Forex Signals Brief August 31: Inflation Data from Eurozone and the US
Yesterday’s Market Wrap
FED’s Jerome Powell brought back the dependency on the data for their monetary policy which he repeated at the Jackson Hole Symposium, so the economic figures from the US continue to hold major importance for the USD and the overall risk sentiment. Recently the US economic data has fallen short of expectations, indicating a further cooling off of the economy.
The JOLTS (Job Openings and Labor Turnover Survey) data revealed another decrease in job openings to 8.83 million in July put pressure on the US dollar since the labour market was one of the few sectors to show resilience. But, yesterday’s decline in the ADP employment numbers from 371K previously to 177K this month, which added further to the positive sentiment for risk assets, with the idea that the FED will refrain from rising interest rates further.
The USD resumed the decline again and completed another bearish round, with the downtrend reinforced by the Q2 prelim GDP which was revised down to +2.1% from +2.4% expected. Inflation was also revised lower with the core PCE ticking lower to +3.7% from +3.8% in the advance reading. Although, the pending home sales showed a 0.9% increase in July against a -0.8% decline expected, which finally gave some support to the USD.
Today’s Market Expectations
Today we have some more inflation figures from the Eurozone and the US which are expected to show some mixed figures, although it starts with data from China first. The manufacturing PMI is expected to fall deeper in recession which is a negative factor for risk sentiment, while services PMI is also expected to soften further, but hold above water.
The French CPI will be released ahead of the Eurozone CPI for August and it is expected to show an increase this month, in line with Spanish CPI inflation numbers yesterday. Although, the Eurozone CPI (consumer price index0 is expected to show a slowdown, with the headline CPI expected to fall 2 pits to 5.1% from 5.3% previously, while core CPI is expected to fall to 5.3% from 5.5% in July.
In the US session we have another employment report, with the Unemployment Claims which are expected to remain steady. That would be a positive factor for the USD, although we have the Core PCE Price Index report which is expected to show a slight increase from 4.15% to 4.2%, which would also support the USD.
Forex Signals Update
Yesterday the price action repeated the same pattern as on Tuesday as it remained slow during the first half of the day, but picked up pace later after the release of the US ADP numbers. Traders seemed to be factoring in the conclusion of the Federal Reserve’s cycle of interest rate hikes. In the recent weeks, our position has largely leaned towards being bullish on the US dollar, reflecting the prevailing dominance of buyers, while simultaneously witnessing a decline in risk-oriented assets. However, in a departure from this trend, yesterday saw a shift towards a bearish stance on the US dollar, with three sell signals being generated.
The 200 SMA Turning into Support for GOLD Now
Gold has displayed a bearish sentiment as evidenced by its pattern of lower highs until last week, but it seems liek the sentiment might have changed as lows are getting higher now. The selling pressure pushed the price below the significant $1,900 threshold. However, a notable shift occurred due to an escalation in uncertainty preceding two consequential summits held last week.
This alteration in market sentiment triggered a reversal in the upward direction. Buyers stepped in, propelling the price above the moving averages, which have now transitioned into supportive levels on the H4 chart. Intriguingly, these moving averages have morphed into levels of support. The smaller moving averages turned into support first and yesterday the 200 SMA (purple) took u that position and we saw a bounce after the ADP numbers.
XAU/USD – 240 minute chart
- Gold Buy Signal
- Entry Price: $1,935
- Stop Loss: $1,920.01
- Take Profit: $1,948
USD/JPY Retesting the 100 SMA
USD/JPY made a sharp reversal on Tuesday after a decent rally of around 80 pips earlier in the day, which sent the price around 180 pips lower. Although that’s where the 50 SMA stood on the H4 chart, which has held twice as support earlier, since the bullish trend resumed in July but it was broken yesterday. Although the 100 SMA (green) took up that position, so we are following the price action to see whether this moving average will hold as support.
USD/JPY – 240 minute chart
Cryptocurrency Update
BITCOIN Retracing to $27,000
Bitcoin has been facing selling pressure after reaching its new yearly highs and subsequently dropping below the $30,000 mark. The decline picked up speed recently as the entire cryptocurrency market experienced another decrease in value. This drop was driven by rumors suggesting that SpaceX had sold off its entire Bitcoin holdings.
BTC/USD fell below its 200-day Simple Moving Average (SMA) which turned into resistance and has been capping attempts to reverse the price higher. Yesterday Grayscale won the lawsuit against the SEC, with the D.C. court ruling that the SEC improperly rejected the Bitcoin spot ETF. The court ordered the petition for review be granted and the commission’s order be vacated. BTC, rallied $2,000 higher, but buyers met the 200 SMA again which stopped the rally.
BTC/USD – H4 chart
We’ve decided to open another buy Bitcoin signal yesterday after the pullback, going in long just above the 100 MS Aon the H4 chart above.
- BTC Buy Signal
- Entry Price: $27,157.1
- Stop Loss: $25,113
- Take Profit: $29,113
ETHEREUM Moves Above $1,700 Again
Ethereum has demonstrated a higher level of resilience when compared to Bitcoin. Although it was not unaffected by the recent crypto market crash and the ETH/USD pair dropped below $1,600, there’s a significant observation on the weekly chart. The 200-day Simple Moving Average (SMA), represented by the purple line, functioned as a support level during this tumultuous period.
Taking into account this observed support and Ethereum’s historical behavior, we have now taken a long position on Ethereum once again. It’s important to acknowledge that the cryptocurrency market can be exceptionally volatile. Conducting thorough research and prioritizing risk management are essential factors prior to making any trading decisions.
ETH/USD – Daily chart
- ETH Buy Signal
- Entry Price: $1,671.79
- Stop Loss: $1,371
- Take Profit: $1,971
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