Core PCE, the Federal Reserve's preferred inflation gauge came in at 3.7% y/y, lower than the previous (and revised) month's 3.8% y/y. On a monthly basis the reading was 0.3%, which annualises to 3.66%, which is still higher than the Federal Reserve's target of 2%. Generally, these numbers matched market expectations.
Of interest, FXCM's USDOLLAR basket reacted by declining on the release. On the 30-minute chart, the USDOLLAR's green 5-period EMA has crossed below its orange 10-period EMA. EMAs are trend-following and if thy develop angle and separation to the downside, the USDOLLAR will be heading lower.
The stochastic has hinged (green rectangle) and is looking to cross down. If it does and then heads towards its lower quintile, there will be an underlying bearish momentum carrying the 30-minute chart.
The core PCE series is encouraging. The downtrend's momentum is still defined by the down sloping orange trendline. Moreover, the core PCE's rate of change remains firmly on the deceleration side of zero (green rectangle). The Federal Reserve's monetary policy is continuing to reduce inflation, albeit at a slow pace. If the technicals hold steady, we remain cautiously optimistic that inflation will continue to fall over time.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.