Forex Signals Brief August 1: Global Manufacturing in Slowdown
The manufacturing numbers from China and Europe continue to show a slowdown in activity as they head deeper into recession
Yesterday’s Market Wrap
We started the week yesterday with the idea of another rate hike by two major central banks, after the hikes by the ECB and the FED and heightened volatility. This week started with the manufacturing and services PMI reports from China, which showed a slight improvement in manufacturing activity, and a slowdown in non-manufacturing, while markets had eyes on China’s Caixin Services PMI for Politburo stimulus action. after the slowdown yesterday, the Politburo should be more inclined to embark on the stimulus to help the domestic demand. That’s both bad and good for the commodity dollars since the slowdown miss dragged them down, but the better prospects for the stimulus is a positive thing.
In the European session, the inflation report from the Eurozone showed that core inflation continues to hold stubbornly high as the core CPI remained unchanged at 5.5%, which had Euro traders confused what side to take. The North American economic calendar didn’t have any significant releases, except for the Dallas Fed manufacturing index, which remained negative at -20.0 points. However, it showed improvement compared to last month’s figure of -23.8 points. Recently, after the Federal Reserve’s decision to raise interest rates by 25 basis points last week, FED’s Goolsbee became the first Fed official to speak, other than Fed Chair Powell during his press conference.
Today’s Market Expectations
Today started with the Caixin Manufacturing PMI from China which shows that this manufacturing indicator also fell into contraction, so things are not going well in China, meaning that the Chinese officials should step up their game. The Aussie dipped a little further on the news, but as we said, the thing about weaker data from China is that thoughts turn to the possibility of more stimulus.
That cushioned the dip for the AUD, but the Reserve Bank of Australia meeting sent it tumbling 50 pips lower, after the RBA held interest rates steady at 4.10%, against expectations of an increase to 4.35%. Later on, the European manufacturing PMI data will be released, and it is widely anticipated that it shows another slowdown into recession, while the US ISM manufacturing is expected to show an improvement. The JOLTS job openings on the other hand, are expected to fall again in July, after declining below the 10 million mark in June.
Forex Signals Update
Last week we opened more than 30 trading signals as the volatility was high, with three major central bankholding meetings and some raising interest rates, which is continuing this week. Yesterday wthe volatility was not high though, as markets were waiting for the heavy events to come up, so we opened only two signals in total, one of which closed in profit, the other cosed in loss.
For more detailed updates, please refer to the section below.
GOLD Keeps Making Lower Highs
Last Thursday, the price of gold experienced a significant decline as the USD strengthened due to robust economic data from the US. The price dropped by approximately $40, breaking below several moving averages on the H4 chart. However, the 200-period simple moving average (SMA) in purple acted as a support level, preventing the price from falling further. On Friday, we observed a rebound as gold retraced more than half of its previous losses and rose above $1,960.
Nevertheless, the upward movement was hindered by the 50-period simple moving average (SMA) in yellow, which acted as a resistance level. As a result, gold is currently trading within the range between these two moving averages (the 200 SMA and the 50 SMA) on the H4 chart and yesterday my colleague Arslan opened a sell Gold signal near the 50 SMA.
XAU/USD – 240 minute chart
Considering the current market conditions, we are providing a trading signal as follows:
- Gold Sell Signal
- Entry Price: $1,963.01
- Stop Loss: $1,977.01
- Take Profit: $1,955.01
AUD/USD
EUR/USD had been bullish since the beginning of June, but on Thursday last week it lost almost 200 pips due to negative risk sentiment and a bullish turn in the USD. The ECB sentiment shifted to dovish, after the had previously maintained a hawkish bias, as economic indicators pointed towards a recession in the Eurozone. ECB president Christine Lagarde revised the statement to adopt a less hawkish approach, later confirming it in the press conference, which made the decline worse in this pair although we saw a retrace on Friday and the piece closed above 1.10. Although we are looking to sell retracements higher and opened a EUR/USD signal last Friday.
AUD/USD – H4 chart
Considering the current market conditions, we are providing a trading signal as follows:
- AUD/USD Sell Signal
- Entry Price: 0.6685
- Stop Loss: 0.6725
- Take Profit: 0.6655
Cryptocurrency Update
BITCOIN Swanning Lower
Bitcoin’s price has been trading in a range above $30,000 after experiencing a significant rise from $25,000. This sideways movement continued for over a month, with the $30,000 level acting as a strong support. However, during this week, selling pressure returned, causing BTC to break below the $30,000 support zone and fall to $29,000. At this new level, $29,000 has become a new support zone that is currently holding. Additionally, the 50-period Simple Moving Average (SMA), represented by a yellow line, is acting as support, and the price of Bitcoin is hovering above this moving average.
BTC/USD – Daily chart
We decided to look for another buy Bitcoin signal, 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
Can the 100 SMA Hold in ETHEREUM
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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