29.10.201812:25 Forex Analysis & Reviews: EUR / USD. Weak PCE summed up the dollar

The data published on Friday about the growth of the American economy left more questions than answers. The dollar's reaction was also ambiguous. After a sharp increase, the greenback weakened its position, which affected almost all dollar pairs. This fact saved the pair EUR / USD from slipping to annual minimums, and the price was able to return to the borders of the 14th figure. Today, the bulls tried to continue the "offensive", but the unresolved Italian issue stopped the northern dynamics.

Data on US GDP growth were very controversial. Most of the surveyed analysts expected a slowdown in the country's economy to 3.3% due to the effects of the trade war between the States and China. Exports really showed negative dynamics (decreased by 3.5% with an increase in imports by 9.1%), the tariff policy did not pass without a trace. But nevertheless, the growth of the economy turned out to be stronger than expectations. According to initial estimates, the figure rose to 3.5%.

This is lower than the results of the second quarter (4.2%), but higher than many previous quarters. The decline in exports was offset by an increase in consumer spending (and a significant increase, the maximum in the last four years) and an increase in investment. In general, according to experts, the annual growth of US GDP is likely to be the strongest over the past 14 years.

These figures could not go unnoticed, so the dollar index jumped to the level of 96.45 points, reaching the annual maximum. But then, the market turned to the inflation component of GDP, the basic price index of personal consumption expenditures. It is believed that this indicator is monitored by the Fed "with a special passion", so its negative dynamics in many ways leveled the positive from the Friday release. The indicator came out at the level of 1.6%, although experts expected growth to two percent from the previous level of 2.1%.

It is worth recalling that the overall inflation rate also disappointed traders, consumer prices in September fell to 0.1% after a weak growth of 0.2% in August. On an annualized basis, the consumer price index of only 2.3% is the weakest growth rate in the past six months. And although annual inflation is still at fairly high levels, a negative trend may alert the members of the regulator.

After the Friday release on the market, it was even said that the December rate hike might also be in question. At least, Fed members have reason to soften their rhetoric by emphasizing weak PCE and negative consumer price dynamics. This is an unlikely scenario, but even the minimal likelihood of its implementation makes market participants nervous, which is reflected in the positions of the US currency.

Another cause for concern is the situation in the stock market. On Friday, US stock indices fell by 1.5-2.1% due to weak financial reports, the likelihood of a slowdown in the global economy, and prospects for the Fed to raise interest rates further. This circumstance may also affect the determination of members of the Federal Reserve, especially against the backdrop of criticism of the American president. In addition, the Fed's Beige Book was published last week, where members of the regulator voiced concerns about the pace of foreign trade, and also noted a shortage of qualified personnel.

Such a fundamental background in the context of the euro-dollar pair does not yet allow the price to update the annual minimum. One should be especially careful with long positions when approaching EUR / USD to the bottom of the 13th figure. However, the pair of bulls cannot seize the initiative, as the Italian question is still not resolved. Therefore, the southern dynamics in the near future may be continued, but the decline is limited to 1.1301, this is the price minimum of the year.

In addition, the current trading week is full of events. NonFarm will be published, data on the growth of inflation in the euro area, the unemployment rate in the EU and the American consumer confidence indicator. Also expected to be representatives of the ECB and the Fed. Such a "bunch" of fundamental factors will provoke increased volatility in a pair, determining the vector of further price movement.

Technically, the pair is also ready to go towards the south. The price is located under all the lines of the Ichimoku Kinko Hyo indicator, which indicates the strength of the bearish pressure. It is also necessary to take into account that the pair is between the middle and lower lines of the Bollinger Bands indicator, also hinting about the advantage of the south. The immediate goal of the decline is the mark of 1.1350 (corresponding to the bottom line of the Bollinger Bands). Breaking through this support will open the way to the base of the 13th figure. The resistance level is the price of 1.1450, the Tenkan-sen line of the Ichimoku Kinko Hyo indicator.