EUR/USD: PCE price report, an important agenda item

The EUR/USD continues its downward consolidation in a market deprived of American benchmarks today, due to a public holiday (Memorial Day). Risk appetite remains thwarted by the distant prospects of a first loosening of the Fed's monetary tap.

In terms of American statistics on Thursday, investors took note of the weekly registrations for unemployment benefits, still very close to the threshold of 199,000 new units. Another leading indicator of inflation, the PMI activity barometers: The S&P Global composite PMI index increased to 54.3 in May, in a first estimate, against 51.3 points the previous month. This is its highest level in almost two years. These are all signals which testify to the robustness of the world's largest economy, and which in turn fuel tensions on the bond market, proving the most "hawkish" members of the Fed right. Just like the durable goods orders published on Friday, and the revised consumer confidence index (U-Mich), both well above expectations.

It is in this context that currency traders will take note of the PCE (personal consumption expenditures) prices on Friday, expected to rise monthly by 0.2%.

"The PCE core index for the United States is the main statistic of the week," says Chris Dembik, investment strategy advisor at Pictet AM. "This is the preferred measure of inflation by the US Federal Reserve (Fed). Based on producer prices and consumer prices in April, we expect an increase of 0.25% month-on-month "It's still too high to consider an imminent rate cut, in June or July for example. With the prospect of the US presidential election in November, the window of opportunity to ease monetary policy is reduced."

Until then, currency traders will have other benchmarks of choice, such as consumer confidence on Tuesday (Conference Board), GDP and weekly registrations for unemployment benefits.

On the European side this morning, only one important statistic to report, the IFO business climate index in Germany, the largest economy in the Eurozone, stable at 89.2, very slightly below expectations.

Right now, the EUR/USD is trading at $1.0858.

KEY CHART ELEMENTS
On large-scale marubozu, the currency pair shattered the technical resistance level constituted by the bearish oblique drawn in black. A recovery is underway, which may ultimately result in a pullback. The conditions in terms of entry point are not met to immediately build a position on the currency pair.

MEDIUM TERM FORECAST
Considering the key graphical factors that we have mentioned, our opinion is neutral in the medium term on the EUR/USD.

We will maintain this neutral opinion as long as EUR/USD prices are positioned between support at $1.0758 and resistance at $1.0885.