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Are you ready to trade the PCE and the NFP?

  • The Fed could slow down the pace of rate hikes already in the December meeting
  • Powell: Core PCE likely to come in at lower levels than in September
  • Gold is approaching a key resistance level ahead of the PCE report
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In his speech yesterday Powell, said that an overheated labour market needs to cool more before the Fed can be confident that inflation would be likely to decline toward the 2% target. At the same time though, he signalled the central bank could take a slower pace with the rate hikes already in the December meeting. This means Friday’s employment report and the future NFP releases too will be closely watched by the market operators and could be therefore significant market movers. Therefore, if you don’t have a low-spread account yet click here to enjoy trading with tight spreads and super-fast trade execution!n!

EURUSD chart 12 01

EURUSD trends higher

EURUSD trends higher and is bullish above the 1.0222 support level but yesterday’s low at 1.0290 is also a key level and likely to attract buyers (should there be a retracement to the level) after Powell’s comments yesterday. He signalled that the Fed could slow down the pace of rate hikes already in the December meeting. Therefore I’m looking for long signals above the 1.0290 level with my T1 at 1.0496 and T2 at 1.0620. Below 1.0222 the market could trade down to the 1.0010 – 1.0015 range. The next key events are the PCE report today, and the NFP report tomorrow.

GBPUSD chart 12 01

Cable rallies after Powell’s comments

GBPUSD – At the time of writing, this GBPUSD is rallying towards my T1 at 1.2149. We never know if the market moves to the targets but knowing isn’t the point in trading. Instead, our job is to evaluate the probabilities. The fact that we have an up-trending market means the upside targets are more likely to get hit and Powell’s comments add to the probability making it more likely the market keeps trending higher.

However, please remember always that nothing is guaranteed and that on top of the fundamentals and the bigger technical picture supporting your trade ideas you have to have an adequate risk management strategy in place. This means that you don’t risk too much per trade and that while you always use protective stops you don’t place the stop orders too close. They are just more likely to get triggered by price fluctuation. My target 2 is at 1.2240 and it remains valid above 1.1900. Below the level, it’s likely that the market tests the 1.1762 level.

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USDCAD chart 12 01

Rally in oil pushes USDCAD lower

USDCAD moved down to the 1.3450 – 1.3460 range after Powell’s comments not only pressured the dollar but also supported the bids in oil. The pair is trending lower in the 8h chart. The next key support level is at 1.3316 while the nearest minor resistance is at 1.3494 and the nearest key resistance area is at 1.3580 – 1.3590.

Now that we know what the Fed thinks the next focus points for this market are today’s PCE report, the NFP report tomorrow and the OPEC+ meeting on Sunday. Powell said yesterday the PCE (Fed’s favourite measure of inflation), has likely risen approximately 6% in October yoy. This would mean the index has moved down from 6.2% in September. Without food and energy, core PCE likely increased around 5%, (down from 5.1% in September) Powell said.

Gold chart 12 01

Gold bullish but trades near to a resistance

Gold hit my downside target (T1 at 1726) last week and has been creating higher lows since then. Therefore we have a bullish technical structure at play in this market (daily timeframe) together with bullish fundamentals (Fed turning less hawkish). It could be though that today it might be a bit challenging for the bulls to advance as the market is approaching a key resistance level (1786.50) and the approaching PCE release later on today could mean traders take profits. Let’s see how the market reacts to the resistance and what kind of reaction we get to the PCE numbers. The next key resistance the 1786.50 is at 1808 and the nearest key supports are at 1763.70 and 1739.60.

 The Next Main Risk Events

  • USD Core PCE Price Index
  • USD Unemployment Claims
  • USD ISM Manufacturing PMI
  • JPY BOJ Gov Kuroda Speaks
  • AUD RBA Gov Lowe Speaks
  • EUR ECB President Lagarde Speaks
  • NZD RBNZ Gov Orr Speaks
  • CAD Employment Change
  • CAD Unemployment Rate
  • USD Average Hourly Earnings m/m
  • USD Non-Farm Employment Change
  • USD Unemployment Rate

For more information and details see the TIOmarkets economic calendar

Trade Safe!

Janne Muta
Chief Market Analyst

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