Central banks doing another round of rate hikes

Forex Signals Brief May 22: RBNZ to Continue Rate Hikes Above 5%

Posted Monday, May 22, 2023 by
Skerdian Meta • 3 min read

Central banks doing another round of rate hikes

Last Week’s Market Wrap

Last week the USD continued the rebound after the bullish reversal we saw in the previous week, surprising analysts who have been expecting the FED to start cutting interest rates later this year. However, there is a chance that the Federal Reserve may continue to hike above 5%, as rate hike comments were brought up by FED members last week. According to Wall Street Journal’s FED insider Nick Timiraos, there is a possibility that the Federal Reserve will continue to raise interest rates. This information is based on comments made by FED member Logan this week, where she stated, “We aren’t there yet.”

The economic data was mixed, with New York area manufacturing activity diving further, while the employment figures from the US didn’t suggest a recession. Most assets slipped lower as a result, so the recent strengthening of the USD can be attributed to the ongoing debt-ceiling debate. Although Democrats and Republicans are making progress in negotiations to raise the $31.4 trillion borrowing limit, the risk of a potential U.S. debt default still remains. This uncertainty is further heightened by concerns regarding the stability of several banks.

This Week’s Market Expectations

This week starts slow, with a very light calendar today, while tomorrow we have the manufacturing and services PMI reports from Asia, Europe, and the US. On Wednesday, the Reserve Bank of New Zealand will be the highlight of the week, as they are expected to raise rates to 5.25%. UK consumer inflation will be released next, which is expected to fall by nearly 2 points, while the FOMC Meeting Minutes will be released later in the evening. US Prelim GDP for Q1 is expected to remain unchanged at 1.1%, with US durable goods orders expected to decline.

Forex Signals Update

Last week started slow, with the USD retreating slightly which caught us on the wrong foot with several signals as we turned bullish on the USD after the previous week’s bullish reversal. But then the USD resumed the bullish momentum and we made a strong comeback, ending the week with 21 trading signals, out of which 14 winning ones and 7 losing signals, while 2 forex signals remain open.

The 50 SMA Turns Into Resistance for GOLD

Gold continues to remain bullish on the larger timeframes, with the 100 SMA (green) still acting as support on the daily chart. Although, after the retreat of the last two weeks which sent XAU below $2,000 per ounce, gold has fallen below the 50 SMA (yellow) which seems to have turned into resistance.

XAU/USD – Daily chart

The 200 SMA Holds for USD/JPY

USD/JPY has experienced a strong rally this week, breaking through two significant technical levels: the first near 136.60 and the second at 137.05. This bullish development has added to the upward momentum, bringing the pair close to its peak in 2023, just below the key psychological level of 138.00. Yesterday buyers pushed above the 138.00 mark and reach new yearly highs, now pushing towards 140.00 in the near term.

USD/JPY – Daily chart

Cryptocurrency Update

BITCOIN Still Hoovering Above the 100 SMA

Bitcoin has been in a bearish trend since April, falling below the 50-day Simple Moving Average (SMA). However, the 100-day SMA acted as support. Recently, there was a bounce that stalled on Tuesday, but buyers returned yesterday and started pushing the price higher once more.

BTC/USD – Daily chart

ETHEREUM Buyers Not Feeling Confident Yet

In recent weeks, the buying pressure for Ethereum has slowed down, and we have witnessed a retreat in its price over the last few days. However, the correction appears to be nearing completion as the BTC/USD 50 SMA (yellow) is holding as support. Additionally, the stochastic indicator is showing an oversold condition. Considering these factors, we decided to open a buy signal for ETH some time ago.