Forex Signals Brief June 19: Thin Liquidity With US Markets Closed
Today we already head the major event for the day which was the UK CPI inflation report, and now markets should calm with US markets closed.
Yesterday started with the meeting from the Reserve Bank of Australia, which held its monetary policy steady. They left the Cash Rate at 4.35% as expected, while not giving any signals regarding the start of policy easing. They looked more worried about higher inflation, which won’t really materialize.
The AUD remained bullish throughout the day with the USD helping as well, as it was retreating lower, especially in the US session after another soft US economic report. Core retail sales for May showed a decline, while April’s numbers were revised down to negative as well, which shows that the US consumer is weakening due to higher interest rates.
Before that, we saw some mixed numbers from Europe, with the German ZEW economic sentiment indicator declining, while the Eurozone ZEW number increased. The final CPI inflation for June confirmed the first reading, showing a 2 point jump in both headline and core CPI inflation.
Today’s Market Expectations
Today the UK Consumer Price Index (CPI) is the main event, with the headline year-over-year (Y/Y) number anticipated to drop to 2.0%, down from 2.3% in the previous year. Similarly, the Core CPI Y/Y is expected to fall to 3.5%, down from 3.9% previously. This data release is crucial as it follows a period of heightened services inflation, which the Bank of England (BoE) has been particularly concerned about. In the last report, services inflation significantly exceeded expectations, coming in at 5.9% Y/Y against the BoE’s projection of 5.5%. Although the upcoming CPI data is unlikely to impact the BoE’s decision on Thursday directly, a surprisingly mild inflation report could influence market expectations and potentially lead to increased pricing of rate cuts. This would, in turn, skew the central bank’s stance to a more dovish outlook.
New Zealand’s GDP data is due on Wednesday, with no official forecasts currently available. However, Westpac predicts a 0.2% quarter-over-quarter (Q/Q) decline in Q1 2024 GDP. This would mark the fifth decline in the past six quarters, contrasting with the Reserve Bank of New Zealand’s (RBNZ) projection of a 0.2% increase. Analysts suggest that while the economy had been overheated in previous years, it is now moving into a ‘cool’ phase.
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 rallied significantly on Wednesday, exceeding the $2,340 level, but it encountered resistance around the 100-day Simple Moving Average (SMA), resulting in a subsequent drop. Technical indicators suggest further declines, with initial support expected around the 200-day moving average at $2,290. Additionally, the monthly low of $2,286.70 serves as a critical support level in the near term. Despite recent losses, ongoing global tensions and uncertainties continue to underpin gold prices. Political instability in Europe and unrest in the Middle East have contributed to a more bullish outlook for gold, as evidenced by the rally on Friday.
XAU/USD – H4 chart
NZD/USD Remains in Consolidation Mode
NZD/USD is currently trading in the middle of its range, with significant moving averages around the 0.61 to 0.62 area playing a crucial role in defining the next trend. A breakout above the 200 SMA (purple) at the top would favor buyers, while failure to break this level would likely push the price back down to the lower end of the range. Early yesterday, NZD/USD exhibited bearish behavior, briefly dipping below the daily chart’s 100 moving average and probing levels below the previous week’s lows around 0.61. These moves did not sustain, leading to a reversal as the day progressed. By the US session, the price had recovered as the USD weakened in response to disappointing US retail sales. Currently, the price is testing a cluster of moving averages, including the 100-hour and 200-hour moving averages both positioned at 0.6145, as well as the 4-hour chart’s 100-bar moving average around 0.6148. This region, between 0.6145 and 0.6148, is critical for predicting the market’s future direction. The current testing of these support and resistance levels will be pivotal in determining the near-term direction of NZD/USD.
NZD/USD – Daily Chart
Cryptocurrency Update
Bitcoin Slips Below MAs
Bitcoin continued its decline yesterday, falling below $65,000 despite the Australian Securities Exchange authorizing the first spot Bitcoin ETF listing. The cryptocurrency’s price plummeted by over $5,000, dropping from nearly $70,000 to around $65,000. This decrease coincided with significant whale activity and large institutional withdrawals. During the downturn, key technical indicators like the 20-day Simple Moving Average (SMA) were breached, leading to the closure of our sell BTC signal with a $6,000 profit. Despite this, the 100-day SMA remains a crucial support level for Bitcoin, showing resilience against the selling pressure, which prompts us to consider buying now.
BTC/USD – Daily chart
Ethereum Returns to MAs
Since the launch of its ETF, Ethereum (ETH) has traded within a range, reaching a high of $3,832.50. This surge was driven by improved market confidence following the SEC’s positive stance on spot Ether ETFs. Ethereum’s price increased by 25% from its previous highs, reflecting strong market demand and investor interest. However, despite this bullish trend, Ethereum’s price has recently declined, with ETH/USD falling below $3,500. Over the weekend, a bullish reversal occurred as the 100 SMA provided strong support, suggesting a potential resurgence in Ethereum’s price.
ETH/USD – Daily chart
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