Forex Signals Brief September 25: Australian Inflation Highlights the Day

Yesterday morning, the Reserve Bank of Australia (RBA) provided support for the AUD during the Asian session by maintaining interest rates at 4.35%, as widely anticipated. This decision kept the AUD/USD pair in positive territory throughout the day. The unexpected announcement of a major economic stimulus by Chinese authorities also fueled a sharp rise in commodities like crude oil and copper, boosting the overall risk appetite and lifting commodity prices and stock markets. The Dow Jones and S&P 500 even hit a new record high.

The European session was relatively quiet, with only the business climate reports from Germany and Belgium on the calendar. Both reports were weaker than expected, reflecting continued economic contraction. In response, ECB’s Muller hinted at a potential rate cut in October, with markets now pricing in a 95% chance of a 25 basis point reduction. However, this had little impact on the Euro, as the weakening USD kept the EUR/USD pair in demand, while gold also reached new record highs at $2,664 points.

The Richmond Fed survey data fell short of expectations, adding to weaker consumer confidence, which led to the USD finishing as the weakest among major currencies. The Conference Board’s consumer confidence reading came in significantly lower than expected at 98.7, marking the largest one-month drop since August 2021. Additionally, the Richmond Fed’s composite index came in at -21 points, missing forecasts and reaching its lowest level since the COVID period. Employment in the Richmond Fed survey also saw a decline, dropping from -15 to -22 points, highlighting further weakness in the labor market.

Today’s Market Expectations

Today’s key event is the release of the CPI inflation report, with expectations that the headline CPI will drop to 2.7% year-on-year, down from the previous 3.5%. However, RBA Governor Michele Bullock emphasized that a single inflation report will not alter the central bank’s stance. She indicated that the RBA is waiting for additional data to confirm that inflation is returning to their target. As a result, it is unlikely that this report alone will trigger any policy changes unless it includes significant surprises.

later in the US session we have the US New Home Sales, which are expected to resume the slowing trend in August. Home sales have been declining with mortgage rates remaining around 8% as the FED keeps interest rates elevated, but we saw a jump in July. However, that’s supposed to be short-lived and for August New Home Sales are expected to fall to 699K.

Yesterday we did pretty well with stock signals, while we got aught on the wrong side with CHF shorts, as the Swiss Franc kept gaining against the Dollar and the Euro. As a result, we ended the day with 5 closed forex signals, three of which were winning stock trades while two forex signals ended up in loss.

Gold Prints Another New Record high

In the precious metals market, gold (XAU/USD) broke past the $2,600 threshold last week, marking a significant milestone in its ongoing rally. Following the Federal Reserve’s 50 basis point rate cut, buyers pushed gold prices higher, with the metal reaching new highs of $2,664 during the U.S. session. The growing demand for safe-haven assets signals further potential upside for gold in the near term.

XAU/USD – Daily chart

USD/JPY Rejected by the 100 Weekly SMA

The USD/JPY pair has experienced volatility, rising after hitting a new yearly low last week and momentarily dropping below the key 140 level. A risk-on sentiment increased demand for the yen as a safe haven, pushing the pair 5 cents higher after the Federal Open Market Committee (FOMC) announced a 50 basis point rate cut. However, the bullish momentum was short-lived, with USD/JPY falling over 1 cent yesterday as it failed to break above the 100-week SMA earlier this week.

USD/JPY – Weekly Chart

Cryptocurrency Update

Bitcoin Stays Below the 200 SMA

BTC/USD – Daily chart

Ethereum Continues to Crawl Higher 

Meanwhile, Ethereum has been in decline since March, falling from $3,830 to under $3,000 by June. After briefly reclaiming the 50-day moving average, strong selling pressure pushed the price below $2,200. However, Ethereum found solid support at this level and recently bounced back from the 100-week SMA, forming a bullish candlestick. This suggests renewed buying interest and hints at a possible reversal in Ethereum’s bearish trend, positioning the cryptocurrency for further gains.

ETH/USD – Weekly chart