Forex Signals Brief September 26: Another SNB Rate Cut

Yesterday started with the CPI inflation report from Australia, which showed an 8-point decline in August, with the headline number falling from 3.5% to 2.7%. This further indicates that inflationary pressures are slowing across the globe. That didn’t hurt the Aussie much as AUD/USD continued higher, however, the bullish return of the USD later in the day did hurt this pair, sending it almost 1 cent lower until late US session.

The Buck made a strong comeback following a one-cent drop on Tuesday. After briefly breaking the 1.12 mark, the EUR/USD pair fell by another penny. This pattern repeated across various markets as the dollar gained strength, supported by better-than-expected New Home Sales data for August, which suggested that the recent cooling in the housing market might be over. A portion of the dollar’s rise was linked to concerns over geopolitical tensions, with rumors circulating that Israel might be preparing a ground invasion of Lebanon.

These worries added to market jitters and helped drive the dollar higher and Oil prices lower, while Gold pushed further up to $2,670. Another factor contributing to the market’s reaction was disappointment over China’s failure to introduce significant fiscal stimulus, to accompany the monetary easing measures. This underwhelming response from China led to a sell-off in crude oil, with U.S. WTI prices dropping by $2 and closing below $70, despite a significant inventory drawdown reported by the U.S. Energy Information Administration (EIA).

Today’s Market Expectations

The SNB meeting is the main event today, with markets pricing in a 25 basis point rate cut, which would bring the policy rate down to 1.00%. However, there’s a 45% chance the SNB might opt for a larger 50 basis point cut, given that inflation surprised on the downside. The most recent data showed inflation dropping to 1.1%, well below the SNB’s forecast of 1.5% for Q3. In late August, SNB Chairman Jordan highlighted that Swiss industry has been struggling with the persistent strength of the Swiss Franc. As a result, there is a strong likelihood that the SNB will either verbally intervene to curb the Franc’s rise or opt for a larger rate cut in response, particularly following the Federal Reserve’s latest move.

The U.S. Jobless Claims report is a critical weekly release that provides timely insights into the state of the labor market. While Initial Claims remain within the range of 200K to 260K that has been in place since 2022, Continuing Claims have been rising significantly in recent weeks after showing steady increases throughout the summer. For the current week, Initial Claims are expected to rise to 225K, up slightly from the 219K reported last week. As for Continuing Claims, there is less consensus, although the previous report showed a decrease to 1.829 million.

Yesterday we had another great day regarding forex signals, as we followed the USD higher, while shorting stocks and risk currencies, which proved to be a good strategy to go with the flow.  We opened 10 trading signals in total, ending the day with 9 closed signal, 7 of which were winning forex signals while two were losing ones.

Will Gold Retreat After the Doji Candlestick?

Gold (XAU/USD) hit a significant milestone last week, surpassing the $2,600 mark. The price surge followed the Federal Reserve’s 50 basis point rate cut, which boosted demand for safe-haven assets. During the European trading session, gold reached fresh highs of $2,670, however it closed the day at the opening level, forming  doji candlestick, which might signal a pullback, so be careful trading Gold.

XAU/USD – Daily chart

USD/JPY Breaks Above Resistance

The USD/JPY pair experienced a sharp drop of 22 cents in August, briefly falling below 140 last Monday, its lowest level since July 2023. However, the pair rebounded and broke through resistance at 144.50, continuing its upward trend. Despite facing some resistance at 144.50, the 20-day SMA on the daily chart has shifted from resistance to support, signaling a potential change in trend. This move opens the door for the pair to potentially reach 146.50, with the Bank of Japan (BOJ) aligned with this trajectory.

USD/JPY – Daily Chart

Cryptocurrency Update

Bitcoin Hesitates at $65,000 Again

BTC/USD – Daily chart

Ethereum Continues to Crawl Higher 

Ethereum has been in a downtrend since March, with its value dropping from $3,830 to below $3,000 by June. Heavy selling pressure drove it further down to $2,200, though it briefly reclaimed the 50-day SMA. Ethereum has now found strong support at the 100-week SMA, with recent bullish candlestick formations suggesting a potential reversal in its bearish trend. Renewed buying interest is positioning Ethereum for potential future gains.

ETH/USD – Weekly chart