U.S. Dollar Moves Higher As PCE Price Index Exceeds Estimates: Analysis For EUR/USD, GBP/USD, USD/CAD, USD/JPY

U.S. Dollar Moves Higher As PCE Price Index Stays At 3.7%

U.S. Dollar Index gains ground as traders focus on economic reports. GDP Growth Rate was +1.5% in the second quarter, in line with analyst estimates.

PCE Price Index remained unchanged at 3.7% in July, while analysts expected that it would drop to 3.6%. PCE Price Index is Fed’s favorite inflation gauge, so the report provided material support to the American currency as traders worried about potential rate hikes.

FedWatch Tool indicates that there is a 40.1% probability that Fed will raise the federal funds rate at the next meeting in September. The market believes that Fed will start the rate hike cycle in October.

The nearest resistance level for U.S. Dollar Index is located in the 99.25 – 99.40 range. If U.S. Dollar Index manages to settle above the 99.40 level, it will head towards the next resistance at 100.00 – 100.15.

EUR/USD Pulls Back As Traders Reduce Bets On Dovish Fed

EUR/USD moved away from recent highs as traders focused on economic reports from the U.S.

Personal Income increased by +0.4% month-over-month in July, compared to analyst forecast of +0.2%. Personal Spending grew by +0.2%, while analysts expected that it would increase by +0.1%. Strong Personal Income and Personal Spending reports provided additional support to the American currency.

In case EUR/USD settles below the 50 MA at 1.1639, it will move towards the nearest support at 1.1600 – 1.1615. RSI is in the moderate territory, so there is plenty of room to gain additional downside momentum in the near term.

GBP/USD Retreats As Traders React To U.S. Inflation Data

GBP/USD is losing ground as traders focus on changes in Fed policy outlook, which were caused by today’s PCE Price Index report. Worries about hawkish Fed put pressure on the British pound.

Currently, GBP/USD is trying to settle below the 50 MA at 1.3599. In case this attempt is successful, GBP/USD will head towards the support level at 1.3550 – 1.3565. A successful test of the support at 1.3550 – 1.3565 will open the way to the test of the next support level, which is located in the 1.3470 – 1.3485 range.

USD/CAD Moves Higher As Precious Metals Markets Pull Back

USD/CAD gains ground as traders react to the pullback in precious metals markets, which was triggered by U.S. economic reports. Other commodity-related currencies are mixed in today’s trading session.

USD/CAD is moving towards the nearest resistance level at 1.3900 – 1.3915. If USD/CAD climbs above the 1.3915 level, it will head towards the next resistance at 1.3985 – 1.4000.

USD/JPY Gains Ground As Treasury Yields Rise

USD/JPY is moving higher as traders focus on rising Treasury yields. The yield of 2-year Treasuries climbed above the 4.22% level, while the yield of 10-year Treasuries moved above 4.66%. It should be noted that USD/JPY bulls remain cautious amid risk of intervention from the Bank of Japan.

A successful test of the resistance at 159.50 – 160.00 will push USD/JPY towards the next resistance at 161.50 – 162.00. The key question is whether BoJ is ready to intervene in case USD/JPY climbs above the psychologically important 160.00 level.

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