Forex Signals Brief July 3: Markets Trading the End of Rate Hikes
Markets have been trading rate hikes for more than a year, now they have shifted to the end of hikes, concentrating on inflation
Last Week’s Market Wrap
Markets have been trading rate hikes from major central banks for more than a year, during the steepest rate hike period in history, so whichever bank hiked faster pulled the currency up with it. Now, the situation has changed. We are approaching the end of the tightening cycle, as we approach the 2-year period, following the 2-year coronavirus period from 2020 to 2022.
Last week we had the inflation reports from several countries, with mixed results. It started with the CPI report from Canada and Australia, which showed another slowdown, sending the CAD and AUD lower respectively. On Wednesday major central bankers meet at the ECB forum in Sintra, although they did;t change much from the normal rhetoric of the last few weeks. In Europe, headline CPI cooled off as well, but core CPI ticked higher again. The US data showed resilience, but the core PCE price index fell in Friday, so the USD ended the week on the back foot.
This Week’s Market Expectations
This week is not as loaded with economic events as last week, starting with manufacturing reports from China and the US today, both of which are expected to contract. The RBA is expected to hold interest rates unchanged this time at 4.10% on Tuesday while on Wednesday we have the OPEC meeting and the FOMC minutes from the last FED meeting. On Thursday we have two employment reports from the US, followed by ISM services and JOLTS job openings, to end the week with the unemployment rate from Canada and the US on Friday.
Forex Signals Update
This week was quite volatile, with price action on both sides and several unexpected reversals, so it was a difficult week to trade. We opened 26 trading signals in forex, commodities and cryptocurrencies, ending it with 16 winning trading signals and 10 losing ones.
GOLD Forming A Bullish Reversing Pattern
Gold has been in a bearish trend since it failed to reach new record highs above $2,075 in early May. Since then, the price has been steadily decreasing. During the European session yesterday, gold prices (XAU/USD) lacked a clear direction. However, in the US session, the price resumed its decline and dropped to its lowest level since March 15, falling below $1,900. Interestingly, shortly after reaching that low, gold quickly reversed its direction, disregarding the strong US economic data, and managed to recover its losses, trading above $1,920. This reversal indicates a level of resilience in gold despite the earlier decline.
XAU/USD – Daily chart
Remaining Short on the JPY
The JPY continues to remain very bearish, with USD/JPY making solid gains last week despite the weakness in the USD toward the end of the week. The trend has been bullish since the end of April and the price is knocking on the 145 level. Moving averages, especially the 20-day Simple Moving Average (SMA) represented by the gray line, have acted as reliable support indicators so we will keep buying the retrace in this pair, as well as on EUR/JPY.
USD/JPY – Daily chart
Cryptocurrency Update
BITCOIN Remains Supported
Bitcoin experienced a notable shift in sentiment in mid-June, leading to a bullish trend in the cryptocurrency market. BTC/USD saw a surge above $31,000, indicating increased buying activity. However, the price has encountered resistance in moving higher, resulting in a period of consolidation. As a result, the price temporarily dropped below the $30,000 mark once again. Currently, both buyers and sellers appear relatively weak, leading to the price hovering around this level without significant momentum in either direction.
BTC/USD – Daily chart
ETHEREUM Approaching Our TP Target
Last week we witnessed a surge in cryptocurrencies, with ETH/USD moving above $1,900. However, it fell short of reaching our take-profit (TP) target, and after some consolidation, the price starts to retreat lower. The 50 SMA (yellow) held as support for some time, but it was broken although the 200 SMA (purple) stopped the decline.
ETH/USD – Daily chart
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