Forex Signals Brief for February 13: Will Inflation Slow Further in January?

Last Week’s Market Wrap

Last week markets started with a negative tone, after the jump in US ISM services and employment numbers raised the terminal top for FED rates. So, the USD started with a bullish bias, while risk assets were declining. We saw a slight improvement as the week got underway and the USD retreated, but at the end, risk sentiment remained negative, with stock markets in retreat, while the USD is looking increasingly bullish.

Crude Oil also finished the week bullish, after Russia decided to cut production by 500K bpd come March, while OPEC left everything unchanged. Regarding the data, we saw further evidence that the global economy is improving, while the RBA delivered yet another 25 basis points rate hike and sounded dovish as inflation continued to increase in Australia in January, but the AUD ended up lower as risk remained sour.

This Week’s Market Expectations

This week we have some important data, which will shake markets. US retail sales and Empire State Manufacturing Index are important, but the inflation reports are what everyone is looking at. It kicked off with Swiss CPI (consumer price index) inflation earlier today, which showed an increase in January, while tomorrow we have the US CPI for January which is expected to increase by 0.5%, as well as the annualized number, which on the other hand is expected to cool off. UK CPI YoY is also expected to move lower on Wednesday, while on Thursday we have the US producer inflation PPI.

Forex Signals Update

Last week the volatility was not too high and we managed to pull 21 trading signals in total, which gave us 15 winning trades and 6 losing ones. We remained long on the USD and short on risk assets, which proved to be a good strategy, although it wasn’t straightforward, since we had a reversal by midweek.

Turning Bearish in GOLD 

It looks like the bullish momentum in Gold has ended and the trend is turning bearish after being in an uptrend for three months. It broke below all moving averages on the H4 chart, which have now turned into resistance, indicating a trend reversal after making a very strong rally since the middle of November. Last week buyers tested the 200 SMA (purple) on the H4 chart, but they kept failing and the decline resumed, with the 20 SMA (gray) now turning into resistance.

XAU/USD – H4 chart 

Going Short on WTI Oil at MAs

Moving averages were doing a great job for EUR/USD, providing resistance and keeping this pair bearish until October, particularly the 50 SMA (yellow). This moving average together with the 20 SMA (gray) turned into support when the trend turned bullish and were pushing the lows higher, as the USD was retreating. Now, the 50 SMA has been broken after the price traded around there for some time, iso it seems like the trend is shifting again. So, we are keeping a bearish bias for this pair and will try to sell retraces higher this week.

EUR/USD – Daily chart

Cryptocurrency Update

Cryptocurrencies made a strong bullish run in January, which came after a prolonged bearish period in the crypto market, so it was a strong signal that the bearish period might be over. But, last week the retreat extended as the sentiment turned negative and the USD turned bullish, so we’ll see if they will continue to slip lower this week or resume the bullish momentum from last month.

BITCOIN Breaking the 200 SMA

Bitcoin was finding decent support at moving averages during the bullish period in January. But it retreated off the highs last week and sellers pushed the price below MAs on the H4 chart. So, this is a test to see if cryptocurrencies have turned bullish in the long term or if January’s run was just a dead cat bounce.

BTC/USD – 240 minute chart

Will MAs Support ETHEREUM?

Ethereum was still showing buying pressure for most of last week as the lows kept getting higher which indicated. The 20 SMA (gray) was acting as support on the daily chart, but over the weekend that moving average was broken and now the 200 SMA will be the next test for buyers.

ETH/USD – Daily chart