Prices starting to slow in the UK as well

Forex Signals Brief July 20: GBP Changes Course As Inflation Slows

Posted Thursday, July 20, 2023 by
Skerdian Meta • 4 min read

Prices starting to slow in the UK as well

Yesterday’s Market Wrap

During the European session, UK CPI report was a key focus for traders, as consumer inflation still remains very high in the UK after the sudden jump in the previous reading. Although expectations were for a slowdown and it turned out to be lower than expected, thus disappointing for GBP bulls. The inflation numbers indicated a reduction in price pressures for June, sending GBP/USD below 1.29 and UK yields lower as well.

As a result, the markets adjusted their expectations for a less hawkish Bank of England (BOE) rate outlook. At the moment, a 25 basis points (bps) rate hike is being priced in for August, over a 50 bps move. Consequently, the GBP/USD pair experienced a sharp decline from 1.3030 to 1.2905 and is currently hovering near the lower levels. The stronger US dollar also contributed to the downward pressure on the pair.

Besides the UK inflation numbers, we also had the final CPI inflation reading from the Eurozone, with the headline number remaining at 5.5%, while core CPI was revised a tick up from 5.4% to 5.5%. The Euro didn’t benefit much but markets are still expecting more hikes from the ECB.

USD/JPY climbed higher, moving from around 139 to near 140.00 although buyers couldn’t overtake that level. The upswing was aided by the more dovish comments made by BOJ (Bank of Japan) governor Ueda in the previous session. His remarks likely influenced the market sentiment and contributed to the strengthening of the US dollar against the Japanese yen.

Conversely, the commodity dollars, such as the Australian dollar and the New Zealand dollar, experienced downward pressure due to the Chinese yuan’s softer performance on the day. The movements of these currencies are often influenced by China’s economic performance and its impact on regional trade and economic conditions. As the Chinese yuan weakened, it weighed on the antipodean currencies, leading to their depreciation against other major currencies like the US dollar.

Today’s Market Expectations

Today started with the employment report from Australia. Employment change were expected to fall to 15.4K from 75.9K last month, while the unemployment rate was expected to remain unchanged at 3.6%. The European session is light, with only the EU Economic Forecasts to be released at any time.

In the US session, the Unemployment Claims are expected to show a slight increase to 239K from 237K previously while Philly Fed Manufacturing Index is expected to improve slightly to -10.1 points in June from -13.7 points in May. The Existing Home Sales figures will be released after that, which are expected to slow down, following the slowdown in the US real estate figures yesterday. That would be another negative factor for the USD.

Forex Signals Update

After the move on Tuesday following the softer US retail sales, yesterday we saw some consolidation in most assets, and the volatility calmed down again. The price action was both ways, as the softer CPI inflation from the UK affected the GBP and the Euro as well, while the Chinese Yuan affected the AUD and the NZD.

For more detailed updates, please refer to the section below.

GOLD Consolidating Below $2,000

On Tuesday Gold resumed the bullish trend after the soft US retail sales for June, following a consolidation of several days. The price experienced a surge of over 1% again, although sellers came in at around $2,985 and started to push the price lower. But, they couldn’t push below $1,970, where a support zone has formed and we opened two Godl signals against this zone yesterday, both of which closed in profit.

XAU/USD – Da60 minuteily chart

Considering the current market conditions, we are providing a trading signal as follows:

Gold Buy Signal
Entry Price: Above $1,970
Stop Loss: $1,960
Take Profit: $1,980

GBP/USD Crashes After Soft CPI Figures

Yesterday we saw a considerable decline in the UK consumer inflation number for June, falling below 8% for the first time in more than a year. The GBP crashed lower, losing more than 250 pips from the top and falling below 1.29. We turned bearish on this pair, since the odds for the Bank of England to raise rates further have diminished and decided to sell the retrace higher to the 20 SMA (gray).

GBP/USD – H4 chart

Considering the current market conditions, we are providing a trading signal as follows:

GBP/USD Sell Signal
Entry Price: 1.2935
Stop Loss: 1.2975
Take Profit: 1.2905

Cryptocurrency Update

BITCOIN Hangs Around the $30,000 Zone

Bitcoin experienced a significant surge last month, with the price surpassing $31,000, as demand for cryptocurrencies picked up. However, in the past three weeks, Bitcoin’s price has stabilized, trading within a range of approximately $30,000 to $31,500. There was a momentary spike to $31,750 last week, but it was short-lived as sellers emerged, causing the price to retreat back to the bottom of the range and briefly dip below $30,000.

During this pullback, the 200 Simple Moving Average (purple) acted as a support level, preventing the price from further declines in the initial attempt. This support level may potentially trigger a reversal, particularly since the statement indicates being “already long on BTC,” suggesting that the current position is a long (buy) position on Bitcoin. This implies a positive sentiment and belief in the potential for the price to rise from this point onward.

BTC/USD – 240 minute chart

We decided to open another buy Bitcoin signal on Monday, playing the range again, buying BTC/USD just above $30,000:

Entry Price: $30,293.2
Stop Loss: $29.490
Take Profit: $31,493.21

The 200 SMA Holding for ETHEREUM

Ethereum has been trading on a bullish trend since the beginning of 2023, with higher lows and higher highs in the larger charts. Moving averages, particularly the 200 Simple Moving Average (purple) on the H4 chart, have been acting as support levels for this cryptocurrency.

In the last long-term signal, which was opened right at the 200 SMA, the price of Ethereum bounced above $2,000, resulting in a profitable trade. Now, as the cryptocurrency market experiences a retreat, the price of Ethereum is returning to the 50 SMA once again. Based on this information, you are considering opening another buy signal at the 200 SMA, anticipating a potential bounce from this support level.

Considering these developments, the current situation prompts whether it is an opportune time to consider buying Ethereum.