Forex Signals Brief October 18: Attention Shifts to UK and Eurozone Inflation

Yesterday important data started coming out, with Inflation reports from New Zealand and Canada, employment report from the UK, and retail sales report from the US. Although markets remained surprisingly relatively quiet. US treasury yields continued the bullish momentum from yesterday, after last week’s retreat but the USD didn’t follow up, with the DXY index ending up lower, which shows that the correlation between US bond yields and the USD might be breaking up.

So, the USD ended up slightly lower and risk currencies made some gains, although the NZD and particularly the CAD missed out and were the biggest losers. The Kiwi was soft as the CPI inflation report showed a 1.8% growth in Q3, missing expectations of 1.9%.

In Canada, the September CPI fell to 3.8% versus 4.0% expected. CIBC on yesterday’s CPI report said that the softer CPI report means that the Bank of Canada probably won’t need to hike again. The CIBC has been hinting at a forecast for one more Bank of Canada rate hike but they’re aren’t leaning that way after the softer consumer inflation numbers.

In the UK the earnings came below expectations, cooling off to 8.1% in September from 8.5% in August, but that didn’t stop the GBP from climbing higher and ending the day as one of the strongest currencies. The USD on the other hand ended up lower, despite a jump in retail sales last month, showing that the US consumer is still in decent shape.

Today’s Market Wrap

Today starts with a speech from the Reserve Bank of Australia Governor Bullock, which can only weigh on the AUD, since no one expects further tightening of the policy. The economic reports from China come up late on. Analysts estimate Chinese Q3 GDP to be 4.4% YoY (formerly 6.3% in Q2), with the QoQ rate projected to be 1.0% (previously 0.8%). According to Reuters, Retail Sales will be 4.5% in September (up from 4.6% in August) and Industrial Output will be 4.3% (up from 4.5% in August).

The YoY measure may be over 4% as freshly announced stimulants work their way through the economy; the economy opened low but moved high in the third quarter. According to September high-frequency indicators, current positive factors for economic recovery are increasing, and economic growth is expected to remain stable throughout the quarter.

The UK CPI Y/Y is projected to be 6.5% vs. 6.7% before, while the M/M number is expected to be 0.4% vs. 0.3% previously. The Core CPI Y/Y is predicted to be 6.0%, up from 6.2% before, with no agreement on the monthly rate at this time. If the labor market report reflects weakness, the Bank of England is likely to ignore an upward surprise in inflation statistics. If both reports reflect strength, however, we are likely to see another rate rise at the following meeting.

Forex Signals Update

Yesterday week the price action was slow again with the USD on retreat and we opened several trading signals along the way. Bond yields turned bullish again yesterday but the USD wasn’t following up. Most of the forex signals continued today apart from two, one of which reached the take profit target, the other we closed manually in profit.

GOLD Keeps Failing at the 100 SMA

Since its lows late last week, gold has risen more than $100, with a huge leap on Friday last week sending the price to the 100 SMA (green) on the daily chart. The spike of around $50 was linked to Middle East concerns, but it also corresponds with Treasury rates falling back down on Friday following the Thursday jump. We stated last week that geopolitical buy Gold trades should normally fade at some time because the reality of conflict seldom matches the fear, and the rise has paused near the 100 SMA, however it remains to be seen if it will reverse back down.

XAU/USD – Daily chart

Gold Sell Signal
Entry Price: $1,905
Stop Loss: $1,875
Take Profit: $1,935

MAs Keeping NZD/USD Down

The New Zealand dollar began to decline in July when risk assets such as commodity currencies fell against the US dollar and have been declining for more than two months. Despite the fact that the NZD has been holding up well and trading in a range since early September, with a support zone below 0.59. We decided to open a sell forex signal here yesterday as the 20 SMA was acting as resistance.

NZD/USD – H4 chart

Cryptocurrency Update

BITCOIN Consolidates Above $28,000

Yesterday we saw a 10% surge in BTC as Coin Telegraph reported that SEC approved spot ETF. It has been gaining since bottoming out at $25,000, and the cryptocurrency market surged together with Bitcoin yesterday. Buyers broke above moving averages such as the 100 SMA (green) and the 200 SMA (purple) which were acting as resistance on the daily chart and the price peaked above $30,000 before retreating down.

BTC/USD – Daily chart

BTC Buy Signal
Entry Price: $26,248.2
Stop Loss: $24,500
Take Profit: $28,000

ETHEREUM Fails at the 50 Dily SMA Again

Yesterday ETH/USD also surged hgiher although the move was smaller. Late last month, Ethereum’s price began to surge above its support level, showing that there was some purchasing interest and demand for Ethereum at roughly $1,600. Buyers have regularly entered the zone above this level, but the daily chart’s 100 SMA (green) has acted as resistance. Following Sunday’s rise, this moving average reversed, wiping away all of September’s gains.