Forex Signals Brief October 13: USD, Bond Yields Back Up After Higher CPI
Yesterday’s Market Wrap
There wasn’t much to take away from the price action of major currencies during the first half of the day in the run-up to the US CPI report. Overall, the Dollar was slightly lower, with minimal movement versus the Euro, Yen, and Pound. In other markets, equities remained optimistic ahead of the major event, with European indexes rising with US futures. Meanwhile, bond rates were somewhat lower, which was helping to keep commodities like Gold creeping higher.
We did get the ECB meeting minutes in the European session, and there was lots of ECB discussion from officials, but they all had one constant theme: they are done raising interest rates. So there was nothing new there. Headline CPI inflation increased 3.7% year on year, compared to the 3.6% forecast. Core CPI YoY fell to 4.1%, compared to the 4.1% predicted last month. Excluding housing, the core CPI climbed by only 0.1% month on month.
The biggest event of the day was the US CPI inflation, which was higher than expected. Despite the fact that the UK GDP data for August revealed that the economy returned to growth after contracting in July. August monthly GDP MoM +0.2% vs. anticipated +0.2% GDP YoY +0.5% vs. anticipated +0.5%.
Today’s Market Expectations
Today starts with the Chinese inflation reports. The Chinese CPI Y/Y is projected to be 0.2%, up from 0.1% previously, while the M/M reading is likely to be 0.3%, up from 0.3% previously. The PPI Y/Y is predicted to continue negative at -2.4%, down from -3.0% before. The Chinese inflation rate fell into deflation in July before returning to positive territory the following month as policymakers continued to implement softening measures to shore up their faltering economy.
The University of Michigan Consumer Sentiment Index is anticipated to fall to 67.4 from 68.1 before. Since October of last year, consumer morale has been growing as consumers’ finances improved as a result of reduced inflation and increased salaries. Higher Oil costs have recently weighed on morale, but the good news is that inflation forecasts have not risen as much as feared.
Forex Signals Update
Yesterday the price action was slow again during the European and Asian sessions but started picking up in the US session, with the USD deciding to make a comeback after the higher CPI inflation figures which sent it more than 100 pips higher across the board. We had three trading signals closing yesterday, all of which were long-term trades.
GOLD Reversing at the 20 Daily SMA
Gold is still bearish and hitting lower highs, as seen by yesterday’s reversal. A support zone had formed above $1,810, and the price of Gold fluctuated above it, peaking at around $1,830 before the bullish momentum since last Wednesday. However, the escalation of hostilities in the Middle East over the weekend has depressed investor risk appetite, which is good news for gold. On the H4 chart, the 50 SMA (yellow) is acting as support after a strong gap higher and a recent crossover above $1,850. But sellers returned after the CPI report sending Gold down.
XAU/USD – Daily chart
- Gold Sell Signal
- Entry Price: $1,875
- Stop Loss: $1,905
- Take Profit: $1,825
WTI Failing at the 50 Daily SMA
Crude Oil was on a retreat since last year, but August and September saw some positive price action for crude Oil due to Saudi Arabia’s production cutbacks, which in turn drove up demand. However, there was a turnaround at the end of September, which sent prices down sharply. The price of WTI crude Oil shot up to just over $95, before crashing to lows of $80, reaching the bottom at $81.60.
However, by the middle of last week, the US dollar started retreating lower. Crude Opened with a big bullish gap on Monday, although buyers failed to keep the price above the 50 SMA (yellow) on the daily chart. Yesterday we opened a sell Oil signal below that moving average and eventually crude Oil reversed lower.
WTI Oil – Daily chart
Cryptocurrency Update
BITCOIN Tumbles to the 50 Daily SMA
Bitcoin has been slowly climbing since it bottomed out just around $25,000, and the cryptocurrency market has recently undergone another surge. Buyers failed to break above moving averages such as the 100 SMA (green) and the 200 SMA (purple) on the daily chart, and we saw a bearish candlestick. Sellers have taken charge in the last several days although they’re facing the 50 SMA (yellow) now.
BTC/USD – Daily chart
- BTC Buy Signal
- Entry Price: $26,248.2
- Stop Loss: $24,500
- Take Profit: $28,000
ETHEREUM Testing the Downside Again
Late last month, the price of Ethereum began to rise off its support level, indicating that there was some purchasing interest and demand for Ethereum at around $1,600. Buyers have repeatedly entered the zone above this level, but the 100 SMA (green) has served as resistance on the daily chart. Following Sunday’s advance, we had a reversal at this moving average, which wiped out all of September’s gains.
ETH/USD – Daily chart
- ETH Buy Signal
- Entry Price: $1,671.79
- Stop Loss: $1,371
- Take Profit: $1,971
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