Forex Signals Brief June 11: Will the FED Surprise With A Rate Hike?
Last Week’s Market Wrap
Last week, the major events were the two unexpected interest rate hikes by major central banks. The Reserve Bank of Australia (RBA) announced a hike on Tuesday morning, followed by the Bank of Canada (BOC) raising rates by 25 basis points on Wednesday. The AUD and the CAD benefited from this, making decent gains against the USD, which took a beating after the weaker unemployment claims on Thursday, after they jumped to the highest level since October 2021.
The 25 bps hike by the BOC and the RBA has raised speculation about the possibility of a 25 basis points hike by the Federal Reserve (Fed) later this month. However, there is also a chance that the FED might choose to pause as these increases in interest rates could potentially create disinflationary pressures globally, meaning that inflationary pressures may be reduced in the US, besides weaker employment figures.
This Week’s Market Expectations
This week starts with the consumer inflation for May from the US, which has been slowing considerably and is expected to slow further this month, with the headline CPI (consumer price index) expected to slow to 4.1% YoY while core CPI is expected to remain unchanged at 0.4% MoM. The UK GDP is expected to show a return to growth in April. On Wednesday we have the producer inflation PPI from the US, before the FOMC meeting, with expectations for the FED to keep rates unchanged at 5.25%, although there might be another surprise after the two hikes last week.
Forex Signals Update
We started last week being long on the USD as the sentiment was slightly negative, which was keeping risk assets bearish. But the US unemployment claims came weaker than expected which sent the USD lower. We decided to change position and shifted to short on the USD. We closed the week with 14 winning forex signals out of 20 trading signals in total.
GOLD Trading Between 2 MAs
Gold reversed lower in early May, and since then, the 100-day Simple Moving Average (SMA) has been a significant support level during the subsequent decline. In recent price action, gold has tested both the 50-day and 100-day SMAs, with the 100-day SMA proving to be a reliable support level. However, on Friday, there was a bearish reversal in the market as a result of increased buying pressure on the US dollar. Despite a rebound on Monday, the upward momentum failed to sustain. Consequently, gold has once again returned to test the 100-day SMA.
XAU/USD – Daily chart H4
EUR/USD Finding Support at the 100 SMA
EUR/USD has been bearish for a month as USD buyers became more active. As a result, the pair reached its lowest point around 1.06 yesterday. On the price chart, the 20-period Simple Moving Average (SMA) represented by the gray line, and the 50 SMA shown in yellow, have been acting as resistance levels. Traders have been utilizing price retracements to sell the pair whenever it reaches these levels. However, last week, there was a bullish reversal, which propelled the pair above the 50 SMA. Moreover, the 100 SMA represented by the green line has also been breached, indicating that buyers have gained control of the market. This suggests a shift in momentum and potentially signifies a change in the overall trend of the EUR/USD pair, with buyers currently holding the upper hand.
EUR/USD – 240 minute chart
Cryptocurrency Update
BITCOIN Still Feeling Heavy
Bitcoin has experienced a bearish phase for the past two months, with prices making lower lows after a bullish period in the first quarter. However, the overall trend for Bitcoin remains bullish. The cryptocurrency slipped to the 100-period Simple Moving Average (SMA) multiple times, and this level had been acting as a reliable support. However, on Monday, the support of the 100 SMA was finally broken following the Securities and Exchange Commission (SEC) filing charges against Binance. On Tuesday, we observed a reversal in Bitcoin’s price, pushing it higher and reclaiming a position above the 100 SMA. As a result, our “buy” signal for Bitcoin at the 100-period SMA remains valid. However, buyers have struggled to push the price above the 50 SMA, which has acted as a resistance level. It suggests that there might still be some hesitation or selling pressure in the market.
BTC/USD – Daily chart
The 100 SMA Breaks in ETHEREUM
In recent weeks, the selling pressure for Ethereum has increased, resulting in a decline in its price over the past few days. It appears that the correction reached its completion point, as the 100-period Simple Moving Average (SMA) represented by the green line was holding as support for ETH/USD, but it was broken on Saturday and now sellers seem in control.
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