Forex Signals Brief August 20: Canada Inflation to Continue Falling
Today the highlight of the day is the CPI inflation data from Canada, which is expected to tick down in June on an annualized basis.
Even though it was one of the quietest news days of the year regarding the economic calendar, the market remained active, with the recent trend of USD selling persisting, particularly against the Yen. During the Asian session, USD/JPY dropped by roughly 3 cents as it tumbled to 145 lows, but retraced most of the losses during the day.
The euro took full advantage of this dollar weakness, climbing to levels not seen since November and closing near the day’s highs. Most markets are continuing to recover from the early-August decline, with US stocks nearly back to their target levels. Following this trend, the British pound (Cable) also rebounded, returning to mid-July levels after gaining another 40 pips today.
This Week’s Market Expectations
The People’s Bank of China (PBoC) is expected to keep the 1-year and 5-year Loan Prime Rates (LPR) steady at 3.35% and 3.85%, respectively. This expectation stems from the fact that the central bank made significant interest rate cuts last month and is unlikely to adjust them again soon.
In Canada, the upcoming CPI data is also under close watch. The month-over-month CPI is expected to rise by 0.4%, compared to a previous decline of -0.1%, while the year-over-year CPI is forecasted to drop slightly to 2.5% from 2.7%. The Trimmed Mean CPI, the main inflation measure tracked by the Bank of Canada (BoC), is anticipated to decrease to 2.8% year-over-year, down from 2.9%. The market is currently pricing in a 98% probability of a 25 basis point rate cut in September, with expectations of a total 75 basis point easing by the end of the year. If inflation data this week comes in lower than expected and economic activity continues to show signs of weakening, the BoC is likely to implement another 25 basis point rate cut at its September meeting.
Yesterday markets were quiet in the first two trading sessions, with the USD on the retreat again, but it picked up further pace during the US session. Although, there weren’t many trading opportunities, so we only opened two trading signals, both of which against the USD and both closed in profit, so we ended up with two winning forex signals for the day,
Gold Holds Above $2,500
Every dip in gold prices has been met with strong buyer interest, signaling a robust upward trend and suggesting that the recent breakout might continue. Global demand remains a key driver behind gold’s price increase. In India, physical gold purchases have seen a slight uptick due to price adjustments, while in China, rising premiums reflect a growing demand for gold as a safe-haven asset. On Friday, gold (XAU/USD) surged to a new all-time high of $2,500, surpassing the previous peak of $2,483.74 set in July. This rise was largely driven by the weakening US dollar and a decline in building permits and housing starts in the United States.
XAU/USD – Daily chart
EUR/USD Heads for the 200 Weekly SMA
The EUR/USD pair has shown resilience this week, holding onto the gains from last week’s move above 1.10. The pair is now approaching the December 2023 high of 1.1150, where the 200-weekly SMA is acting as resistance. The Euro has benefited from a wave of risk appetite, capitalizing on a weakening USD and softer US economic data while largely ignoring the ongoing economic challenges in Europe.
EUR/USD – Weekly Chart
Cryptocurrency Update
Bitcoin Sticks to $60k for the Moment
In the cryptocurrency market, Bitcoin experienced a sharp drop by midweek, falling about 3% to the $57,700 range, which led to significant losses across the broader market. Earlier in the week, Bitcoin briefly surged to $61,830, driven by excitement over Bitcoin exchange-traded funds (ETFs) and major investments from large financial institutions like MicroStrategy. However, despite these gains, Bitcoin’s price remains volatile, hovering around $60,000.
BTC/USD – Daily chart
Ethereum Climbs Above the 20 Daily SMA
Ethereum has also been on a downward trend since March, with lower highs indicating potential further declines in August. In June, Ethereum’s price fell from $3,830 to below $3,000. Although buyer pressure briefly pushed the price above the 50-day SMA, persistent selling pressure led to another bearish reversal. The price dropped below the 200-day SMA but then rebounded from a low of $2,000, rising above $2,600 and breaking through the 20-day SMA.
ETH/USD – Daily chart
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