Forex Signals Brief September 27: Can the PCE Inflation Save the USD?

Yesterday started with the Swiss National Bank meeting which delivered the third rate cut of 25 basis points, while some were expecting a 50 bps rate cut. That helped the CHF somewhat, with USD/CHF ending 50 pips lower, while USD/JPY ended higher. However, the USD declined against yet most other major currencies, as rumours grew that China is coming up with the second part of the plan, the fiscal stimulus to help the economy which helped risk sentiment.

In the US session, we had some more positive numbers from the US, with Durable Goods Orders and Pending Home Sales beating expectations, whish shows that the US consumer is holding well, while the lower Unemployment Claims showed that the labour sector is also doing well. That sent the USD around50 pips higher, but it couldn’t sustain the gains and sellers returned.

As the Chinese politburo committed to delivering the necessary investment to achieve 5% GDP growth this year and funneled funds to major banks for lending, speculation surrounding China’s stimulus package intensified. This fueled market expectations that the anticipated fiscal stimulus would soon follow the monetary measures announced earlier in the week.

In response, traders shifted to selling the U.S. dollar and buying risk-sensitive currencies. This sentiment boosted the GBP/USD pair, driving it to its highest level since 2022. The market’s confidence in China’s intervention is prompting increased optimism, with risk assets benefiting from the prospect of further economic support.

Today’s Market Expectations

Today started with the Tokyo Coe CPI inflation which was expected to fall from 2.4% to 2.0%.

The US PCE report is expected to show little change in inflation. The month-over-month (M/M) figure is forecasted to remain steady at 0.2%, matching the previous month’s reading. On a year-over-year (Y/Y) basis, PCE is projected to drop to 2.3%, down from the previous 2.5%. Similarly, the Core PCE figures are anticipated to show minimal shifts. The M/M reading is expected to stay at 0.2%, with the Y/Y core figure inching up to 2.7%, slightly higher than last month’s 2.6%. Given that both the Producer Price Index (PPI) and Consumer Price Index (CPI) have already been released, market expectations for the PCE data are largely set.

Fed Governor Christopher Waller recently noted that they expect the core M/M inflation measure to rise only by 0.14%. In recent months, the Federal Reserve’s focus has shifted more towards the labor market rather than inflation, making employment data more influential in driving market reactions. While inflation data is still closely monitored, it no longer has the same immediate market-moving impact as it once did. Overall, the inflation numbers are expected to be stable, with the Fed more attuned to employment trends in shaping their future policy decisions.

Yesterday we had yet another great day with our trading signals, as we followed the trend, with the USD reversing lower while risk assets turned higher, which proved to be a good strategy to go with the flow. We opened 8 trading signals in total, ending the day, all of which were winning forex signals.

Another Leg Closer Toward $2,700 for Gold

Gold prices fell $30 during yesterday’s European session following positive U.S. data, including favorable unemployment claims and durable goods orders, which pointed to the U.S. labor market’s resilience. On the H1 chart, the 50-day SMA (yellow) provided support, with a bounce indicating a bullish sign, as lows continue to climb.

XAU/USD – H1 chart

EUR/USD Forms A Triangle

In the forex market, China delayed its fiscal stimulus measures after earlier unveiling monetary stimulus, which led to a rise in the U.S. dollar and a one-cent drop in the EUR/USD on Thursday. However, hopes for China’s fiscal action increased yesterday, causing a rebound in the Chinese yuan. The U.S. economy remained stable this week, with strong durable goods orders pushing the USD up by 50 points and the EUR/USD down to 1.1125. Nevertheless, buyers returned to lift the pair above 1.12, demonstrating continued strong buying pressure with rising lows, signaling a potential bullish shift.

EUR/USD – H4 Chart

Cryptocurrency Update

Bitcoin Climbs Above $65,000 as the200 SMA Turns Into Support

BTC/USD – Daily chart

Ethereum Continues to Crawl Higher 

Since March, Ethereum has been on a downward trend, dropping from $3,830 to below $3,000 by June. Continued selling pressure pushed it down further to $2,200, though it briefly regained the 50-day Simple Moving Average (SMA). The 100-week SMA now serves as a solid support, with recent bullish candlestick formations signaling a potential reversal in Ethereum’s bearish momentum. Renewed buyer interest suggests Ethereum may be set for future gains.

ETH/USD – Weekly chart