The US dollar was mixed yesterday as the PCE data showed a 0.2% increase on the core or 1.5% on a year over year basis. This was below the Fed’s 2.0% inflation target rate. However, personal income and spending both managed to post some modest gains, rising 0.4% on both as forecast.
The euro spiked higher back to $1.1200 before giving up the gains. The rally came on speculation that the ECB could remove the easing bias when it meets in June with the possibility of announcing further tapering as early as September. The euro, however, gave up the gains towards the close.
The monetary policy makers in the US, however, were slightly dovish with Lael Brainard saying that the soft inflation could lead her to reassess the path for monetary policy.
Looking ahead, the Eurozone’s flash inflation estimates for May will be released today with expectations showing a modest decline following an increase in April. In Canada, the GDP numbers will be coming out for March with forecasts showing a 0.3% increase on a month over month basis.
EURUSD intraday analysis
EURUSD (1.1245): On the daily chart, EURUSD is currently looking to breakout from the bullish flag pattern. Price is currently testing the higher closer at 1.1236 from May 22, and a successful bullish close above this level could trigger further upside.
The minimum upside is expected to see EURUSD push to 1.1338 and 1.1467, marking the 127.2% and 161.8% targets of the bullish flag pattern. However, on the 4-hour chart, the mini-pitchfork shows that price could be at risk of a pullback. Support is seen at 1.1200. The bullish flag pattern remains intact up to 1.1160. Only a break down below this level will trigger further downside in price.
GBPUSD intraday analysis
GBPUSD (1.2868): The British pound is likely to post a head and shoulders pattern on the daily chart, but this pattern is still evolving. Support has been firmly established at 1.2800, while the current bounce could see price likely to reverse around 1.12950 region.
A reversal here is to be expected followed by a test back to 1.2800. A break down below 1.2800 could trigger the head and shoulders pattern which puts the minimum downside target to 1.2600. On the 4-hour chart, the upside bounce could see price test the minor support that was broken at 1.2937 where resistance could develop. Failure to reverse near 1.2950 – 1.2937 will see 1.3000 being tested once again and will invalidate the head and shoulders pattern.
USDJPY intraday analysis
USDJPY (110.95): The U.S. dollar fell back to 110.79 support against the yen. Price action is seen currently attempting to push higher. The symmetrical triangle on the 4-hour chart suggests that the upside could continue.
Watch for the breakout from the minor falling trend line to suggest the upside move. A successful breakout will keep USDJPY supported to the upside with the target of 112.50 likely coming into focus. However, there are also some risks to the downside. Failure to hold the consolidation at 110.79 support will mean a possible break down lower. This will put USDJPY on thepath to test the lower support at 110.00.
