Forex Signals Brief July 17: UK and New Zealand CPI Highlight the Day
Today we have the CPI consumer inflation for UK and New Zealand, both of which are expected to show a decline.
Yesterday was quiet during the Asian and European sessions, however, we had the ZEW economic sentiment report for the Eurozone and Germany. Both reports came below expectations, showing that the Eurozone economy is increasingly showing signs of weakness, as high ECB interest rates have hiked borrowing costs, while the political landscape seems unstable.
Then in the US session, we had the major event of the day, the CPI inflation report from Canada and the US retail sales figures for June. US retail sales surpassed expectations, including revisions for the previous month. The Ex-Autos month-on-month increase was 0.4%, compared to the anticipated 0.0%. The ex-auto and gas figure was even more impressive at 0.8%, with the prior month’s estimate adjusted from 0.1% to 0.3%, while inventories grew by 0.5%, exceeding the 0.4% forecast.
In Canada, the CPI confirmed the likelihood of the BOC’s rate cut in next week’s meeting. Despite the rise in retail sales and a lower CPI in Canada, one might expect the USD/CAD to increase but it ended down instead, at the end of the day. The USD/CAD is down by about 15 pips from yesterday’s close, although it was up approximately 35 pips after the jump following the positive US retail sales.
Today’s Market Expectations
Today we had the Q2 New Zealand CPI inflation report early in the morning. New Zealand’s Q2 CPI registered at 0.4% quarter-on-quarter, slightly below the expected 0.5%. The year-on-year CPI stood at 3.3%, also a bit lower than anticipated. Non-tradable inflation, which gauges the prices of goods and services not exposed to foreign competition and indicates domestic demand and supply conditions, recorded +0.9% quarter-on-quarter and +5.4% year-on-year, down from the previous 5.8%. While non-tradable goods and services are shielded from direct international competition, they can still be influenced by global markets. Tradeable inflation, representing the prices of goods and services affected by international markets, decreased to 0.3% year-on-year from 1.6%.
UK headline CPI inflation year-on-year is forecasted to be 2.0%, consistent with the previous year’s rate, while the month-on-month figure is expected to be 0.1%, down from 0.3% last year. The Core CPI is anticipated to increase by 3.4% annually, slightly lower than the previous 3.5%. Initially, the market estimated a 60% probability of a rate cut in August, but this dropped to 50% following some hawkish remarks from BoE’s chief economist Pill.
He commented that it remains uncertain whether now is the appropriate time for a rate cut, emphasizing that more data will be reviewed before the next policy decision. However, he also mentioned that expectations need to be tempered regarding the impact of one or two data releases on their overall perspective. This indicates a reluctance to implement the first rate cut in August unless the inflation data is exceptionally favorable or the employment data presents a significantly bleak scenario.
Yesterday the volatility was low in the Asian and European session, but the price action picked up in the US session. We were mostly long on the USD which proved to be a good trading strategy, since we had 8 closed trading signals, all of which reached the take profit target, while several others remained open for today.
Gold Buyers Testing the 50 Daily SMA
Gold surged over $40 on Thursday, breaking past $2,400, and after a brief pullback on Friday, it resumed its upward trend yesterday. As XAU approaches its previous record high, a renewed wave of interest has emerged. In the last few minutes, gold prices have jumped by more than $20 to $2437.30, the second-highest level. Today, gold buyers seem driven by forecasts regarding bonds, the possibility of a Republican sweep, and expectations of increased government spending and deficits. Additionally, ongoing trade tensions and tariffs are strengthening the argument for some countries, especially China, to boost their gold reserves. The all-time high of $2450 was reached in May.
XAU/USD – Daily chart
NZD/USD Heading for A Bearish Break
The NZD/USD has maintained a steady range for several months, although recent highs have shown a gradual decline. June saw a peak around 0.6220, while July’s highs hovered in the 0.6150s. Following the Reserve Bank of New Zealand’s (RBNZ) decision to keep interest rates unchanged and adopt a dovish stance, the currency pair dropped by 70 pips, settling at 0.6065. While moving averages initially supported prices on the daily chart, renewed selling pressure emerged yesterday, spurred by stronger-than-anticipated retail sales figures from the United States in June.
NZD/USD – Daily Chart
Cryptocurrency Update
Bitcoin Stabilizes Above 65K
Bitcoin, previously well-supported around $60,000, has recently experienced a significant downturn. Cryptocurrency prices have plummeted this week, with Bitcoin dropping below $60,000 yesterday and continuing its decline today, nearing levels last seen in early May. There was a brief dip below $57,000, suggesting a potential broader breakdown in its chart pattern. The 200-day moving average (purple line), breached in May but previously stable around $57,000, is once again under threat. However, initial support at $58,000 held firm during the first test. A sustained drop below this mark—its most significant breach since October last year—would indicate a shift in Bitcoin’s downward momentum. Nevertheless, buyers have re-entered the market, pushing prices back above the moving averages.
BTC/USD – Daily chart
Ethereum Approaches $3,500
Since the introduction of its ETF, Ethereum (ETH) has experienced considerable volatility, reaching highs of $3,832.50. The surge was driven by improved market sentiment following the SEC’s endorsement of spot Ethereum ETFs. Despite ETH being up 25% from its previous peak, recent movements have seen it fall below $3,000. Currently, there’s a rebound from this pivotal level. To establish a sustained upward trend, buyers need to propel ETH above the 50-day Simple Moving Average (SMA), represented by the yellow line.
ETH/USD – Daily chart
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