FED's Powell will be under a lot of pressure today

Forex Signals Brief for February 2: USD Falls on Powell’s Rate Cut Comments

Posted Thursday, February 2, 2023 by
Skerdian Meta • 2 min read

Yesterday’s Market Wrap

This week we have meetings with 3 major central banks, although the main one took place yesterday after FED’s rate hike decision. The FOMC meeting took pace in the evening, with broad expectations of a 25 bps hike, although the interest was on what the FED would do next. Powell opens the door to rate cuts this year “if inflation comes down much faster” and he didn’t need to be dovish, but he was, which sent the USD lower again.

He also said that he isn’t too worried about a lower Fed terminal rate in market expectations for, because it comes about due to the market’s belief that inflation will move down more quickly than anticipated. Markets are showing inflation coming down much quicker, he added, while noting the FED has a different view. Everything else rallied higher, with stock markets closing another bullish day.

Today’s Market Expectations

Today the risk sentiment remains positive in financial markets, t we still have two major central bank meetings to come. The Bank of England is expected to raise the Official Bank Rate by 50 bps, to 4.00%, followed by the European Central Bank, which is also expected to deliver a 50 bps hike. Markets are expecting the ECB to remain hawkish, so the risk for the Euro is to the downside today.

Forex Signals Update

Yesterday the volatility increased as we headed into the FED decision, with a visible weakness in the USD. We opened several trading signals in forex and Gold, ending up with two losing and five winning trading signals, so we ended up on the right side despite the volatility.

Turning Bullish on GOLD Again

Gold retreated lower late last week after a positive US employment report, which gave the USD a boost. But the bullish momentum picked up again this week on expectations of a dovish FED and Gold pushed above moving averages again. We opened several buy Gold signals, which closed in profit.

XAU/USD – 60 minute chart 

Booking Profit on USD/JPY

USD/JPY has been bearish since October after the intervention by the Bank of Japan, although we saw a pullback higher this month as the BOJ held everything steady, instead of turning hawkish. But, the USD has been weaker and after yesterday’s FED decision this pair resumed the downtrend.

USD/JPY – H4 chart

Cryptocurrency Update

Cryptocurrencies have turned bullish, as dips keep finding buying pressure. They retreated lower on Monday after buyers had another go at the upside over the weekend, but the decline stopped and yesterday buyers returned after the FED risk event was removed, living the sentiment positive.

BITCOIN Returns Above MAs

Bitcoin turned quite bullish last month and pushed close to $24,000 after completing three bullish waves. But these moves were getting smaller and on Monday the bearish reversal came. The 50 SMA (yellow) which was acting as support on the H4 chart was broken and it was acting as resistance but yesterday buyers returned an pushed BTC above all moving averages.

BTC/USD – 240 minute chart

 ETHEREUM Above $1,600 Again

Ethereum has been trading sideways for the last two weeks, but it seems like the buying pressure is picking up again, which sent the price above $1,600 yesterday. Moving averages were doing a great job acting as support on the H4 chart and the latest bounce came at the 100 SMA (green) after the retreat.

ETH/USD – H4 chart
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