Forex Signals Brief for August 1: RBA and BOE to Hike Rates by 50 bps

Last Week’s Market Wrap

We had some negative signs at the beginning of last week, as the business climate in Europe and consumer confidence in the US continued to weaken, according to the reports released on Monday and Tuesday. The CPI report on Wednesday morning showed that Australian inflation is at a multi-decade high, although that day was all about the FED meeting and the decision to rise interest rates by 0.75% as expected.

The USD continued to remain soft, especially after FED’s president Jerome Powell softened up his language on such steep monetary tightening that we have seen in recent months. The decline in the US Q2 GDP which puts the US in a recession, also weighed on the USD, while risk assets had mixed feelings, with stock markets going higher, as the odds of the FED delivering further strong rate hikes declined. Eurozone CPI inflation and the US PCE price index also showed further increases on Friday.

Today everything is about manufacturing, with the Chinese Caixin manufacturing report which was released early this morning, followed by Eurozone final manufacturing numbers for July and the US ISM manufacturing later in the afternoon, all of which were/will be weaker than previously, as this sector and services head into contraction.

The Reserve Bank of Australia (RBA) is anticipated to hike interest rates by 50 bps, taking them to 1.85% on Tuesday, as is the Bank of England (BOE) which is expected to take rates to 1.75% on Thursday. On Friday we close with the employment and earning reports from the US and Canada.

Forex Signals Update

This week was tough on forex as most pairs traded sideways, without a clear trend, although the sentiment was slightly positive for risk assets. We had 26 trading signals in forex, commodities, cryptocurrencies and indices, 19 of which closed in profit, while 7 closed in a loss, giving us a 73/27 win-loss ratio.

AUD/USD Buy Signals

This pair was on a bearish trend from early June until the middle of July, with the 50 SMA (yellow) acting as resistance at the top, on the H4 chart. But the trend reversed at the middle of last month and buyers have been in control since then.

Now moving averages have turned into support, particularly the 20 SMA (gray) which shows decent buying pressure, so we have been buying AUD/USD and most of our forex signals here closed in profit last week.

AUD/USD – 60 minute chart

GOLD – Signals

Gold continued to decline until the ECB meeting, with the 20 SMA (gray) acting as resistance, which means that the decline was quite strong earlier last month. But the situation shifted after that meeting and the FED meeting, as well as the recession in the US last week, gave more reasons for Gold to move higher. We opened many Gold signals last week, most of which closed in profit.

XAU/USD – H4 chart

Cryptocurrency Update

Cryptocurrencies continue to keep a slight bullish momentum for more than a month now, since the latest crash ended in the middle of June. Most cryptocurrencies have moved above the low moving averages, which means that buyers are still in charge although they have formed a bearish pattern in the last several days, so let’s see how this week will be.

ETHEREUM Failing at the 100 SMA Above the $1,700 Resistance

Ethereum has made a decent bullish attempt for more than a month, increasing from below $900 at some point, to above $1,700 last week, despite the Merge of PoS being delayed several weeks, probably until September. Although buyers are facing the 100 SMA (green) on the daily chart now. So, if we see a retrace lower, we will try to open a buy signal here.

ETH/USD – Daily chart

 BITCOIN Pushes Closer to $25,000

Bitcoin fell below $20,000 in June, but there has been no follow-through since then, which shows that the support zone is holding. BTC has been making higher highs and higher lows since then which is a bullish signal and last week buyers pushed above the resistance zone again, reaching $24,700, so we will try to buy the dips in BTC.

BTC/USD – Daily chart