Yesterday’s Market Wrap

The FED rate decision kicked off the rate hike bonanza on Wednesday evening, after 50 basis points (bps) hike, which was a slowdown after several 75 bps hikes in the last few meetings. Although, more important were the comments from Jerome Powell on the future path after the slowdown in consumer inflation CPI. Markets took Powell’s comments as less hawkish than expected, which sent the USD lower and risk assets higher, but during the first two trading sessions, yesterday markets reversed as risk turned negative before 3 other central banks started their meetings.

The Swiss National Bank (SNB) was the first to raise rates by 50 basis points and chairman Jordan comments that further rate hikes cannot be ruled out. The Bank of England (BOE ) followed with a 50 bps hike as well, although votes split 7-2 in favour of raising rates to 3.50%, while Tenreyro and Dhingra who dissented argued that 3% rates are “more than sufficient” to bring inflation back towards 2%, which is dovish for the GBP. The European Central Bank (ECB) was the last major central bank to raise rates by 50 bps and closed the most hawkish year for central banks. President Lagarde said that “the ECB says will need to raise rates significantly” which is a hawkish signal, which sent the Euro higher, but risk sentiment closed off negative.

Today’s Market Expectations

Today started with the GfK consumer confidence form the UK which remains deeply negative, while the manufacturing and services PMI reports showed that these sectors remain in contraction in the country, which will send Britain into a recession in 2023 probably. The manufacturing and services sectors also remained in contraction in the Eurozone in December, while the final consumer inflation numbers for November remained unchanged with the headline CPI number at 10.0% and core CPI at 5.0%. Later the US flash services and manufacturing PMI reports will close the day and the year.

Forex Signals Update

Yesterday the volatility picked up during the Asian session as the reversal in the USD began and risk assets dived lower. We were long on some risk assets after Jerome Powell sounded less hawkish in the previous day, but the situation reversed overnight and the sentiment remain bearish for risk assets, so we closed the day in breakeven with three wining and three losing signals, but are well in profit for the week.

EUR/USD Approaching 1.07

EUR/USD surged from 1.0530s to 1.0670s as traders got excited after the soft US CPI inflation report on Wednesday but the surge stalled there ahead of the FED and ECB rate decisions. The ECB sounded more hawkish than the FED and this pair jumped to 1.0735 yesterday and we opened a buy signal just above 1.07, with take profit target below the high, so that trade closed in profit.

EUR/USD – 60 minute chart

 GOLD Testing the 100 SMA

Gold has been bullish since early November and kept pushing higher, reaching above $1.820 after the FED rate hike. But then we saw a reversal and the negative sentiment yesterday sent it even lower to the 100 SMA (green) on the H4 chart, which has been acting as support. We decided to open a buy Gold signal down there yesterday.

US Oil – 240 minute chart 

Cryptocurrency Update

Cryptocurrencies were displaying bullish pressure after reversing late last month, following the FTX drama in the crypto market. The sentiment has improved in financial markets as central banks start to slow down and the bullish momentum continued this week, especially after the slowdown in US inflation, but yesterday we saw a strong bearish reversal after the FED rate hike.

The 200 SMA Resisting As Support for BITCOIN

Bitcoin turned quite bullish this week after being on an uptrend since last month. Buyers pushed above the resistance zone around $17,200-300, which was stopping buyers for several weeks and we booked profit on our buy BTC/USD signal as BTC moved above $18,300. But then came the reversal after the FED rate hike and sellers continued to push lower yesterday although let’s see if moving averages will hold as support.

BTC/USD – 60 minute chart

ETHEREUM Heading for the 200 SMA 

Ethereum has been trading sideways since early November with a resistance zone forming around $1,300. Although buyers pushed above that resistance area and moving averages have turned into support on the H4 chart although let’s see if the area around $1,300 will now turn into support as well.

ETH/USD – 240 minute chart