Forex Signals Brief June 20: Attention on the SNB and the BOE
Today market's attention will focus on the meetings by Swiss National Bank and the Bank of England which will highlight the GBP and CHF.
Yesterday the big event was in the European session, with the UK CPI (Consumer Price Index) inflation report being released. The headline consumer inflation lost three points and fell to 2.0% for the first time in three years, while core CPI inflation lost four points falling from 3.9% to 3.5% in April, however the GBP didn’t blink.
In USD/JPY trading, buying activity increased notably when the pair moved above the 158.00 level, possibly driven by news of issues at a Japanese bank. Despite this, the overall trend indicated slight strength in the US dollar during North American trading, with minimal fluctuations that could be seen as part of the normal market ebb and flow.
The Canadian dollar saw early gains but later gave up most of them. Market sentiment suggests a 65% chance of a rate cut next month, although recent meeting minutes indicate a preference for a more gradual approach to monetary policy. Bank of Canada Governor Tiff Macklem is set to deliver a speech on June 24, and the retail sales report due on Friday will offer another opportunity to gauge potential policy changes. While it was difficult to identify a clear risk sentiment across the markets, European and Canadian stocks demonstrated resilience amidst varying global economic conditions and uncertainties.
Today’s Market Expectations
The day started with the Q1 GDP report from New Zealand.
Although market pricing currently suggests a 60% probability, the Swiss National Bank (SNB) is anticipated to lower interest rates to 1.25%, making it nearly a toss-up between reducing rates to 1.50% or 1.25%. The latest inflation figures, showing a 1.4% year-over-year increase (with core inflation at 1.2% year-over-year), align with the SNB’s expectations. Recent remarks by SNB Chairman Jordan have contributed to a notable appreciation of the Swiss franc. He indicated that purchasing CHF would likely result in a weaker franc and noted that any inflation risk would probably come with a stronger currency. Jordan also estimated the neutral interest rate (r*) to be near zero percent, suggesting that even with a rate cut, the policy would remain restrictive.
In the previous meeting, there was a somewhat more dovish tone than expected from the Bank of England, highlighted by Governor Bailey’s indication that they might consider cutting rates more aggressively than initially anticipated. Deputy Governor Ramsden also voted in favor of a rate cut, underscoring the committee’s openness to easing monetary policy. It is evident that the central bank is inclined towards rate cuts but remains cautious, preferring to gather additional confidence in economic conditions before making any adjustments to the policy rate. Despite these considerations, the Bank Rate will remain unchanged at 5.25% for the time being, reflecting the central bank’s current stance amidst ongoing economic uncertainties and the need for further clarity on inflationary pressures and economic recovery.
Yesterday the USD was retreating again, so we remained long on other currencies, having a several winning trading signals in forex and commodities as well. However, in the US session stock markets started to retreat and we got caught on the wrong side with a few losing trades in the Dow Jones. We ended the day with six winning forex signals and three losing ones.
We Continue to Sell Gold at the 200 SMA
Gold made a significant comeback on Wednesday, surpassing the $2,340 mark; however, it encountered resistance at the 100-day Simple Moving Average (SMA), leading to a pullback. Technical indicators suggest further declines, with the 200-day moving average at $2,290 providing the first line of support. Additionally, the monthly low of $2,286.70 serves as a critical short-term support level. Despite recent drops, gold prices remain bolstered by ongoing global tensions and uncertainties. The surge on Friday reflects a more optimistic outlook for gold, driven by political turmoil in the Middle East and Europe but buyers couldn’t break above the 200 SMA (purple) where we decided to open another sell Gold signal.
XAU/USD – H4 chart
AUD/USD Remains in Consolidation Mode
Following the release of disappointing US Consumer Price Index (CPI) inflation data last Wednesday, the AUD/USD pair saw a significant rally, breaking above the 200-day Simple Moving Average (SMA). However, the price quickly retreated back into its previous range and started trending towards the lower end. Support levels around the 100-day SMA (red) on the daily chart briefly halted the downward movement. This week, as the AUD/USD pair bounced back from lower levels, extending its winning streak over three days, buyer interest revitalized. The pair surged to multi-session highs, testing levels in the upper-0.6600s. Improved sentiment in riskier markets, ongoing weakness in the US dollar (USD), and continued market adjustments following the Reserve Bank of Australia (RBA) meeting were key factors driving this upward momentum.
NZD/USD – Daily Chart
Cryptocurrency Update
Bitcoin Remains Close to $65,000, Below MAs
Yesterday, despite the Australian Securities Exchange approving the first spot Bitcoin ETF listing, Bitcoin’s price dropped below $65,000. The cryptocurrency saw a steep decline of over $5,000, falling from around $70,000 to approximately $65,000. This drop coincided with substantial institutional withdrawals and significant whale activity. Key technical indicators, such as the 20-day Simple Moving Average (SMA), were breached during the decline, resulting in the closure of our sell Bitcoin signal with a $6,000 profit. Nevertheless, the 100-day SMA remains a crucial support level for Bitcoin, showing resilience against the selling pressure and prompting us to consider buying at this point.
BTC/USD – Daily chart
Ethereum Bounces Off the 50 SMA
Ethereum (ETH) has experienced fluctuations since the introduction of its ETF, reaching a peak of $3,832.50. This surge was driven by increased market confidence following the SEC’s favorable stance on spot Ether ETFs. From its previous highs, Ethereum’s price has climbed by 25%, reflecting strong investor interest and market demand. Despite this bullish trend, Ethereum’s price recently dipped, with ETH/USD falling below $3,500. However, over the weekend, there was a positive reversal, suggesting that Ethereum’s price may rise again, supported by the solid backing of the 50-day Simple Moving Average (green).
ETH/USD – Daily chart
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