Forex Signals Brief for August 29: Powell Leaves the Door Open for Strong Rate Hikes
Last Week’s Market Wrap
Last week there was plenty of uncertainty in the markets, with the economic data showing a slowdown in recent months, as prices keep increasing while central banks keep raising interest rates pretty fast. Central banks have been giving signs of slowing down with rate hikes, which has been keeping the market guessing for the near future. Last week’s data showed that manufacturing activity continues to slow worldwide, although the global economy is more stable than previously thought.
US services did dive further in August, but the broader US economy overall remains stable. So, the attention shifted to the Jackon Hole Symposium where a number of central bankers spoke about the economy. There was a dovish tilt in the markets before Powell’s speech, as the PCE inflation numbers came in soft. That was validated by FED member Bostic who said that this report made him lean more slightly towards 50 bps in September.
However it all came undone with Powell and the risk sentiment turned negative, while the USD turned higher. He delivered an 8-minute speech that included strong language on holding rates higher for longer and taking ‘forceful’ action, which is a tool he hasn’t used before, which is a bullish signal, even though saying that September was still undecided as they wait for data.
This week we have the CPI (consumer price index) inflation numbers coming out from the Eurozone, which is expected to show another increase, taking the annualized number to 9.0%. That would be another reason for the ECB to deliver another 50 bps (basis points) rate increase in September, although the manufacturing reports on Wednesday should indicate whether the economy can support more hikes like that. In the US, the manufacturing, employment, and consumer confidence data is expected to show that the US economy is still holding on.
Forex Signals Update
Last week we opened 26 trading signals in total, about half of which were forex signals, while the rest were signals in Gold, Silver, Oil, stock indices, cryptocurrencies etc. We had five losing signals, and 21 winning trades, giving us an 82/205 win-loss ratio.
Selling GOLD
Gold has been on a bearish trend for most of the month, so we have been keeping a bearish bias and most of our Goldsignals have been sell trades. We have had the occasional buy Gold signal, but we remain bearish on Gold and will keep selling it next week, as the USD is gaining momentum again.
XAU/USD – 240 minute chart
Remaining Bearish on EUR/USD
EUR/USD traded sideways most of last week, after being quite bearish the previous week. It traded above and below the parity level although closed the week below it after turning bearish on Friday, following Jerome Powell’s comments, so we will keep selling this pair as well.
EUR/USD – 60 minute chart
Cryptocurrency Update
Cryptocurrencies were trying to crawl higher after the crash the previous weekend, but it seems like sellers returned once again and send the crypto market another leg down. The reason for this might be the bearish reversal in risk sentiment which has sent risk assets lower, including cryptocurrencies.
ETHEREUM Slipps Below the 100 SMA
The retreat in Ethereum stopped at moving averages, which turned into support and held the price pretty well. Since then Ethereum has been moving higher and although the climb seems slow, it has gained more than other major cryptocurrencies, moving above $1,700 yesterday, so our signal here is well in profit.
ETH/USD – Daily chart
[Bitcoin]] Falls Below $20,000
Bitcoin formed an ascending range as buyers remained in control for two months, following the last crash in June. We kept buying BTC at the bottom of the range, but buyers gave up when the price reached the 100 SMA (green) on the daily chart and BTC broke the range to the downside. We were looking to buy close to $20,000, but the buying pressure remains really weak so we stayed on the sidelines after the break below $20,000.
BTC/USD – Daily minute chart