Forex Signals Brief June 10: Attention Shift to the FED and US CPI

Last week, we had two major central banks lowering interest rates, with the ECB cutting the Main Refinancing Rate from 4.50% to 5.25%, while the Bank of Canada cut the Overnight Rate to 4.75% from 5.00%. However, the Euro ended up bullish after the ECB meeting, which delivered a bullish cut, as they didn’t commit to further rate reductions. The CAD has turned bearish, but not overwhelmingly.

The FED is on the spotlight again this week

However, everything turned bearish on Friday after the NFP report from the US, which sent the USD surging higher. Last week, the S&P and NASDAQ indices reached new all-time highs amid generally bullish risk sentiment, despite some weak US job numbers. On Friday, the S&P index hit a fresh all-time high of 5375.08.

However, these gains were short-lived, and the index ended the day in negative territory. This reversal coincided with the release of the NFP employment report, which came in unexpectedly strong. The robust jobs figures caused a shift in risk sentiment, dampening investor enthusiasm and leading to a downturn in the indices by Friday’s close.

This Week’s Market Expectations

This week the attention shifts to the FOMC meeting, which will be watched closely by traders for any hints about the start of monetary policy easing. Besides that, we have the US CPI inflation on Tuesday as well which will induce come volatility in financial markets.

Upcoming Economic Events:

Tuesday:

  • UK Labour Market Report:
    • Importance: Provides insights into employment trends, wage growth, and overall labor market health in the UK.
    • Impact: Can influence GBP and UK equities based on the strength or weakness of the data.
  • US NFIB Small Business Optimism Index:
    • Importance: Measures the economic health of small businesses, a key driver of the US economy.
    • Impact: Can provide early indications of economic trends and impact the USD and US equities.

Wednesday:

  • Japan PPI (Producer Price Index):
    • Importance: Measures the change in the price of goods sold by manufacturers, indicating inflationary pressures.
    • Impact: Can influence the JPY and Japanese equities, particularly if there are significant deviations from expectations.
  • China CPI (Consumer Price Index):
    • Importance: Key indicator of inflation and consumer spending trends in China.
    • Impact: Significant for the CNY and global markets, as China is a major global economic player.
  • UK GDP:
    • Importance: A broad measure of economic activity and growth in the UK.
    • Impact: Strong or weak data can influence the GBP and UK equities.
  • US CPI (Consumer Price Index):
    • Importance: A key measure of inflation in the US.
    • Impact: Critical for USD and US equity markets as it influences Federal Reserve policy decisions.
  • FOMC Policy Decision:
    • Importance: The Federal Reserve’s decision on interest rates and monetary policy.
    • Impact: Major implications for USD, US bonds, and global financial markets. Market participants will be particularly focused on any forward guidance provided.

Thursday:

  • Australia Labour Market Report:
    • Importance: Provides data on employment trends and unemployment rates in Australia.
    • Impact: Influences the AUD and Australian equities.
  • Swiss PPI (Producer Price Index):
    • Importance: Measures the change in the price of goods sold by manufacturers, indicating inflationary pressures.
    • Impact: Can impact the CHF and Swiss equities.
  • Eurozone Industrial Production:
    • Importance: Measures the output of the industrial sector in the Eurozone.
    • Impact: Influences the EUR and European equities.
  • US PPI (Producer Price Index):
    • Importance: Measures inflation from the perspective of producers.
    • Impact: Can impact USD and US equities, particularly if it deviates from expectations.
  • US Jobless Claims:
    • Importance: Provides weekly data on the number of people filing for unemployment benefits.
    • Impact: Important for gauging the health of the labor market and can influence USD and US equities.

Friday:

  • New Zealand Manufacturing PMI:
    • Importance: Indicates the health of the manufacturing sector in New Zealand.
    • Impact: Can influence the NZD and New Zealand equities.
  • BoJ (Bank of Japan) Policy Decision:
    • Importance: The Bank of Japan’s decision on interest rates and monetary policy.
    • Impact: Significant for the JPY and Japanese equities.
  • US University of Michigan Consumer Sentiment:
    • Importance: Measures consumer confidence in the US economy.
    • Impact: Can provide insights into consumer spending trends and impact the USD and US equities.

Last week there was quite some volatility, with risk assets being bullish for most of the week as sentiment remained positive, while the USD was retreating, which lasted until Friday when everything reversed after the strong NFP numbers. We were mostly long on risk assets such as commodity dollars and Dow Jones, opening 50 trading signals in total. At the end of the week we closed it with 35 winning forex signals and 15 losing ones.

Gold Breaks the 50 SMA After Falling $100

Since hitting a peak in May, gold has faced significant headwinds, particularly from the strengthening US dollar and improving economic indicators, which have reduced the appeal of the precious metal as a safe-haven asset. The reversal in gold prices coincided with a broader shift in market expectations regarding Federal Reserve policy. As negative US job numbers raised speculation of a potential interest rate cut by the Fed, investors turned to gold as a hedge against inflation and currency depreciation. This increased demand provided some support for gold prices, preventing a further decline. However, technical indicators suggest that gold’s downward momentum may continue, as it has breached key support levels such as the 50-day simple moving average (SMA). While there is still support around $2,277, further weakness in gold prices cannot be ruled out, especially if economic data continues to improve and the US dollar turned pretty strong after the NFP.Chart XAUUSD, D1, 2024.06.09 22:54 UTC, MetaQuotes Ltd., MetaTrader 5, Demo

XAU/USD – Daily chart

The 200 SMA Turns into Support for NZD/USD After the Bullish Momentum

USDJPY fell lower early last week, but it found firm support near the 50-day Simple Moving Average (SMA), which has been a significant level for buyers to enter and drive prices up. This moving average appears to be a durable dynamic support level, reflecting the strength of the bullish trend; last week, the price bounced twice from this moving average. The latest recovery off the 50 SMA on Wednesday, followed by a nearly 200-pip rise on Friday that took the price above 157, indicates that buyers are firmly in control of the market. This rally has the ability to reassert the bigger positive trend following a brief spell of weakness early this week.Chart USDJPY, D1, 2024.06.09 23:02 UTC, MetaQuotes Ltd., MetaTrader 5, Demo

USD/JPY – Daily Chart

Cryptocurrency Update

Bitcoin Retreat Stalls at the 20 SMA

The cryptocurrency market hasn’t been experiencing notable developments in the last two weeks, with BTC experiencing contrasting price action. Bitcoin’s long-term uptrend remains robust, as evidenced by its ability to hold above the 100-day Simple Moving Average (SMA), a critical support level. Recent price action has seen Bitcoin breaking through key resistance levels, including the 20-day and 50-day SMAs, signaling renewed bullish momentum. The successful breach of the $70,000 barrier reflects the prevailing optimism among investors and traders.

BTC/USD – Daily chart

Ethereum Continues to trade in A Tight Range Below $4,000

Ethereum (ETH) has has also been trading in a range after the surge following the ETH ETF approval, with the high of $3,832.50. This price increase has been attributed to growing confidence following the SEC’s more favorable stance on spot Ether ETFs. Ethereum’s recent performance, with a remarkable 25% increase from its previous peak, indicates strong market demand and investor interest. Despite Ethereum’s bullish trend, there has been a recent decline in its value, with ETH/USD trading below the $4,000 mark for the past two weeks.

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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