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Forex Signals Brief October 23: Plenty of Data to Induce Volatility This Week

Last Week’s Market Wrap

Although stocks continued to decline, there were encouraging indications elsewhere. US Treasurys continued to surge higher but following a test of 10s that reached 5.00% but failed to push higher, buyers entered the fixed income market. Gold and Oil remained really bullish throughout the week but news concerning hostage talks in Gaza contributed to a retreat on Friday, so we’ll see how they behave this week.

There was some stability in FX, but it could have been paralysis because the USD/JPY is still holding at 150.00 and there is a lot of uncertainty. Overall, the market was waiting to see what would happen with bonds, the USD/JPY exchange rate, and the Middle East because of the extreme uncertainty. As TSLA continues to decline after a dismal earnings release, stocks were heavily impacted in a wide move. With a packed schedule of earnings starting on Tuesday, including Microsoft, Alphabet, and Visa, next week will be crucial.

This Week’s Market Wrap

UPCOMING EVENTS:

  • Monday: European and US manufacturing
  • Tuesday: AU-JP-EZ-UK-US PMIs, UK Unemployment Rate.
  • Wednesday: Australia CPI, German IFO, BoC Policy Decision.
  • Thursday: ECB Policy Decision, US Durable Goods, US GDP Q3, US Jobless Claims.
  • Friday: Tokyo CPI, Australia PPI, US Core PCE.

Last week, the ONS only released data on wages, job openings, and real-time employment information. Falling LFS survey response rates forced the release of the remaining UK labor market statistics to this week. The consensus is that the 4.3% unemployment rate will not change. The PMIs for Australia, Japan, the Eurozone, the UK, and the US will be released on Tuesday. As the central banks are anticipated to hold interest rates stable until they gather additional data and allow the monetary policy lags to permeate the economy, they are unlikely to have an impact on the near-term policy outlook at this time. The UK, the Eurozone, and particularly the US PMIs will be the most significant ones.

While the Q/Q reading is 1.1% vs. 0.8% before, the Australian Q3 CPI Y/Y is anticipated to be 5.3% vs. 6.0% prior. With the Trimmed Mean CPI Q/Q predicted at 1.1% vs. 0.9% before and the Y/Y reading seen at 5.0% vs. 5.9% prior, and the Weighted Mean CPI Q/Q expected at 1.0% vs. 1.0% prior and the Y/Y figure seen at 5.0% vs. 5.5% prior, the RBA is more likely to concentrate on the core measures. In light of the recent disappointment in the CPI data, the BoC is anticipated to maintain interest rates at 5.0%. Before then, there was a strong possibility that the BoC may have raised rates by 25 basis points because the underlying inflation indicators continued to surprise upward.

Given the dovish remarks made by ECB members, the miss in the Eurozone CPI, and the statement in the September Monetary Policy Statement stating that “the GC judges that rates have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to target,” the ECB is expected to maintain the deposit rate at 4.0%. The US Initial Claims last week exceeded forecasts once more, while the Continuing Claims missed for the second consecutive week, indicating that workers are having difficulty finding new employment following layoffs. According to consensus, this week’s initial claims will be 209K, up from 198K last week, while this week’s continuing claims will be 1720K, up from 1734K last week.

Although the Core-Core measure appears stickier, the Tokyo CPI is regularly heading downward and is considered a leading indication for the National CPI. The consensus predicts that the CPI ex-Fresh Food Y/Y will stay at 2.5%, while the Headline CPI Y/Y will slightly decline to 2.7% from 2.8% before. While the M/M reading is likely to be 0.3% vs. 0.4% prior, the US PCE Y/Y is predicted to slightly decline to 3.4% vs. 3.5% before. The Fed’s favored inflation indicator, the Core PCE Y/Y, is predicted to be 3.4% compared to a previous of 3.5%, while the M/M number is forecast to be 0.3% compared to a prior of 0.1%. Considering that it is unlikely to alter the near-term policy stance, this report shouldn’t move the market.

Forex Signals Update

Yesterday the volatility in the forex market remained high again, with the price making a few reversals, as risk sentiment improved after Powell’s comments but reversed as thme confilct in the Middle East heated up. We opened several forex signals, four of which reached the targets, with three of them reaching the take profit target and the other closing in loss. The positive correlation between the USD and US bond yields resumed again, which pulled the USD higher.

GOLD Remains Well Supported 

Gold has made a really strong recovery this month. After a notable increase the previous Friday, the price reached the 100 SMA (green) on the daily chart on Friday. The $50 increase was partly driven by fears from the Middle East, but Friday’s drop in Treasury rates after Thursday’s spike also happened at the same time. As we talked about last week, the fear of conflict seldom matches the reality, so geopolitical buy gold trades should usually diminish over time. Moving averages provided support when XAU crossed $1,960 yesterday, but the price is still increasing.

XAU/USD – 60 minute chart 
  • Gold Buy Signal
  • Entry Price: $1,945
  • Stop Loss: $1,915
  • Take Profit: $1,985

GBP/USD Breaks Above the 100 SMA

GBP/USD dropped to 1.2040 early this month, its lowest level since March. However, it bounced back for more than a week, reaching a high of 1.2340 early last week. The USD gained strength with the release of the US consumer inflation report, which caused this pair to revert downward and earlier drop to just below 1.21.

Moving averages have been behaving as resistance all past week, limiting the higher retraces, particularly the 20 SMA (gray), which indicates that there is significant selling pressure. This pair has also been declining due to the increase in US Treasury rates brought on by geopolitical concerns. This week saw the release of the UK’s inflation data, which was also higher than anticipated; nevertheless, this had little impact on the GBP. So, it seems like this pair will break below 1.20 soon.

GBP/USD – Daily chart

Cryptocurrency Update

 BITCOIN Trades at $28,000

Last week we saw two surges in the crypto market, first early in the week as Coin Telegraph reported that SEC approved spot ETF, which sent BTC to $30,000. But the price retreated to $28,000 where it consolidated for several days, before the bullish momentum resumed again later in the week. BTC pushed to $30,000 again where it closed the week.

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

ETHEREUM Pushing Above the 50 Dily SMA Again

Yesterday ETH/USD also surged higher 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.

ETH/USD – Daily chart
  • ETH Buy Signal
  • Entry Price: $1,671.79
  • Stop Loss: $1,371
  • Take Profit: $1,971
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Skerdian Meta
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Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.
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