has strengthened its downtrend below its May low of 1.0634, but the lower boundary of a bearish channel could provide another opportunity for a rebound near 1.0560.
Aussie CPI, China PMIs –> AUD/USD
In Australia, investors expect a higher core CPI inflation rate of 5.2% y/y in August from 4.9% before when the monthly readings come out on Wednesday at 01:30 GMT. If forecasts are met, that would still be the lowest reading in two years and perhaps insufficient data to bolster rate hike projections. Although the minutes from the RBA’s September meeting revealed discussion for another rate hike, the central bank would like to see stronger domestic demand and falling external risks from China before signaling additional tightening.
Note that China’s business PMI figures will be published during the weekend.
In any case, AUD/USD has been moving horizontally around a key support trendline over the past month, increasing hopes for a bullish correction near 0.6400. A decisive bounce above the 0.6500 level and the 50-day simple moving average (SMA) could boost market sentiment.