Forex Signals Brief May 27: Quiet Day Ahead with UK, US On Bank Holiday
Today markets should be quiet with US and UK off, but the volatility will pickk up as the week progresses.
Last week started slow, with most of Europe and Canada on a bank holiday weekend on Monday, however, we had a plethora of FED speakers, most of whom seemed uncertain about the start of the monetary easing process, which is bullish for the USD/ The USD made some gains during the week, however on Friday the buck retreated lower again on lower inflation expectations by the UoM, despite positive economic data, such as stronger durable goods orders, Services PMI and Manufacturing PMI which came out of recession in April.
On Tuesday the Canadian CPI inflation report showed a bigger-than-expected slowdown in April, however, the CAD and the NZD ended the week as the strongest currencies. However, the NZD had reason for this since the RBNZ meeting on Wednesday sounded hawkish, which kept the NZD upbeat.
This Week’s Market Expectations
This week also starts slow, with the UK and the US on a bank holiday weekend. The economic data is light during the week as well, however toward the end of the week we have the US prelim Q1 GDP and most importantly, the FED’s favourite inflation report, the PCE price index.
Upcoming Economic Events
Monday:
- UK/US Bank Holiday: Markets in the UK and US will be closed, leading to lower trading volumes.
- German IFO Business Climate Index: This key indicator measures the business climate in Germany and can impact the EUR/USD pair.
Tuesday:
- Australia Retail Sales: An important indicator of consumer spending, which is a major component of overall economic activity.
- Canada PPI (Producer Price Index): Measures the average change in prices received by domestic producers for their output, an early indicator of consumer inflation.
- US Consumer Confidence: Gauges consumer sentiment, which can impact consumer spending and overall economic growth.
Wednesday:
- Australia Monthly CPI: A key measure of inflation, influencing the Reserve Bank of Australia’s monetary policy.
Thursday:
- Switzerland GDP: Measures the economic performance of Switzerland, influencing CHF pairs.
- Eurozone Unemployment Rate: Indicates the health of the labor market in the Eurozone, impacting the EUR.
- US GDP 2nd Estimate: Provides a more accurate estimate of economic growth in the US.
- US Jobless Claims: Weekly data on the number of Americans filing for unemployment benefits, an important indicator of labor market health.
Friday:
- Tokyo CPI: A key inflation measure for Japan, influencing JPY pairs.
- Japan Retail Sales and Industrial Production: Indicators of economic health in Japan, impacting JPY.
- China PMIs: Early indicators of economic activity in China, impacting global markets.
- Switzerland Retail Sales and Manufacturing PMI: Indicators of economic health in Switzerland, impacting CHF pairs.
- Eurozone Flash CPI: A preliminary measure of inflation in the Eurozone, influencing ECB policy decisions and EUR pairs.
- Canada GDP: Measures the economic performance of Canada, impacting CAD pairs.
- US PCE (Personal Consumption Expenditures): The Fed’s preferred measure of inflation, influencing monetary policy decisions.
Analysis
- German IFO Business Climate Index: Watch for impacts on the EUR, especially against the USD and GBP, as this data can provide insights into business sentiment in Europe’s largest economy.
- Australia Retail Sales and Monthly CPI: Important for AUD pairs, especially AUD/USD. Strong data could support the AUD, while weak data could see it decline.
- US Consumer Confidence and PCE: These will be crucial for USD pairs. High confidence and rising PCE could support the USD, reinforcing expectations of continued Fed rate hikes.
- Eurozone Flash CPI and Unemployment Rate: Critical for EUR pairs. Higher inflation or lower unemployment could bolster the EUR by suggesting a need for tighter ECB policy.
- Japan Economic Data (Tokyo CPI, Retail Sales, Industrial Production): Key for JPY pairs. Higher inflation or strong economic activity could support the JPY.
- China PMIs: Vital for global market sentiment and commodities. Strong PMIs could boost risk appetite, benefiting AUD and NZD.
- Canada GDP and PPI: Important for CAD pairs. Strong economic growth or rising producer prices could support the CAD.
Last week the USD buyers returned, with the price of Gold tumbling more than $100 lower, however, in forex the volatility wasn’t too high. The price action in stock markets was also mixed, despite higher-than-expected Nvidia earnings. We opened 19 trading signals throughout the week, ending up with 14 winning signals and six losing ones.
Gold Closes the Week at the Lows
Gold experienced a notable decline last week, following its historic high where the XAU/USD pair closed above $2,400 for the first time. This milestone suggested the potential for further upward movement in the near future. The market’s response to lower-than-expected CPI statistics triggered a flight to safe-haven assets, with gold being a primary beneficiary, driving the XAU price back towards the $2,400 level. The price fell to $2.330 where it closed the week.
XAU/USD – Daily chart
EUR/USD Bounced Off the 200 SMA on Friday
Before beginning a downward trend last week, the EUR/USD had been on a consistent positive trajectory for several weeks. As the price dropped towards 1.08, it fell short of breaching that level, suggesting that this area has turned into support. Despite the strong US durable goods orders report, the 200 SMA (purple) continued to act as a robust support level. On Friday, a bounce off this moving average was observed, indicating that the overall trend for this forex pair remains favorable. This resilience suggests that traders are still bullish on the EUR/USD, even in the face of positive US economic data. The 200 SMA’s support is a key technical indicator that can offer traders confidence that the EUR/USD could maintain its upward momentum, at least in the short term. This bounce back from the 200 SMA indicates that the pair may continue to find buyers around this level, supporting further advances as long as other economic and technical indicators align favorably.
EUR/USD – Daily Chart
Cryptocurrency Update
Bitcoin Continues to Consolidate
The price of Bitcoin dropped to about $61,000 yesterday, providing investors with a potential buying opportunity as the 100-day Simple Moving Average (SMA) now acts as a support level. This aligns with our viewpoint that the long-term trend remains positive. Historically, upward momentum in Bitcoin has been impeded by resistance from technical indicators such as the 20-day and 50-day SMAs. However, as seen on the daily chart, Bitcoin has overcome these resistance levels, and the 50-day moving average is likely to become a new support level. Despite the recent decline over the past three days, Bitcoin’s upward momentum remains intact, evidenced by its rise beyond $70,000 on Monday. This resilience suggests that the market sentiment towards Bitcoin is still bullish, and the current price dip might be a temporary correction within a broader upward trend.
BTC/USD – Daily chart
Ethereum Resumes the Upside Momentum
Sentiment in the cryptocurrency market was significantly bolstered earlier this week by signs that the SEC might approve an Ethereum ETF in January. However, there was no immediate market reaction following the official approval yesterday. Despite this, Ether (ETH) has surged to a new high of $3,832.50, driven by the market’s increased confidence stemming from the SEC’s more optimistic stance on spot Ether ETFs. Ethereum’s price has experienced a strong upward trajectory after hitting a low of around $3,000. This impressive rise has resulted in a nearly 25% increase in Ethereum’s value. Given this explosive growth, we decided to close our buy Ethereum signal at a profit yesterday, capitalizing on the bullish momentum.
ETH/USD – H4 chart
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