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Having bounced around in ranges all week like a caffeinated squirrel, the dollar might just be ready to embark on a new trend. With the Fed playing a game of “Let’s See What the Data Says,” the April core PCE deflator is set to be the belle of the ball. If it deviates from the consensus 0.3% month-over-month reading, expect the markets to react like they just saw their favorite celebrity.Daily, policymakers and traders of all stripes and colors huddle over statistical abstractions to make important trading decisions. Sometimes, those abstractions are later revised and resemble the original data as much as a Picasso painting resembles reality. Let’s face it: approximations are the best we can do with macroeconomic aggregates in large economies. Precision? That’s a unicorn we’re all chasing.But treating these approximations as if they’re meaningfully precise down to the fourth, fifth, and sixth decimal places is like playing a game of darts in a pitch-black room. Or, if you’re trading around macro releases, it’s more like betting in a casino where the house always wins.If you’re keen on trading the month-end randomness, the dollar enters the release smack dab in the middle of this week’s range after yesterday’s slightly softer first-quarter US GDP revision dragged US rates lower across the curve. We can only say that the DXY has crucial support in the 104.35/40 area. A close below that would throw a wet blanket on this year’s dollar bull trend, which has been running at an impressive 8% annualized pace. Conversely, a hotter inflation print could propel the DXY to the 105.30/50 target.Stay tuned, and as always, keep your trading helmets on! After all, in this market, it’s better to be safe than sorry (or broke).More By This Author:US Market Rollercoaster: Between A Rock And A Hard Place
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