Forex Signals Brief July 31: BOJ and FED Meetings in A Day
Yesterday started quiet but as the day progressed, risk appetite intensified, leading to a 6% drop in Microsoft (MSFT) shares after earnings were reported at the close. While it’s still early in the earnings season, AMD’s positive results provided some offset to the decline. Meanwhile, the yen surged just hours before the Bank of Japan’s announcement, following reports that policymakers were considering a 15 basis point interest rate hike.
This was unexpected, as the market had only anticipated a 10 basis point increase or no change, suggesting a hawkish shift that could sustain the yen’s rally. However, there are two-way risks, as this news caused the USD/JPY pair to drop by 50 points. Additionally, US 10-year bond yields fell to their lowest level since March, and the pound continued to face pressure despite a broader decline in the dollar, as the market interprets signals of a potential Bank of England rate cut.
Today’s Market Expectations
Trimmed Mean CPI is projected to rise 4.0% year-on-year, consistent with prior figures, while the quarterly measure is anticipated to slightly decrease to 0.9% from 1.0%. The Weighted Median CPI is forecasted at 4.3% year-on-year, slightly down from 4.4% previously, with the quarterly reading expected to edge lower to 1.0% from 1.1%.
In Japan, despite a market expectation of a 70% chance of a 10 basis point increase, the Bank of Japan (BoJ) is anticipated to keep interest rates unchanged in the range of 0.00–0.10%. The central bank is expected to announce a tapering plan, potentially reducing monthly bond purchases to JPY 5 trillion. Meanwhile, the Eurozone’s Flash CPI year-on-year is forecasted to come in at 2.4%, down from 2.5% previously, with the Core CPI expected to be 2.8%, slightly lower than the previous 2.9%.
European Central Bank (ECB) members continue to signal that markets are expecting another rate cut in September, a sentiment that appears “reasonable” according to officials. Before the ECB’s next decision on September 12th, there will be another significant report at the end of August, providing further economic insights.
The US Q2 Employment Cost Index (ECI) is expected to show a growth of 1.0%, down from 1.2% in the previous quarter. While not as timely as the Average Hourly Earnings data, the ECI is the most comprehensive measure of labor costs and is closely monitored by the Federal Reserve. Despite the ongoing strength in wage growth by historical standards, there has been a noticeable slowdown over the past two years.
The Federal Reserve is anticipated to keep interest rates steady at 5.25–5.50% later today. The overall tone from the Fed is expected to be dovish, reflecting improvements in the labor market and inflation. However, the Fed is unlikely to provide any firm commitments ahead of time. The market has already priced in potential rate cuts in September and December, with a slight possibility of another cut in November.
Yesterday the volatility declined in most forex pairs, as markets await the FOMC meeting later today. USD/JPY dived 200 pips lower on BOJ rumours. We had 6 closed trading signals three in indices, one in forex, one in commodities and one crypto signal, all of which were winning forex signals.
Gold Continues the Bounce As Israel Strikes Beirut
Over the past two days, gold prices have seen a rise during US trading sessions, climbing from $2,400 to a peak of $2,430. This uptick reflects a broader trend of investors seeking safe-haven assets amid falling global stock markets. However, gold struggled to sustain this momentum after crossing above the 50-day Simple Moving Average (SMA). The price then reversed, forming a doji candlestick, often a sign of a potential bearish reversal. Consequently, the XAU/USD pair retreated below the $2,400 level and the 100-day SMA. After yesterday’s gains, which pushed the price above $2,400, sellers re-entered the market, driving the price down by $30 during the US session.
XAU/USD – H4 chart
NZD/USD Moves to 1.08 After Failing at the 100 Weekly SMA
Meanwhile, the NZD/USD rate has stabilized this week after a 150-pip decline last week, as markets anticipate the outcome of the Federal Reserve meeting. The NZD/USD pair has been in a downtrend since 2021, although it mostly traded within a range during 2024. Recently, the pair broke below the key 0.60 level, with traders now eyeing the lower end of this range near the 0.5850 mark. The weekly chart indicates a downward trend from previous highs, with the pair currently in a bearish phase due to the weakening Chinese economy and dovish statements from the Reserve Bank of New Zealand (RBNZ).
NZD/USD – Daily Chart
Cryptocurrency Update
Bitcoin Resumes the Upside Momentum
We closed long position on Bitcoin, as buyers failed to keep the price above $70,000. BTC/USD surged from around $53,000 where it dipped in early July, increasing above $70,000 last week, but Over the weekend, the price reversed as sellers returned above that round level, and BTC fell lower and dived toward $65,000 where we decided to close the buy BTC signal.
BTC/USD – Daily chart
The 200 SMA Holds As Support for Ethereum
Since early March, Ethereum has been experiencing a series of lower highs, even with the introduction of an ETH ETF. In June, the price of Ethereum fell below $3,000 from its peak of $3,830. However, as buyers stepped in, the price managed to climb back above the 50-day Simple Moving Average (SMA), which had previously acted as resistance. Last week, there was another pullback, but the 200-day SMA (purple) provided support, preventing a further decline.
ETH/USD – Daily chart
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