Markets have moved back to focussing on fundamentals over the last few sessions and today’s US Core PCE Price Index data release is one of the blue riband US data events of the month. Expectations for a Fed rate cut in the coming months have pulled in strongly over the last few weeks and another low inflation print, from the Fed’s favoured inflation indicator could lock in a 25-basis point cut for the September meeting. Markets are currently pricing in a 75% chance of a cut in September but anything significantly lower than the expected 0.1% month-on-month increase in today’s print could see that number push a lot closer to 100% and even raise the chances of a July cut which are currently around 20%.
USDJPY could potentially provide one of the better long-term trading options for those looking at interest rate differentials as a Fed fully embracing an easing cycle could combine with a more hawkish Bank of Japan over the coming months to see the pair push into lower ranges. It has a turbulent month for USDJPY as geopolitical influences have seen it rally nearly 4% from its June 2 low before then falling over 2.5% to its current level just above 144.00. A weaker print today should see hourly trendline support around 143.50 challenged swiftly whilst a stronger print would take a July cut off the table completely and place a September cut in doubt and propel the pair back into recent ranges with the 200 Day Moving Average at 145.30 the first resistance level.
Resistance 2: 147.65 – Trendline Resistance
Resistance 1: 145.30 – 200 Day Moving Average
Support 1: 143.57 – Trendline Support
Support 2: 142.77 – 13 June Low
