Forex Signals Brief for November 3: Stocks Down, USD Up on Higher Top for Rates
The FOMC statement sent the USD lower yesterday, but the press conference from Powell reversed everything as the terminal top goes higher
Yesterday’s Market Wrap
Yesterday was the big moment markets had been waiting for, since the FED had given hints lately that they were going to slow down with rate hikes and pause at some point not too far away. Markets were anticipating another 75 basis points (bps) hike which the FED delivered, so that wasn’t the important moment, but rather the layout of the future path. Expectations were for a 50 bps hike in December and a 25 bps hike early next year, with the terminal top at 5.03% according to bookies.
Initially, the USD tumbled 60 pips lower and risk assets such as stock markets rallied higher after the release of the statement. It said that it will “take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation.”
Markets took that as a sign of a slower pace of hikes. But in the press conference, Jerome Powell signalled a higher terminal top for rates which now stands at 5.07% and also said he wasn’t worried about overtightening. That reversed everything and sent EUR/USD 200 pips lower from below parity while stock markets suffered some heavy losses as well.
Today’s Market Expectations
Today will be all about the post FED reaction, so we’ll see how markets chew yesterday’s comments from Powell, whether the bullish momentum in the USD will continue or if it will stall. US ISM services might have some impact on the USD and the sentiment later in the day as Powell left the rate decision to the data once again. Before that though, the Bank of England will hold its meeting and it is expected to deliver a 75 bps rate hike, so we’ll see how the GBP reacts.
Forex Signals Update
Yesterday the volatility leading to the FOMC meeting was low, slightly in favour of the USD, as markets were anticipating a more hawkish FED. We didn’t open any trading signals after the rate decision as the volatility increased but opened four signals during the European session, three of them closed in profit.
Remaining Bearish on EUR/USD
EUR/USD surged higher last week as the USD was declining, but reversed after the ECB meeting and the rate hike, as the ECB signalled a slowdown. The FED is keeping up the pace on the other hand, so the bearish momentum is getting stronger here, especially after yesterday’s reversal. We opened a sell forex signal here yesterday, which closed in profit.
EUR/USD – H1 chart
Booking Profit on EUR/GBP
EUR/GBP surged higher in September as UK gilt yields surged higher too, sending the GBP crashing lower. Although, with the Bank of England intervening this pair has reversed lower and has been bearish since then. Yesterday we decided to open a sell forex signal here as buyers were failing at the 20 SMA (gray) and booked profit as the decline resumed.
EUR/GBP – 240 minute chart
Cryptocurrency Update
Cryptocurrencies turned bullish early last week, as the sent9iment improved, which was followed by another push higher toward the end of the week as Elon Musk took over Twitter, sending Dogecoin higher, which pulled up other cryptocurrencies. Although they were not pushing any higher and yesterday they turned lower after Powell’s comments turned the sentiment negative.
BITCOIN Falls Below the 50 SMA
Bitcoin finally made a bullish breakout of the range which had been confining the price for a couple of months. BTC/USD moved above $21,000, although buyers have failed to make further gains in recent days which was a bearish signal and yesterday sellers pushed below the 50 SMA (yellow) on the H4 chart which had provided support previously. So we’re holding on to our sell BTC signal, which is in profit now.
BTC/USD – H4 chart
Will $1,500 Hold As Support for ETHEREUM?
Ethereum made some decent gains last week, surging from around $1,250 to $1,650, as the crypto sentiment improved while the USD was retreating lower. But, the reversal came and yesterday buyers pushed ETH below the 50 SMA. Although, we’ll see if $1,500 will hold as support once again.
EUR/USD – H4 chart
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