Despite the positive data from the US over the past few days, the US Dollar Index failed to rally, especially after yesterday’s data. Yet, this doesn’t mean that the short term outlook is bearish.
Core PCE Price Index Rises
The so-called core PCE price index in the United States, which excludes food and energy, went up 0.1 percent month-over-month in September 2017, the same pace as in the previous period and in line with market expectations.
Year-on-year, the core PCE price index rose 1.3 percent, the same pace as in the previous month and also in line with market consensus. The core PCE is the Fed’s preferred inflation measure. The central bank has a 2 percent target.
Personal Income
Personal income in the United States rose 0.4 percent month-over-month in September 2017, following a 0.2 percent gain in August and in line with market expectations.
The growth in personal income was mainly driven by increases in wages and salaries (0.4 percent from 0.1 percent in August) and nonfarm proprietors’ income (0.6 percent from 0.3 percent).
Personal Spending
Personal spending in the US jumped 1 percent month-over-month in September of 2017, after edging up 0.1 percent in August and beating market expectations of a 0.8 percent rise.
It is the biggest gain in personal consumption since August of 2009, mainly boosted by auto sales and utilities as households recover from damages caused by Hurricanes Harvey and Irma.
Short Term Positive Data
If you look back in to the numbers, the data suggested that the notable rise in spending came on the back of the recovery of the families after the Hurricanes Harvey and Irma, which means that such rise is likely to be limited for a month or two.
USD Bullish Outlook Remains Intact
As mentioned in our previous reports, the US Dollar Index has confirmed a bullish head and shoulders pattern on the daily chart (inverted).
Yesterday’s decline could be seen as a short term retracement after breaking the neckline as shown on the chart. Such decline is likely to be limited above that neckline which stands around 94.30’s. As long as the index continues to trade above that support, the bullish outlook is here to stay.
On the upside view, 95.0 is the next immediate resistance, which should be watched very closely, as a break above that resistance, would clear the way for the next resistance area, which stands at 95.50 followed by 96.00 and 96.30.
Edited by:
Nour Eldeen Al-Hammoury
Market Analyst
