The sensitivity of extended X-ray absorption fine structure spectroscopy (EXAFS) for minute structural changes can be enhanced by combination with the modulated excitation approach and making use of phase sensitive analysis. A modulated EXAFS experiment of a reversible periodic Pd to PdO partial oxidation has been simulated in order to understand the effect of the phase sensitive analysis on the shape and meaning of the resulting phase-resolved EXAFS spectra. In particular, the simulation comprises either a synchronous or a delayed sinusoidal variation of the EXAFS parameters, i.e. coordination number (N), interatomic distance (R) and Debye–Waller factor (σ²), of first Pd–Pd, first Pd–O, and second Pd–(O)–Pd coordination shells. The effect of these variations on the resulting phase-resolved Fourier transform EXAFS spectra is discussed. The results of the simulation are validated by an in situ EXAFS experiment at the Pd K-edge over 1.6 wt% Pd/Al₂O₃ undergoing reversible partial oxidation in a H₂ vs. O₂ modulation at 573 K. It is shown that phase sensitive detection (PSD) is able to separate the minor contribution at ca. 2.8 Å corresponding to the growth of the Pd–(O)–Pd shell that is otherwise hidden under the static signal of the Pd–Pd shell of reduced Pd particles. The fitting of the phase-resolved EXAFS spectra suggests that the fast H₂ to O₂ switch leads the partial oxidation of the Pd surface with the formation of a PdO shell covering a metallic Pd core. Therefore, the dynamics of the full system can be described with greater detail than in conventional EXAFS. The intention of this work is to provide the tools and therefore a solid guidance to qualitatively and quantitatively understand the nature of the shape of phase-resolved FT-EXAFS spectra that may prove helpful in the analysis of a wide range of functional materials.