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Markets are convinced inflation is under control

Forex Signals Brief for October 13: Markets Fearing A Strong US CPI Consumer Inflation Reading

Posted Thursday, October 13, 2022 by
Skerdian Meta • 3 min read

Yesterday’s Market Wrap

After the bearish turn in risk sentiment on Tuesday on Bank of England comments to end the bond buying operations at the end of this week, yesterday we saw calmer tones in financial markets. Markets traded mostly sideways, in a tight range apart from the JPY which continued to decline, as traders play the chicken game with the Bank of Japan. As a result, USD/JPY got pretty close to 147.

UK 10-year gilt yields surged above September’s high, reaching 4.633% even though the BOE leaked the idea of continuing with purchases despite what Bailey said yesterday. UK GDP numbers in the morning showed a contraction for the UK economy during August, which is another negative factor for the GBP. The US PPI inflation came above expectations for September, which is a sign of today’s CPI consumer inflation. The FOMC meeting minutes were more balanced than the strident Fed hawkishness.

Today’s Market Expectations

After yesterday’s positive producer inflation PPI report today traders might be more prepared for a positive CPI number. Last month, traders were caught leaning towards a softer CPI number on the way to the inflation release. When it surprised to the upside instead, traders were caught on the wrong side. That’s one to keep in mind and I think that even the bulls will want to see the numbers before making a move. The US unemployment claims are also to be released at the same time as the CPI report, so we’ll keep an eye there as well.

Forex Signals Update

Yesterday the volatility declined further as we approach the release of the US inflation report, although we managed to open four trading signals. Three of them were forex signals while the other one was an Oil signal, where we caught a nice move. We remained long on the USD, especially on GBP/USD, which was a good strategy.

Selling WTI Oil at the 100 SMA

Oil was remaining bullish until the end of last week despite the reversal in risk assets, but it turned bearish on Monday and has been bearish for three days. Yesterday we decided to open a sell Oil signal as it was being rejected by the 100 SMA (green) on the H1 chart, which closed in profit as the price fell lower on Biden’s comments for further Oil production.

US Oil – 60 minute chart

Remaining Short on GBP/USD 

GBP/USD has turned bearish again as UK bond yields keep surging and we have been bearish on this pair. Yesterday the pressure was mostly to the upside, but we decided to push two sell trades, both of which closed in profit as MAs rejected the price initially.

GBP/USD – H1 chart

Cryptocurrency Update

Cryptocurrencies continue to trade in a range, bouncing up and down without any direction. They are waiting for further development regarding the war on cryptocurrencies and the legal battle between the SEC and Ripple Labs, which will be an industry-defining case.

$19,000 Holding for BITCOIN

Bitcoin was softening in recent days falling to $19,000 from above $20,000, although it seems like this zone has formed a support area and sellers are finding it difficult to push the price below it. We are thinking about opening a buy BTC signal around here, since buyers are trying to push the price above the 50 SMA (yellow) as well.

BTC/USD – H1 chart

The 50 SMA Still Holding for XRP/USD  

Ripple has been bullish since the middle of last month, surging above $0.50 last week, as the lawsuit against the SEC saw some developments. The price has retreated, so the bullish momentum coned lower a couple of times, but the 20 SMA (gray) has turned into support, holding the price, while the 200 SMA (purple) turned into resistance for some time. Although last week we saw a breakout of the triangle to the upside so the bullish momentum continues.

XRP/USD – Daily chart
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