Forex Signals Brief August 1: BOE to Deliver First Rate Cut
Yesterday USD/JPY dropped by more than 400 pips. The Australian CPI data had a significant impact on the market, while Chinese PMIs indicated sluggishness, which sent the Aussie lower, but commodity dollars ended higher at the end of the day. In the evening, Jerome Powell mentioned the possibility of “several” rate cuts, leading to some confusion, as he also implied that cuts might not happen at all. Meanwhile, tensions in the Middle East have resurfaced, raising concerns of potential conflict. In the tech sector, chipmakers saw a dramatic rise, with NVIDIA alone adding $329 billion in market capitalization today. Cryptocurrencies, however, continued to decline, showing a rare divergence from the Nasdaq index.
Powell’s comments did not include anything particularly surprising, and there was disappointment that he didn’t show a stronger inclination toward a rate cut in September. Nevertheless, the market is pricing in 72 basis points of easing across the next three meetings. Some believe Powell’s approach acknowledged the market’s expectations for September without contesting them, possibly reflecting signs of slowing inflation and global growth. Both Microsoft and Meta signaled plans for increased capital expenditures next year, following a significant rise this year, highlighting their commitment to the AI.
Today’s Market Expectations
The market is currently anticipating a 50% chance of a 25 basis point rate reduction by the Bank of England (BoE), which would lower the Bank Rate from its current 5.25% to 5.00%. However, these expectations might be premature, as there’s a significant likelihood that rates will remain unchanged. BoE’s chief economist, Huw Pill, stated that it’s still uncertain whether this is the right time for a rate decrease, emphasizing the need for more data before the next policy decision. He also mentioned that they need to be realistic about how much any one or two releases could influence their outlook.
In the U.S., the Jobless Claims report remains a key weekly release, providing timely insights into the labor market. Initial claims have been stable within the 200K–260K range since 2022, with current predictions for this week at 236K, slightly up from last week’s 235K. Continuing claims are expected to be 1856K, up from 1851K last week. This stability suggests that while hiring has slowed, layoffs are not increasing significantly and remain at low levels.
The US ISM Manufacturing PMI is forecasted to rise to 48.8 from 48.5. Last week, the S&P Global US Manufacturing PMI dropped from 51.5 to 49.5, despite generally positive sentiment. The report noted that the rate of price increases for goods and services has slowed, aligning with the Federal Reserve’s 2% inflation target. On the downside, the report highlighted election-related uncertainty affecting investment and hiring, as well as rising input costs due to higher labor, transportation, and raw material expenses.
Yesterday the volatility was low in forex and the FED didn’t offer something much different, which left the markets slow, with a bearish tilt on the USD, while safe havens benefited. We opened many trading signals and closed the day with six closed signals, five of which were winning forex signals, while we just had one losing signal.
The Bounce in Gold Continues
Gold prices have surged over the last two days during US trading sessions, peaking at $2,430. This uptick reflects a broader trend of investors gravitating toward safe-haven assets as global stock markets falter. Despite this rise, gold struggled to sustain its gains after crossing the 50-day Simple Moving Average (SMA). The price subsequently reversed, forming a doji candlestick, often a signal of a potential bearish reversal. As a result, the XAU/USD pair fell below the $2,400 level and the 100-day SMA. Following gains that pushed the price above $2,400, selling pressure resumed, driving the price down by $30 during the US session.
XAU/USD – Daily chart
AUD/USD Pierces Below 0.65 but Retraces Back Up
The Australian dollar has declined by about 3 cents over the past two weeks, though this drop has paused this week ahead of the FOMC policy meeting and the release of the June Australian CPI inflation report. Earlier in the month, the AUD/USD exchange rate increased by 2 cents, nearing 0.68, but selling pressure returned, causing the Australian dollar to break below moving averages. Both the AUD/USD and NZD/USD pairs continue to slide, hitting new cycle lows. The AUD/USD is nearing a retracement of its upward movement from April’s low. The Australian Consumer Price Index (CPI) report, which is expected to show slower inflation, has weighed on the currency, raising concerns among speculators. Over the past few days, AUD/USD has been consolidating above the monthly low of 0.6514, with the Stochastic indicator moving into oversold territory.
AUD/USD – Daily Chart
Cryptocurrency Update
The 50 SMA Turns Into Resistance for Bitcoin
We decided to liquidate our long position on Bitcoin after buyers failed to sustain the price above $70,000. BTC/USD had climbed from around $53,000—where it had dropped earlier in July—to well above $70,000 last week. However, over the weekend, the price reversed as sellers came in above that key level, causing BTC to drop sharply towards $65,000. This decline led us to close our Bitcoin purchase signal. Yesterday the decline continued as the 50 SMA rejected the price.
BTC/USD – Daily chart
The 200 SMA Holds As Support for Ethereum
Ethereum has been experiencing a pattern of lower highs since early March, even with the launch of an ETH ETF. In June, Ethereum’s price fell below $3,000 from a peak of $3,830. However, as buyers re-entered the market, 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, but the 100 SMA has turned into resistance.
ETH/USD – Daily chart
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