Eyes on US Core PCE today

Eyes on US Core PCE today – The S&P 500 rally lost momentum as Nvidia Corp. extended its selloff by more than 6%. The positive development is that most US stocks advanced.

The Gross Domestic Product increased at a 3% annualized rate during the April-June period, up from the previous estimate of 2.8%. The main driver of this growth, personal spending, advanced 2.9%, compared to the prior estimate of 2.3%. A separate government report released on Thursday showed that initial applications for unemployment benefits remained stable at 231,000.

US data ahead

Today, during the US session, all eyes will be on the Core PCE Price Index, which is the most favorable inflation indicator used by the Federal Reserve. In general, the indication is that stable inflation may be slightly higher compared to last month.

The primary focus will be on the Core PCE YoY, which is expected to increase to 2.7% from 2.6%. However, if there is a lower-than-expected outcome, it could lead to a significant market reaction by fueling expectations of a 50 basis points rate cut by the Federal Reserve in September.

Currently, the Fed Funds Futures are pricing in a 100% chance of a 25bps rate cut and a 30% chance of a 30bps rate cut in September’s meeting.

DXY retracement continues

The US Dollar Index has risen for the second consecutive trading session after finding strong support at 100.64 earlier this week. This led to another increase, reaching as high as 101.57. At the same time, the technical indicators have moved out of oversold territory.

The rapid increase from being oversold to around 40 usually indicates that this is simply another upward correction before the downward trend continues. For now, the upward correction is expected to stay below 101.80 and/or 102.40. On the downside, a drop below 100.64 is needed for the downward pressure to continue.

Gold holding well

Even though Gold dropped to $2593 two days ago, it managed to recover during yesterday’s trading and in the European session today, regaining all its losses for the week. It reached as high as $2526 at the time of this report. Gold is currently just a few dollars away from its record high of $2530, and today’s data could be the catalyst for a new record.

The technical indicators are mostly bullish on most timeframes. Although the upward momentum has decreased slightly in recent days, it is evident that Gold is establishing a new support level above $2500. If it surpasses $2530, it could set the stage for another significant increase, potentially reaching $2550, where we may see selling pressure.

EURUSD near support

Over the past two days, EURUSD has continued to decline after failing to break the 1.12 mark, which was the highest level for the Euro since July of last year. The pair dropped to as low as 1.1057 during yesterday’s trading, causing the technical indicators to move away from overbought territory. The RSI indicator is now around 57.

In the meantime, this is considered another short-term retracement before the upside trend resumes. Today’s data from the US could be the catalyst for either a continuation of the downside trend, or a catalyst for another leg higher in the coming days. The bullish outlook remains unchanged as long as the Euro continues to trade above 1.09 and 1.10.

SPX correction continues

The S&P 500 failed to break above the 5640 resistance area for two weeks straight. Despite recent economic releases and earnings, the index formed a clear bearish shooting star candle on the daily chart at the end of yesterday’s trading session.

Currently, it’s possible that the index is creating a double top pattern, which could be confirmed if the index falls below 5560 in the next few days. The data coming out of the US today, especially the Core PCE, could be the trigger for this. Furthermore, if the index doesn’t reach a new record high, it’s more likely that it will continue to trend downwards, potentially targeting 5500.

Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

Disclaimer
This is a marketing communication and does not contain, and should not be construed as containing, investment advice or an investment recommendation or, an offer of or solicitation for any transactions in financial instruments. Past performance is not a guarantee of or prediction of future performance. The information contained herein does not constitute a personal recommendation and does not consider your personal investment objectives, investment strategies, financial situation or needs. Squared Financial makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on a recommendation, forecast, or other information supplied by Squared Financial.

The information on this site is not intended for any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.