Forex Signals Brief May 14: Eyes on UK Earnings, US PPI Inflation
Today the UK employment and earnings reports, as well as the US PPI inflation will highlight the day before the CPI inflation tomorrow
Tuesday’s economic calendar may have been quiet, with only the New Zealand Inflation Expectations Quarter-on-Quarter which came at 2.33%, below the previous quarter of 2.50%. besides that, the New York FED offered insights into inflation expectations and central bank perspectives:
- New York Fed’s Inflation Predictions: The New York Fed’s May inflation forecasts presented a mixed outlook. While short-term inflation expectations rose, indicating near-term concerns, longer-term expectations also increased, suggesting some stability worries in the future.
- Fed Governor Jefferson’s Remarks: Fed Governor Jefferson provided an assessment of the US economy, acknowledging significant progress in inflation reduction and labor market resilience. However, he also highlighted a slowdown in the decline of inflation rates and reiterated inflation as an ongoing concern, indicating the need for continued monitoring and management.
- SNB Chairman Thomas Jordan’s Statement: SNB Chairman Jordan offered a cautiously optimistic view, stating that the battle against inflation is nearing its end. However, he underscored the persistence of uncertainty and the importance of remaining vigilant. The improved outlook for Swiss inflation signals a more stable economic environment ahead.
Today’s Market Expectations
Today it kicks off with the UK unemployment report which is expected to show a slight increase in the unemployment rate to 4.3% from the previous 4.2% in the previous month. Additionally, average hourly earnings, including bonuses, are projected to come in at 5.3%, down from the previous figure of 5.6%. Given these expectations, the report is unlikely to prompt any immediate action from the Bank of England (BoE). The central bank is currently more focused on upcoming inflation readings, as they may influence decisions at the June meeting. Speculation suggests that the BoE might announce its first rate cut at that meeting, with the market currently estimating a 50/50 probability of such a move.
The US Producer Price Index (PPI) report is anticipated to show a month-on-month (M/M) increase of 0.2%, consistent with the previous reading. Meanwhile, the Core PPI, which excludes volatile food and energy prices, is also expected to rise by 0.2%. Considering that the prices paid components in the ISM Purchasing Managers’ Index (PMI) surveys have recently reached cycle highs, there is a possibility of an upside surprise in the PPI figures. Such an outcome could lead to defensive positioning in anticipation of the Consumer Price Index (CPI) report, which is scheduled for the following day.
Yesterday the lack of economic news prevented major moves in most markets, however there was enough price action for us to open six forex signals, five of which closed in profit, while one closed in loss. Forex pairs moved in a range, with the USD retreating first and then making a comeback, so we played the range and it resulted in a good strategy.
Gold Returns Below the 20 Daily SMA
Gold’s price dynamics have indeed been turbulent, with notable fluctuations observed in recent weeks. After reaching highs above $2,400 in April, the price retraced below $2,300, finding support around $2,280. Subsequently, gold has been trading within a range bound by $2,310 and $2,350. However, there has been renewed buying interest in the past week, driving the price of gold above both the 20-day Simple Moving Average (SMA) and the upper boundary of the established range. However the price reversed back down at $2,375 yesterday, falling back in the range below the 20 SMA.
XAU/USD – Daily chart
USD/CHF Continues to Find Support at the 100 SMA
USD/CHF pair has indeed experienced a continued decline but found support around the 0.90 level, which coincided with a previous barrier zone and was reinforced by the 100-period Simple Moving Average (SMA) on the 4-hour (H4) chart. Following this support, the pair has traded within a narrow range between 0.90 and 0.91, indicating a period of consolidation and indecision in the market. Recently, the chairman of the Swiss National Bank (SNB) made dovish remarks, suggesting that further rate cuts may be forthcoming. While this could potentially weaken the Swiss Franc (CHF), market sentiment is currently focused on the US Dollar (USD). Overall, the pair’s direction in the near term remains uncertain as neither buyers nor sellers have established dominance.
USD/CHF – H4 Chart
Cryptocurrency Update
Bitcoin Bounces off the 100 SMA After Opening A Buy Signal
Bitcoin has been exhibiting a pattern of lower highs since March, indicating a potential downtrend or consolidation phase. Yesterday, the price of Bitcoin dropped to around $61,000, prompting a buy signal. Technical indicators such as the 50-day and 20-day Simple Moving Averages (SMAs) have acted as resistance levels for Bitcoin, constraining its upward movements. However, Bitcoin found support near the 100-day Simple Moving Average (SMA) (green line), presenting a potential buying opportunity which we too. Yesterday we saw a bounce off this moving average so Bitcoin continues to find support at this level.
BTC/USD – Daily chart
Ethereum Sticks Support
Ethereum (ETH) has demonstrated volatility as well, experiencing fluctuations that have led its price to dip below the $3,000 threshold on multiple occasions. Additionally, it has occasionally traded below the Simple Moving Averages (SMA) on the daily chart. Despite these fluctuations, Ethereum has exhibited resilience by frequently recovering and surpassing the $3,000 mark. This resilience suggests that there is strong support below the $3,000 level. However we didn’t see a bounce off the support yesterday, like we did in BTC/USD.
ETH/USD – Daily chart
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