Today we get to see the meeting minutes from the RBA, the BOE and the FED

Forex Signals Brief July 24: Last Hikes by the FED and ECB This Week?

Posted Monday, July 24, 2023 by
Skerdian Meta • 4 min read

Today we get to see the meeting minutes from the RBA, the BOE and the FED

Yesterday’s Market Wrap

The USD came after a bearish week due to reports showing a slowdown in consumer and producer inflation (CPI and PPI) for June, with markets pricing in a less hawkish FED, and it continued to decline early last week. The softer retail sales and housing starts figures early last week week further weighed on the USD. However, by the middle of the week, we saw signs of buyers returning and eventually the reversla came and the Buck ended the week on a bullsih footing.

The decline in US unemployment claims improved the sentiment, suggesting a tightening labor market. This, in turn, indicates the possibility of higher wages and increased demand in the upcoming months, which is positive for the USD. Besides that, the decline was overdone, so there was time for some fight back.

Risk assets such as stock markets turned bearish in the second half of the week on the other hand, as the risk sentiment turned negative. Commodity Dollars went through a strong retreat last week as tensions between the US and China over chip production increased, while the GBP was the hardest hit, as it lost more than 300 pips after the consumer inflation numbers came our lower than expectations for June.

Today’s Market Expectations

Although, traders still seem unconvinced, with three major central banks holding meeting this week and deciding on the policy. The main event certainly is the the FOMC meeting on Wednesday, is expected to resume hiking interest rates by 25bps to 5.50%, although traders are looking for hints on to whether this is the FED’s last hike of the cycle, or whether it is likely to go an additional hike at a future meeting, in line with its own projections.

The ECB meetting is on Thursday and they’re expected to deliver a 25bps hike which would take the ReFi rate to 4.25% and the deposit rate to 3.75%. ECB President Lagarde declared at the June meeting that there was still “more ground to cover” and the ECB is “not done” on rate hikes, but inflation cooled off considerably in the last reading.

After the ECB we have the US GDP report for Q2 which is expected to come at 1.7%, followed by the US PCE core price index on Friday, which will have impact on the USD if the FED leaves a possibility for another rate hike in September. The Bank of Japan meeting is not expected to produce much, after chairman Ueda hinted on no changed to their policy last week.

Forex Signals Update

Last week markets were volatile, but unlike in the previous week when we saw a one way traffic against the USD, this week was more mixed, with many reversals. As a result, it made it sort of difficult to keep long term positions open, so we traded mainly with short term signals which didn’t last too long. We opened 31 forex signals in total, mainlyin forex and commodities.

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

Will GOLD Bounce off the 50 SMA?

Gold prices (XAU/USD) experienced a downward reversal after climbing nearly $100 since the beginning of July, declining by around 3% to close the week at around $1,962. This came due to the surge in U.S. bond yields and the bullish reversal in the U.S. dollar. The positive economic data included a decrease in the US unemployment claims, which fell to 228,000. As a result of this market sentiment, Gold retreated and reached the 50 Simple Moving Average (SMA) on the 4-hour chart, represented in yellow. Althugh the decline stoped there, so the bullish trend might resume this week, although it will all depend on the FED and the economic data from the US toward the end of the week.

XAU/USD – 240 minute chart

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

Gold Buy Signal
Entry Price: Above $1,960
Stop Loss: $1,95o
Take Profit: $1,975

USD/JPY Resuming Uptrend

USD/JPY went through a major retreat in the previous week, with the price falling more than 750 pips lower. But, the 200 SMA (purple) which has been acting as support and resistance before and it turned into support last week, holding the retreat above 137. The stochastic indicator was overnought on this pair so that was the right time to go long on USD/JPY. The price bounced off that moving average and has been moving higher as the JPY continues to weaken due to reports that the Bank of Japan (BOJ) is not planning to make any adjustments to its yield curve control settings this week week. So, we remain bullish on this pair.

USD/JPY – H4 chart

Cryptocurrency Update

The 20 SMA Capping BITCOIN Recently

After the surge by the middle of June, cryptocurrencies have been trading sideways in a range since the last week of June. Bitcoin has also been trading in a range after going though a decent surge in June, moving above $31,000 and continuing to make new highs for the year. But, in the last two weeks sellers have been in control despite a softer USD earlier, which shows weakness. Besides that, the 20 SMA (gray) has turned into resistance, so buyers are having some difficulties at the moment.

BTC/USD – Daily 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

ETHEREUM FInds Support at the 100 SMA

Ethereum continues to remain bullish this year, despite the recent retreat. 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.