Forex Signals Aug 2: Attention on the NFP As Employment Softens

After a number of soft employment reports from the US, today's attention will be on the NFP data, which might send the USD diving lower.

Skerdian Meta•Friday, August 2, 2024•3 min read

Yesterday, risk sentiment turned bearish and the Swiss franc outperformed, reaching its highest level since February as a preferred safe haven. Although some expected the yen to perform better in this risk-averse environment, it seems that the movement was more indicative of an oversold USD/JPY pair. The pair dropped 500 pips initially and paused after hitting 148.50 during the Asian session and after a retrace higher, it closed the day below 150.

The bond market is sensing trouble in the Middle East and the global economy, following a disappointing ISM manufacturing report and a rise in US unemployment claims, with 10-year bond yields falling below 4% today. Markets are pricing in 173 basis points of rate cuts through June next year, with a 28% chance of a 50 basis point cut in September.

In other news, the pound fell after an initial surge following the interest rate cut. This movement likely reflects risk sentiment rather than rate expectations, though the market may also believe the BOE will lag behind the curve, given Governor Bailey’s caution against pricing in persistent cuts.

Today’s Market Expectations

The Swiss CPI year-over-year is projected to be 1.3%, unchanged from the previous year, while the month-over-month measure is expected to be -0.2%, down from 0.0% previously. The Swiss National Bank (SNB) recently cut interest rates by 25 basis points to 1.25% and lowered its inflation forecasts. The SNB anticipated a slight rise in inflation, averaging 1.5% in Q3, which influenced their decision. If inflation falls short of expectations, the SNB is likely to cut rates again in September. Given the recent softer-than-expected CPI report, the market has already assigned a 75% likelihood of a rate cut in September.

In the US, the Non-Farm Payrolls (NFP) report is expected to show 175K jobs added in July, compared to 206K in June, with the unemployment rate remaining steady at 4.1%. Year-over-year average hourly earnings are predicted to be 3.7%, down from 3.9% the previous year, while the month-over-month measure is expected to be 0.3%, unchanged from the prior year. The Federal Reserve is currently focused on the labor market due to concerns about a rapid deterioration. The Fed anticipated an average unemployment rate of 4% for 2024, so they may become concerned and consider a rate cut if unemployment reaches 4.2%. A rate decrease in September is widely expected, aligning with market expectations.

Yesterday the volatility kicked in in most markets, as well as in forex, with safe havens making some large moves again, while stock markets tumbled lower. We opened many signals yesterday, with 10 of them closing until the end of the day, 9 of which were winning forex signals, with only one losing trade.

The Bounce in Gold Continues

Gold prices have climbed over the last two days during US trading sessions, peaking at $2,462.21 yesterday but ending the day unchanged. This bullish momentum reflects a broader trend of investors seeking safe-haven assets amid global stock market instability. However, gold has struggled to hold its gains after rebounding off the 50-day Simple Moving Average (SMA). The price then reversed, forming a doji candlestick, which often signals a potential bearish reversal. Chart AUDUSD, H4, 2024.08.01 22:03 UTC, MetaQuotes Ltd., MetaTrader 5, Demo

XAU/USD – Daily chart

AUD/USD Pierces Below 0.65 but Retraces Back Up

The Australian dollar has fallen by around 3 cents in the last two weeks, but the decline has stalled this week ahead of the FOMC policy meeting and the release of the June Australian CPI inflation report. Earlier this month, the AUD/USD exchange rate rose by 2 cents to about 0.68, but selling pressure returned, causing the Australian currency to fall below moving averages. Both the AUD/USD and NZD/USD pairs continue to fall, reaching fresh cycle lows. The AUD/USD is approaching a retracement of its upward advance since April’s low. The Australian Consumer Price Index (CPI) report, which is expected to indicate slower inflation, has pressured the dollar, causing concerns among speculators. In recent days, the AUD/USD was stabilizing above t0.6530s, but yesterday we saw break of this level. Chart AUDUSD, D1, 2024.08.01 22:05 UTC, MetaQuotes Ltd., MetaTrader 5, Demo

AUD/USD – Daily Chart

Cryptocurrency Update

Bitcoin Continues Lower Below the 50 SMA

We decided to liquidate our long position in Bitcoin after buyers failed to sustain the price above $70,000. BTC/USD rose from roughly $53,000, where it had fallen earlier in July, to over $70,000 last week. However, over the weekend, the price reversed as sellers emerged at that crucial level, causing BTC to drop significantly to $65,000. This decline prompted us to close our Bitcoin purchase order for a $5,000 gain which was the right thing to do sine BTC slipped lower below the 100 SMA yesterday.

BTC/USD – Daily chart

Ethereum Testing the 200 SMA

Despite the creation of an ETH ETF, Ethereum has been trading at lower highs since early March. The price of Ethereum dropped below $3,000 in June, after reaching a high of $3,830. However, as buyers returned to the market, the price climbed again above the 50-day SMA, which had previously served as resistance. Last week, another dip occurred, but the 200-day SMA (purple) provided support, preventing further decline, while the 100 SMA has now become resistance.

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.