Forex Signals Brief March 29: Locked and Loaded for Core PCE Inflation

As traders and central bankers prepare for the long Easter weekend, with Good Friday today and the holiday extending through Monday, the major US stock indices and bond markets will be closed. Despite the upcoming holiday closure, the markets concluded the first quarter with advances across various asset classes.

Major US stock indices recorded advances, marking positive performance for the quarter with Dow Jones and S&P 500 making a new record high yesterday, which was the 22nd since the start of 2024. Oil prices saw gains during the quarter, reflecting ongoing strength in the energy markets.

Bond yields also advanced, indicating increased confidence in the economic outlook. The US dollar also saw advances yesterday, driven by economic data releases and Federal Reserve policy expectations. The USQ4 GDP was revised 2 points higher to 3.4%, Unemployment Claims remained steady at 210K while Pending Home Sales and the Revised UoM Consumer Sentiment also came above expectations.

The Tokyo Core CPI inflation report opened the day early in the morning. The Tokyo Core Consumer Price Index (CPI) year-on-year (Y/Y), often viewed as a leading indicator for the National CPI in Japan, was projected to tick lower to 2.4% from the previous reading of 2.5%. In recent news, the Nikkei reported that the Bank of Japan (BOJ) is considering raising interest rates in either July or October. However, last night the Tokyo Core CPIP remained unchanged at 2.6% YoY in March, so there’s no reason for the BOJ to change anything right now.

Later the US PCE YoY will be released, which is predicted to remain unchanged at 2.4%, while the MoM measure is expected to be 0.4%, up from 0.3%. The Core PCE YoY is predicted to be 2.8%, up from 2.8% last year, while the MoM reading is expected to be 0.3%, up from 0.4% the previous year. Forecasters can properly estimate the PCE once the CPI and PPI are out, so the market is already aware of what to expect. We may witness a miss, however, as Fed Chair Powell stated during his press conference about the February PCE: “We have it well below 30bps on core PCE”.

Yesterday there were a few reversals, with the USD continuing to gain in the Asian session, but it reversed lower during the European session, which was reversed again in the Asian session. We opened several trading signals, however only two trading signals closed as the trading ranges weren’t big, both of which hit the take profit target.

Gold experienced a significant surge on Wednesday, climbing $40 to reach $2233, marking its first daily close above the $2200 milestone. This rally is notable from a technical standpoint as it is characterized by an upside-down head and shoulders pattern. According to technical analysis, this pattern typically indicates a bullish reversal, with a target price projection of $2500. Given the recent strong advance in gold prices, this target price is not too far off. The breakout above the $2200 level and the formation of the upside-down head and shoulders pattern suggest that bullish momentum is strengthening in the gold market.

The weakening of the yen against the US dollar, leading to USD/JPY approaching record highs near 152 for the third time, suggests ongoing strength in the US dollar and weakness in the yen. This trend may indicate a potential breakout above the record highs in the USD/JPY exchange rate. The decision by the Bank of Japan (BOJ) to refrain from making further moves after raising interest rates last week indicates a stance of monetary policy stability. This stance likely contributes to a low risk premium for yen shorts. Yesterday we opened a buy USD/JPY signal but it remains open.

The BITCOIN price has once again surpassed $70,000 today, continuing its remarkable rally since October. However, despite this upward trend, there are challenges in maintaining the price above $70,000, suggesting the emergence of a near-term peak. This difficulty in sustaining higher levels could indicate a potential short-term reversal. Moreover, analysis of the daily chart suggests the formation of a bearish reversal pattern, adding to the indication of an impending decline. This pattern implies that the bullish momentum driving Bitcoin’s price higher may be waning, potentially leading to a corrective move downward. If this bearish pattern materializes and the price of Bitcoin begins to decline, traders may find opportunities to profit from short-term downward movements in its price.

ETHEREUM has demonstrated significant support at the 50-period Simple Moving Average (SMA) on the daily chart, highlighted in yellow, indicating the significance of this technical level in guiding price movements. Despite experiencing a negative reversal after surpassing the key milestone of $4,000, Ethereum managed to establish support at the 50-period SMA. This support attracted buyers, leading to a subsequent increase in price. However, it’s worth noting that the 20 SMA (grey) is acting as resistance, hindering further upward movement. Additionally, following an upside-down pin formation on Tuesday, the price began to reverse yesterday, signaling a potential shift in momentum. These technical indicators suggest a period of consolidation and potential reversal for Ethereum in the short term.