Forex Signals Brief for July 22: Services and Manufacturing Heading Into Recession?

Yesterday’s Market Wrap

Yesterday started with the Bank of Japan rate decision, which didn’t change, as expected, keeping them at -0.10%. Governor Kuroda said that a large rate hike would be needed to stop yen weakness, but that didn’t help the JPY much, since traders were focused mostly on the rate decision from the European Central Bank (ECB).

The market consensus was for a 25 bps raise, but the ECB delivered a larger hike, with the main refinancing rate 0.50% vs 0.25% expected, up from 0.00%, the deposit facility rates also went up to 0.00% vs -0.25% expected from -0.50% previously and the marginal lending facility 0.75% vs 0.25% prior. That sent the Euro and all other risk assets higher against the USD, but it didn’t last long as we had anticipated and the Euro lost all the gains after ECB president Christine Lagarde said that they are accelerating hikes, but are not changing the final level.

Today markets are still in the aftermath of yesterday’s ECB rate decision. Although we have some important data being released today. Australian services remained soft, as the report released early in the Asian session showed. A short while ago the Eurozone and UK services and manufacturing reports were released and they were soft as well, indicating that Europe is heading into a recession, but it’s not quite there yet. Later in the US session, we have the retail sales report to be released from Canada, as well as the US manufacturing and services PMI reports.

Forex Signals Update

Yesterday the volatility was not extremely high as we are used to seeing in recent times, but the price action was in both directions, which made it difficult to trade in most markets. As a result, we ended up with two winning and two losing signals, after opening four forex signals in commodities and forex.

AUD/USD – Buy Signal

AUD/USD reversed higher on Friday last week and continues to move higher, as the sentiment remained positive after the ECB rate hike decision. Yesterday we saw a dip to the 100 SMA (green) on the daily chart and we decided to open a buy signal, which closed in profit the 100 SMA rejected the price and buyers pushed this pair higher eventually.

AUD/USD – 60 minute chart

GOLD – Buy Signals

Gold made a bullish move yesterday, as the USD retreated lower. XAU/USD has been bearish since March but the decline yesterday stalled right at the support zone below $1,700. Gold reached that level just as the USD turned bearish due to the sentiment improving after the ECB hiked rates yesterday. We opened two buy signals and closed  one in profit and another one in loss.

XAU/USD – Daily chart

Cryptocurrency Update

Cryptocurrencies continue to display bullish momentum as the dips are finding decent buying pressure, which is the opposite of what we have seen since November. We saw a small retreat in the last few sessions, but yesterday buyers came back again and stopped cryptocurrencies from turning bearish.

The 20 SMA Pushing BITCOIN Up

Bitcoin has been bearish since November and moving averages have been doing a good job in keeping it down. Although now it seems like buyers are in control, as they pushed the [rice above the 50 SMA (yellow) on the daily chart. The resistance zone has also been broken, although we can’t say that they are bullish yet.

BTC/USD – Daily chart

ETHEREUM Facing A Major Resistance at $1,700

Ethereum has been showing some bullish signs after consolidating in a range for a month. Smaller moving averages such as the 20 SMA (gray) and the 50 SMA (yellow) have been acting as resistance at the top, but yesterday the price pushed above the 50 SMA which could be the beginning of a larger bullish reversal, although we have to see how fundamentals/politics evolve in the crypto market.

ETH/USD – Daily chart