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Forex Signals Brief May 16: Attention Shifts to US Employment

Yesterday started with the Wage Price Index from Australia, which was expected to tick lower from 1.0% to 0.9% in Q1, but slowed further to 0.8% instead. However, AUD/USD ended up higher at the end of the day, after the soft US CPI April inflation report, which showed a slowdown after the sticky figures we saw in Q1. Monthly inflation came at 0.3% for both the headline and core CPI numbers, down from 04% in March, while CPI YoY ticked down to 3.4% from 3.5% previously.

US Unemployment Claims expected to fall to 219k

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The Eurozone Flash Employment Change QoQ and Flash GDP QoQ for the first quarter remained unchanged at 0.3% in the prelim reading, which didn’t offer much action in the forex market. However it kicked off after the US CPI and retail sales report, which were softer than anticipated.

The stagnant retail sales numbers, weaker-than-expected NY manufacturing figures, and lower-than-anticipated US CPI, contributed to a decline in the US dollar while boosting investor sentiment towards riskier assets. This led to a surge in stock prices, with all three major US stock indices reaching record closing levels.

Amid the risk-on sentiment, the US dollar experienced weakness compared to other major currencies in the forex market, with the New Zealand dollar (NZD) and the Australian dollar (AUD) emerging as the strongest performers. Overall, the market sentiment appeared optimistic, favoring riskier investments over safe-haven assets.

Today’s Market Expectations

Today it kicked off with the Australian Labour Market report is anticipated to reveal a significant rebound in job additions, with an expected increase of 25.3K in April compared to the previous month’s decrease of -6.6K. However, alongside this improvement, there’s a projected uptick in the unemployment rate from 3.8% to 3.9%. The Reserve Bank of Australia (RBA) is predominantly focused on inflation, but sustained tightness in the labor market, especially coupled with robust wage growth, could pose challenges in achieving the central bank’s inflation target “within a reasonable timeframe.”

The US Jobless Claims report remains a crucial indicator for assessing the health of the labor market on a weekly basis. A deteriorating labor market may signal disinflationary pressures, posing challenges for the Fed’s inflation objectives. Conversely, a resilient job market could present hurdles in achieving the Fed’s targets. Last week’s initial claims data missed expectations by 231K, marking the largest deviation since August 2023. While a single deviation doesn’t establish a trend, it’s noteworthy given recent disappointments in the NFP report and weaker consumer sentiment data. This week’s initial claims are forecasted at 220K compared to the previous 231K. Continuing Claims, however, lack a consensus forecast, despite the previous release showing an increase to 1785K versus the expected 1785K and the prior 1768K.

Yesterday there was a USD dump after the CPI report, which sent the USD more than 70 pips lower across the board, closing the day at the bottom. We only had three closed trades, with two winning forex signals and a losing signal in Dow Jones, s we got caught on the wrong side after the CPI surge in risk trades.

Gold Finds Any Reason to Rally

The market’s response to yesterday’s US CPI number was significant, leading to heightened volatility and a notable impact on asset prices. The softer-than-expected report prompted investors to seek safe-haven assets like gold, driving XAU/USD back towards the $2,400 level. The recovery off the 2,330 support level, which previously acted as resistance during the consolidation phase in April, suggests a bullish sentiment in the market. This rebound in GOLD , coupled with the presence of the 20-period Simple Moving Average (SMA) on the H4 chart, reinforces the positive outlook. The fact that buyers regained control after the US CPI report underscores their confidence and willingness to push prices higher.

XAU/USD – H4 chart

USD/JPY Falls Below 155

The USD/JPY pair has indeed experienced a series of notable events and fluctuations in the past two months, reflecting the complex dynamics influencing its price movements. Initially, the intervention by Japanese officials triggered a sharp 10% decline in the pair, pushing it from highs around 162 to lows near 151. However, the pair subsequently staged a recovery and embarked on another upward trajectory, with the price reaching levels near 1.58 recently. However, the release of the disappointing US CPI figure has had a significant impact on this pair, causing it to drop by 200 pips and fall below the 152 level.

AUD/USD – H4 Chart

Cryptocurrency Update

Bitcoin Ends the Downtrend, Breaks Above the 50 Daily SMA 

Bitcoin has been exhibiting a pattern of lower highs since March, suggesting a potential shift towards a downtrend or consolidation phase. Recently, the price of BITCOIN declined to approximately $61,000, presenting a buying opportunity for investors. Technical indicators like the 50-day and 20-day Simple Moving Averages (SMAs) have acted as resistance levels, constraining Bitcoin’s upward movement. However, Bitcoin found support near the 100-day Simple Moving Average (SMA) (represented by the green line), which has proven to be a significant level of support. Consequently, Bitcoin’s price rebounded, closing the day above this crucial support level and breaking above the 50 SMA. This rebound indicates that Bitcoin continues to find support around the 100-day SMA, suggesting ongoing resilience in the cryptocurrency despite the recent downward trend.

BTC/USD – Daily chart

Ethereum Pops Above $3,000

Ethereum (ETH) has experienced significant volatility, with fluctuations pushing its price below the $3,000 threshold on multiple occasions. Notably, ETHEREUM has dipped below its Simple Moving Averages on the daily chart. However, despite these ups and downs, Ethereum has demonstrated resilience by consistently rebounding and surpassing the $3,000 milestone. This resilience underscores the robust support present below the $3,000 level. Yesterday we saw yet another bounce off the support zone, sending ETH above $3,000 again.

ETH/USD – Daily chart

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Skerdian Meta
Lead Analyst
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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