USDJPY, EURUSD, AUDUSD

US Core PCE price index --> USDJPY                                                                          

Investors may turn their focus to the US core PCE price index for April on Friday, which is the Fed’s preferred measure of inflation. Following a period of stability at 2.8% y/y in March, there are indications that the core PCE rate may see a slight decrease, which is supported by the relaxation of the core CPI rate. Therefore, a decrease in the PCE rate, along with income and spending data indicating that inflation may continue to decrease in the future, could lead investors to reconsider their previous expectations of interest rate cuts. As a result, this might have a negative impact on the value of the dollar.

Technically, USDJPY is weakening its upside movement near the 156.75 barricade, remaining within a positive territory. A boost to the upside may take the pair until the 161.8% Fibonacci extension level of the downward wave from 151.95 to 140.20 at 159.13. Slightly higher, the 34-year high of 160.20 could be next attraction of the bulls, endorsing the bullish structure. Alternatively, a drop beneath the 23.6% Fibonacci level of the upleg at 140.20 to 160.20 at 155.50 and more importantly below the uptrend line may switch the outlook to neutral. The technical oscillators are confirming the recent horizontal move on price. 

Eurozone flash CPI --> EURUSD

Eurozone’s upcoming preliminary CPI figures for May, which will be released next Friday, are expected to hold major importance for traders. Based on the most recent PMIs, the rate of increase in production prices decreased in May and was the lowest since November 2023. The probability of a June interest rate reduction is increased by the prospect of lower inflation rates. Additionally, this may enable investors to add to their rate reduction bets after June.

EURUSD has been creating higher highs and higher lows in the near-term view, standing above the short-term simple moving averages (SMAs) and the 1.0800 psychological number. More increases could send the market until the immediate resistance of 1.0895 ahead of the 1.0940 hurdle. On the flip side, a successful drop below the ascending trend line and the 200-day SMA could open the door for a decline until the 1.0720 support, switching the bias to bearish again. The RSI indicator is moving sideways above the neutral threshold of 50, while the stochastic posted a bullish crossover within its %K and %D lines.

Australia monthly CPI --> AUDUSD

Australia publishes its monthly Consumer Price Index (CPI) figures on Wednesday. During its May meeting, the RBA decided to maintain its neutral posture, which was disappointing for those who were anticipating a more aggressive approach due to the fact that Australian inflation has been more persistent than anticipated. However, investors are currently estimating a likelihood of about 10% for an interest rate increase this year. Therefore, if the Consumer Price Index (CPI) data for April indicates that inflation stayed stable, the Australian dollar could continue to strengthen as speculators abandon any remaining expectations of interest rate cuts. The Australian dollar could be influenced by the Chinese PMIs for May, which will be released on Friday. 

In FX charts, AUDUSD is heading north after the bounce off the 0.6590 level, surpassing the 20-day SMA with the first battle coming from the 0.6635 bar. The latter level seems to a real struggle for traders as it failed several times to jump above it in the pass. Climbing higher, the 0.6710-0.6730 restrictive region could be the next major resistance to look for. In the negative scenario a slide below the 0.6590 could take the pair until the 50-day SMA at 0.6555 ahead of the 200-day SMA at 0.6530. The technical oscillators are moving higher, indicating more upside pressures.