This morning at 8:30 am Eastern Time, the United States’ Bureau of Economic Analysis released even more bullish USD news. The Core Personal Consumption Expenditures (PCE) Price Index, which measures changes in prices for consumers (excluding volatile food and energy prices), rose more than expected month-over-month. A 0.5% increase was expected for August, with 0.6% being the result today; while a 0.1% margin may not seem incredibly significant at face value, it is especially noteworthy because this is the Federal Reserve’s favorite measurement of inflation. This will likely further embolden the Fed in their assumption that more interest rate hikes are necessary to cool a severely overheated US economy.
Best Pairs to Trade
The following pairs are ranked by the EdgeFinder, A1 Trading’s market scanner tool that provides supplemental analysis, as optimal pairs to watch for those who are bullish on USD. They are listed below with their respective ratings and biases, as well as some additional fundamental and technical analysis.
1) EUR/USD (Receives a -6, or ‘Strong Sell’ Signal)
As can be seen in the line items given for the EdgeFinder score summary above, the US Dollar beats the Euro in all listed categories except retail sentiment and GDP growth, with GDP growth being the Euro's only advantage. Sadly, this will likely not last long due to Europe's energy crisis, which has been exacerbated by this week's mysterious Nord Stream pipeline damage. This pair is on the verge of retesting both trendline and parity resistance, which could prompt a continuation of the downtrend.
2) GBP/USD (Receives a -5, or ‘Sell’ Signal)
Most of the categories listed above favor USD, while the Pound does have the upper hand in both GDP growth and unemployment. However, these two apparent victories for GBP are not what they seem, as the launching of UK Prime Minister Truss' growth-focused fiscal stimulus ambitions prompted a historic near-crash of the Pound earlier this week. Coupled with the Bank of England's subsequent dovish intervention and recent lukewarm efforts to mitigate inflation, there is little favoring GBP in terms of fundamentals. As with EUR/USD, a retest of resistance seems likely before the downtrend resumes.
3) USD/TRY (Receives a 5, or ‘Buy’ Signal)
All listed categories besides GDP growth and interest rate divergence favor USD. While these two factors favoring the Lira seem particularly significant, these line items are recontextualized in light of the tragic stagflation and hyperinflation that Turkey is contending with. With an astonishing 80% annual inflation rate, and unemployment over 10%, a 12% interest rate and recent positive Turkish GDP growth are sadly not enough to stop the Lira's crisis from transpiring. It appears we may see a breakout to the upside for this pair, followed by a potential retest of the 18.5 level as support.
Just before the scheduled shutdown at 12:01 am on Sunday, Congress voted to extend the deadline for another 45 days. Yields jumped higher to above 5.1% which has remained elevated for some time. As we enter an historically bullish month for the indices, here are some setups on dollar, gold and index setups EdgeFinder Analysis […]
GDP numbers came in lower than expected in the US, marking the third straight drop in economic output. This is usually good news for the stock market indices and gold, however, bond yields continue to hold up above 5.1%. Here are some potential trade setups for both dollar and index longs depending on how the […]
Hi, I’m Nick! I am the founder of A1 Trading, market analyst, YouTuber, and creator of the EdgeFinder software tool. I caught a huge winner on USoil with the help of the EdgeFinder! In this article, I’ll walk you through my thought process behind the trade and how I found this crazy runner! Finding My […]
