US 10-year bonds helping push the USD higher

Forex Signals Brief October 29: Mixed Signs From US, But USD Keeps Rallying

Posted Monday, October 2, 2023 by
Skerdian Meta • 3 min read

Last Week’s Market Wrap

This was the last week of September and of Q2, with the quarter concluding on a strong note, with the USD continuing to make gains despite some mixed numbers. The Euro and the Pound were the biggest losers last week as the economic data remained soft, with the Eurozone CPI consumer inflation coming at 4.2%, below expectations of 4.5% and down from 5.3% in the previous month.

Commodity dollars held up well as the situation in China seems to be a bit better. Although we saw a surge in USD/CAD as the CAD tumbled lower, following the $5 bearish reversal in crude Oil, which closed the week closer to $80 from above $85.

Treasury rates rose once again which weighed on equity markets, as they closed another week down. We saw some fluctuations during the week though, but the reasons for the changes were more about quarter-end flows than fundamentals, since the PCE inflation readings were somewhat modest and Williams was dovish.

Gold remained hammered throughout the week and fell below $1,900, now heading for this year’s lows after falling to its lowest level since mid-March. The US was mostly strong although it retreated on Thursday ahead of the PCE price index report, which came in softer than expected, but markets brushed it off after the strong jobs report. This concludes trade for the week, month, and quarter.

This Week’s Market Expectations

The economic data is heavy this week again, although today is more about manufacturing. Yesterday we already saw the Caixing manufacturing and services reports which came in below expectations, showing another slowdown in both sectors, so we’ll see how commodity dollars behave during the week.

Today started with the Tankan Manufacturing and non-Manufacturing Indexes, both of which were expected to tick one point higher. Later on, we have the Manufacturing PMI reports from the Eurozone, which are expected to show little change as this sector remains in deep contraction.

Besides that, the Eurozone unemployment rate is anticipated to stay at 6.4%. The labor market remains tight, and central banks would want to see it ease in order to have more confidence in meeting their inflation objectives on time and in a sustainable manner.

Later we have the US, the US ISM Manufacturing PMI is projected to rise to 47.7 from 47.6 previously. As a reminder, the S&P Global US Manufacturing PMI surpassed forecasts, while it remains in contraction, and the remarks overall hint to activity stagnation.

Forex Signals Update

Last week the USD started it strong. rallying in the first few days before retracing lower by the middle of the week. But it ended the week up eventually. We remained long on the USD and opened 20 trading signals, closing it with 16 winning forex signals and 4 losing ones, giving us an 80-20% win/loss ratio.

GOLD Heading for February’s Lows 

The graphic below depicts a bearish breakthrough in gold. On the daily chart, XAU/USD found support at the 200 SMA (purple), which rejected the price twice in roughly a month, and we have already witnessed two bounces off of it, but the price continued returning to it, indicating that the 200 SMA has now been broken. Yesterday, the price went below $1,960 as the downturn continued.

XAU/USD – Daily chart 
  • Gold Sell Signal
  • Entry Price: $1,880
  • Stop Loss: $1,915
  • Take Profit: $1,830

EUR/GBP Continues the Bullish Reversal 

EUR/GBP has been bullish since early September, starting the bullish momentum above 0.8520 and reaching the 0.8705 level on Friday, which it retested again early this week after a retreat lower to the 20 SMA (gray) on the H4 chart. We bought that dip and the price returned higher, resuming the bullish momentum after dipping below the 20 SMA for a short period.

EUR/GBP – 240 minute chart
  • EUR/GBP Buy Signal
  • Entry Price: 0.866
  • Stop Loss: 0.862
  • Take Profit: 0.869

Cryptocurrency Update

 BITCOIN Findu SUpport at the 20 SMA

Yesterday we saw another bounce in digital currencies as the crypto market has been flipping in mood over the last few weeks, with Bitocin seeing a positive comeback after falling to $25,000 earlier this month. We witnessed a significant recovery above $27,000, but buyers failed to break above the 200 SMA, and we saw a bearish candlestick yesterday after a doji last, which is a bearish reversal indicator. The price was slipping lower for a week but yesterday we saw a $900 bounce which sent the price above $27,000 and above the 50 SMA (yellow) on the daily chart.

BTC/USD – Daily chart
  • BTC Buy Signal
  • Entry Price: $26,248.2
  • Stop Loss: $24,500
  • Take Profit: $28,000

ETHEREUM Facing the 50 SMA

The price of Ethereum jumped higher last month indicating that there was a level of buying interest and demand for Ethereum at the sone around $1,600. Buyers have stepped in on several occasions at the area above this level but the 20 SMA (gray) has been acting as resistance on the daily chart. However this week buyers had another go at this moving average and pushed the price above it for some time, but it has retreated back below $1,600 now.

ETH/USD – Daily chart
  • ETH Buy Signal
  • Entry Price: $1,671.79
  • Stop Loss: $1,371
  • Take Profit: $1,971
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