US and Eurozone inflation data will end the month

Forex Signals Brief August 7: Waiting for US Inflation Numbers Late in the Week

Posted Monday, August 7, 2023 by
Skerdian Meta • 4 min read

US and Eurozone inflation data will end the month

Yesterday’s Market Wrap

Last week we came from two rate hikes of 25 bps in the previous week by the FED and the European Central Bank, while the Reserve Bank of Australia (RBA) and hr Bank of England (BOE) were expected to do the same this week. Although, the RBA refrained again from rising rates, leaving them at 4.10% for the second time, which suggests that they should be done with tightening the policy.

That left the AUD and the NZD bearish, although some improvement in Chinese manufacturing PM I and Caixin services kept them above the water. The Bank of England on the other hand raised rates by 25 basis points to 5.25% as expected and left the door open for more hikes, but that couldn’t help GBP/USD which was sliding lower as the USD was pushing higher until Friday.

The Non-Farm Payrolls in the US came weaker than expected, below 200K for July, and June was revised lower below 200K as well, which shows a trend and that the labour market is not tightening too much. The reaction to the soft figures was to sell the USD although toward the end of the day, the market had a look at the higher wage numbers and we saw some sort of recovery. Ultimately though, a strong bid appeared for bonds and there was a growing sense that the FED has probably finished raising rates. FED probabilities didn’t move much after the data but there’s only a 30% chance of one more hike as the market grows confident that the economy is cooling.

Today’s Market Expectations

This week is quite light compared to the last 2-3 weeks, when we have seen some heightened volatility. The economic data is not too important until Thursday when we get to see the US CPI (Consumer price index) report for June, with the headline CPI expected to show a pick up to 3.3% in consumer inflation during July, up from 3.0% in June. Although core CPI inflation which has remained high at 4.8%, is expected to tick down to 4.7%, which is a positive start in the right direction.

The UK June GDP will be released on Friday, which is expected to come at 0.2%, showing a reversal from the 0.1% contraction in June. The US PPI (producer price index) report will be released later that day, while the Prelim UoM Consumer Sentiment will close the day and it’s expected to remain unchanged, coming from a downward revision previously.

Forex Signals Update

Last week central banks came back, although the volatility declined from the previous week, until Friday after the US NFP report. As a result, the number of signals we opened was lower at 18 trading signals in total, mainly in forex and commodities such as Gold and crude Oil. Seven of them closed in loss as markets reversed a couple of times, while the rest hit the take profit target.

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

GOLD Signal Surviving After the NFP Reversal

Gold has been making lower highs since July as sellers resumed control, breaking moving averages on the H4 chart. Last week the 200 SMA (purple) turned into resistance after being broken, but and we saw a continuation lower to $1,925 lower but this moving average was broken on Friday after the bullish reversal, following the soft NFP report, which sent the USD lwoer and XAU/USD surged $22 higher above $1,947. That was a strong reversal, but our Gold signal survived both the sellers and the buyer, continuing into this week.

XAU/USD – 240 minute chart

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

Gold Sell Signal
Entry Price: $1,937.36
Stop Loss: $1,951.36
Take Profit: $1,929.36

The 200 SMA Breaks in USD/JPY but the 50 SMA Holds

We’ve been following USD/JPY closely and have been taking advantage of bullish trends since the second week of July. We’ve been pursuing a strategy of buying when there are temporary declines in the USD/JPY pair’s price. Recently, you noticed that the pair experienced a retreat in its price, which grabbed our attention. The 200-day Simple Moving Average (SMA) in purple held as a support level and we decided to open a long term buy USD/JPY signal on Friday. Although the 200 SMA was broken on Friday after the NFP report, but the 50 SMA (yellow) held as support on the H4 chart, so our signal is still live.

USD/JPY – H4 chart

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

USD/JPY Buy Signal
Entry Price: 142.48
Stop Loss: 141.08
Take Profit: 143.28

Cryptocurrency Update

MAs Keeping BITCOIN Under Control

Bitcoin’s price has been gradually decreasing ever since it dropped below the critical support level of $30,000. This level had previously acted as a strong support, but now it seems to be acting as a resistance, with the moving averages providing additional resistance. Specifically, the 50-day Simple Moving Average (SMA) has become a barrier as sellers continue to push the price lower.

Recently, the price dipped to $28,616, but it managed to find strong buying support in that area, causing the price to bounce back above $29,300. This indicates that there is significant buying pressure around the $28,600 level, which makes it an attractive point for potential buyers. Given this analysis, there are plans to open a buy signal for Bitcoin if the price dips back to around $28,600 soon, as it presents a promising opportunity with strong buying support in that region.

BTC/USD – Daily chart

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

Entry Price: $28,600
Stop Loss: $27,000
Take Profit: $31,300

The 100 Daily SMA Holds for 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.