Friday 26/5/2023 at 10:25 am GMT
Today the US PCE inflation data will be release ahead of the New York session which I think it could impact the market by completing the macro picture with the inflation component after the recent release of the FOMC and the Q1 GDP estimates earlier this week.
After the FOMC minutes on Wednesday came out divided in opinions among the Fed members which raised the bar of uncertainty and gave support to the USD bulls, the GDP came out higher than the analysts’ expectations and soothed the market fears of a US recession which the market expressed through the S&P500 Futures closing with a +0.82% despite a higher DXY’s +0.31% closure yesterday. The debt benchmark US10 Year Yields closed higher by +2.06% higher yields signaling a flee of capital from the US Bonds market to the benefit of the USD and closing the day on a mixed sentiment. The US Debt Ceiling negotiations are key for the US10YY.
Inflation forecast turned harder than ever with mixed economic data specially that the manufacturing sector is showing some weakness triggering recession fears while the services sector is showing that the consumer is still in good shape and demand is fine. When demand is still fine during sticking inflation times it makes me expect that inflation could stick to higher than 5% for longer.
My top asset selection for today’s analysis is USDJPY followed by Gold (XAUUSD) the most straight forward assets to trade inflation data. Moreover, both technical setups analysis could be interesting.
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USDJPY Daily Time Frame[/caption]
On the 1D time frame the USDJPY broke out last Wednesday, retested the last breakout point on Thursday and continued higher and forming a swing low setup. Yesterday’s high now plays as the breakout point for the new swing low setup. A firm break from 140.230 level indicates investors are eyeing the next resistance zone at 141.080.
