Forex Signals Brief July 27: Slightly Dovish FED Hike, ECB Next

The expectations for the FED meeting yesterday were very high, but after the meeting everything is as it was, besides the 25 bps hike

Skerdian Meta•Thursday, July 27, 2023•4 min read

Yesterday’s Market Wrap

Yesterday all markets were awaiting the FOMC meeting, which was expected to deliver another 25 bps rate hike, with many analysts expecting this to be the last one after such a steep hiking cycle. Although the FED left everything dependent on the economic performance, and the data has leaned more on the softer side in the last couple of months. Yesterday we saw the New Home Sales for June, which were the last piece of data before the FOMC meeting and they came softer than expectations, with negative revisions for May as well.

Markets sensed the FED sentiment and turned bearish on the USD in the USD session. The FED delivered on the promised hike, which took interest rates to the 5.25%-5.50% range, although it didn’t have much impact as traders were already anticipating that.

Later the statement was released and Jerome Powell held a press conference, which got markets moving and sent the USD slipping lower. He repeated that they’ve covered a lot of ground and the full effect of the tightening has yet to be felt, which is a dovish comment, suggesting that the economic vowes might get worse in the coming months.

He added that they will be going meeting-by-meeting, which is another repeated message, putting the importance on the data. He also said that it is certainly possible that they would hike in September, also possible they would hold. So, after the first dip, the decline stopped and we saw a slight comeback, but the uncertainty remains and the USD still remains slightly bearish after the FED.

Today’s Market Expectations

Today we have the second major central bank meeting, with the ECB expected to raise rates as well later on. Although before that we had the German GfK Consumer Climate which remains deeply negative, but it is expected to show a slight improvement as inflation slows in Europe. The EU is expected to release the economic forecasts as well.

The ECB will follow, with a 25 basis points hike widely anticipated, which will take the main Refinancing Rate to 4.50%. ECB president Christine Lagarde used to be quite hawkish in previous months, but the recent comments have sounded more balanced, as inflation slows in Europe, while the economy is really feeling the weight of higher rates as many sectors continue sinking. So, the Euro is in the same situation that the USD was yesterday ahead of the FED.

Forex Signals Update

Yesterday should have been quiet ahead of the FED, but traders were agitated and they were trying to position themselves ahead of the meeting. As a result, there were a few reversals in the financial markets and we opened five trading signals in total, mainly in forex but also in commodities, closing the day with three winning signals and two losing ones.

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

GOLD Resuming Uptrend

Gold slipped below moving averages after declining for about a week, reaching $1,953 lows on Tuesday. Moving averages turned into resistance at the top, particularly the 200 SMA (purple). But the price started to reverse higher as uncertainty increased and yesterday we saw an attempt to the upside ahead off the FED meeting, as the USD turned weaker. The 200 SMA turned into support and we saw a bounce off this moving average after the FED meeting, but sellers returned again.

XAU/USD – 240 minute chart

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

Gold Buy Signal
Entry Price: $1,960-65
Stop Loss: $1,952
Take Profit: $1,977

MAs Keeping WTI Oil Supported

Crude Oil has been benefiting from a better risk sentiment and weaker USD recently, displaying bullish monetum for approximately one month. The upward movement began when it reversed at a support zone, leading to significant gains of around $12. However, at the end of last week, there was a temporary retreat in price, and it found support at the 50-period Simple Moving Average (SMA) on the H1 chart (depicted in yellow). The 50 SMA held the decline, and a bullish reversal occurred. Yesterday, we opened another buy Oil signal, which also hit the take profit target, after the two winning Oil signals on Tuesday. The price of Oil approached the $83 level, which seems to be a significant resistance point.

USD/JPY – H4 chart

Cryptocurrency Update

BITCOIN Consolidates Above $29,000

After a surge last month, Bitcoin entered a range with approximately $1,5000 above the $30,000 level. This surge was a result of an improved crypto market sentiment amid increasing global economic uncertainties. The price of Bitcoin saw a significant rise, climbing from below $25,000 to above $30,000, and briefly even reaching a high near $32,000. However, the buyers were unable to sustain the price above this range for an extended period, leading to a reversal.

During this period, Bitcoin’s price found support around the $30,000 level and held there for about a week. However, on Monday, the sellers managed to break below the $30,000 support level. Fortunately, the 50-period Simple Moving Average (SMA) is acting as support and the price continues to hang around above that moving average.

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: $28,000 or $28,500
Stop Loss: $26.500
Take Profit: $31,300

ETHEREUM Slightly Crawling Higher

Ethereum made a strong bounce and moved above $2,000 earlier this month as buyers remained in charge. We have had quite a few long term buy Ethereum signals since the trend has been bearish since the beginning of 2023, with the lows getting lower. Although since then the pressure has been to the downside, but Ethereum has still shown more resilience than Bitcoin. So, we decided to open a buy ETH signal on Monday after the retreat, so we’re betting on moving averages to act as support and hold the retreat and the 100 SMA (green) seems to be holding.

ETH/USD – Daily chart

Entry Price: $1,860
Stop Loss: $1,740
Take Profit: $2,020

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ABOUT THE AUTHOR See More

Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.