US Dollar clings to gains ahead of PCE inflation in thin-trading day

• The US Dollar has been trading near the fresh high of March. 
• Traders are enjoying a bank holiday despite the release of US economic data. 
• The US Dollar Index has 105.00 in reach. 

The US Dollar (USD) never sleeps and that proverb certainly applies to this Friday. The Greenback holds onto recent gains on Good Friday, a bank holiday during which European and US trading desks will be running at minimum capacity. This could mean fireworks ahead as thin liquidity in market conditions will be met with pivotal economic data from the US. 

That pivotal piece of data is the US Federal Reserve’s preferred inflation gauge: The Personal Consumption Expenditure Price Index (PCE). There are chances for another red hot print after the latest Consumer Price Index (CPI) data also beat expectations. Although he will not be bringing any Easter eggs, US Fed Chairman Jerome Powell is set to speak later this Friday and he may be bearing a surprise. 

Daily digest market movers: Looking for clues before looking for chocolate eggs

• At 12:30 GMT the main data release to look out for:
  • Personal Consumption Expenditures for February:
    • Headline monthly PCE seen heading from 0.3% to 0.4%.
    • Headline yearly PCE is expected to head from 2.4% to 2.5%.
    • Core monthly PCE is expected to head from 0.4% to 0.3%.
    • The core yearly PCE Index should remain stable at 2.8%.
  • The US Goods trade balance for February will also be published after reporting a  $91.6 billion deficit in January. 
  • Personal Income is expected to increase 0.4% in February, slowing from 1% rise seen in January.
  • Personal Spending should rise from 0.2% to 0.5%.
  • Wholesale Inventories data for February will be released as well. In January, inventories fell by 0.3%..
• At 15:15 GMT, Federal Reserve Bank of San Francisco President Mary Daly will kick off the Federal Reserve Bank of San Francisco Macroeconomics and Monetary Policy Conference. She will be followed by a statement from Fed Chairman Jerome Powell at around 15:30 GMT. 
• Equities will not be moving this Friday with both Europe and US markets closed. 
• According to the CME Group’s FedWatch Tool, expectations for the Fed’s May 1 meeting are at 95.8% for keeping the fed funds rate unchanged, while chances of a rate cut are at 4.2%.
• The benchmark 10-year US Treasury Note trades around 4.20%, up from 4.18% earlier this week. 

US Dollar Index Technical Analysis: Again, you don’t fight the Fed

The US Dollar Index (DXY) is making its way to a possible fresh high for March seeing its current positioning just below it at 104.72. The US Dollar bulls are clearly back in the game with a four-day winning streak for the Greenback. Although expectations around the PCE numbers are already in favor of an uptick, the magnitude of that uptick could fuel a substantial US Dollar rally amid exceptionally thin liquidity in markets.  

That first pivotal level for the DXY at 104.60, where last week’s rally peaked, has been broken.  Further up, 104.96 remains the level to beat in order to tackle 105.00. Once above there, 105.12 is the last resistance point for now before the Relative Strength Index (RSI) will trade in overbought levels. 

Support from the 200-day Simple Moving Average (SMA) at 103.75, the 100-day SMA at 103.48, and the 55-day SMA at 103.72 are unable to show their importance as support because traders didn’t wait for a drop to those levels for a turnaround. The 103.00 big figure looks to remain unchallenged for longer, after the decline in the wake of the Fed meeting last week got turned around way before reaching it.