Forex Signals Brief October 7: US Inflation and RBNZ Rate Cut

While this week the US PCI inflation will be the highlight, last week the market attention was all on the NFP numbers, which showed a decent surge during September. In fact, all US employment reports last week showed a robust sector, with JOLTS Job Openings and ADP employment also coming above expectations.

Besides that, the Unemployment Rate ticked lower to 4.1%, but the unrounded number was very close to 4.05%, which reinforced Jerome Powell’s comments and diminished the prospects of another 50 bps rate cut by the FED in November. As a result, the USD ended the wek as the strongest among major currencies, with EUR/USD falling below 1.10 from 1.12.

This Week’s Market Expectations

The first half of this week is almost empty regarding the economic data, but it kicks off on Wednesday morning with the Reserve Bank of New Zealand meeting which is expected to produce a 50 bps rate cut. Later that day we have the FOMC minutes from the last meeting, while the USD CPI consumer inflation is scheduled for Thursday, which will be the highlight of the day.

Upcoming Economic and Forex Events for the Week:

• Monday:
  • Eurozone Retail Sales: This report will provide insight into consumer spending patterns across the Eurozone, reflecting the region’s economic health.
  • China: Markets closed for a public holiday.
• Tuesday:
  • Japan Average Cash Earnings: A key indicator of wage growth and inflationary pressures in Japan, influencing Bank of Japan’s policy outlook.
  • Reserve Bank of Australia (RBA) Meeting Minutes: Provides details on the latest monetary policy decision and the RBA’s economic assessment.
• Wednesday:
  • Reserve Bank of New Zealand (RBNZ) Policy Decision: Traders will be watching for any changes in interest rates and economic outlook.
  • Federal Open Market Committee (FOMC) Meeting Minutes: Offers insights into the Fed’s last meeting, shedding light on inflation concerns and future rate moves.
• Thursday:
  • Japan Producer Price Index (PPI): An indicator of inflation at the wholesale level, influencing price stability and monetary policy.
  • European Central Bank (ECB) Meeting Minutes: Will provide more context on the ECB’s stance amid ongoing economic challenges in the Eurozone.
  • US Consumer Price Index (CPI): A critical inflation measure, impacting the Fed’s decisions on interest rates.
  • US Initial Jobless Claims: Weekly data on the number of people filing for unemployment benefits, reflecting labor market strength.
• Friday:
  • UK Gross Domestic Product (GDP): Measures the overall economic performance of the UK, indicating growth or contraction.
  • Canada Labour Market Report: Analyzes employment changes, impacting the Bank of Canada’s monetary policy.
  • US Producer Price Index (PPI): Provides insights into inflationary trends from the perspective of producers, influencing future pricing and profit margins.
  • University of Michigan Consumer Sentiment: Gauges consumer confidence in the US, indicating potential consumer spending.

Last week the USD reversed course and so did we, ending up with a great win/loss ratio. We mainly remained long on the USD against other forex majors, while playing both sides in Gold, as it continued to consolidate all week. IN total we opened 47 trading signals, ending the week with 45 closed trades, 36 of this were winning forex signals.

Gold Remains Supported by the 100 SMA

Gold prices have been on the rise in 2024 due to heightened political, geopolitical, and economic uncertainty, which has increased demand for safe-haven assets. Recently, gold reached a high of $2,685 last Thursday but dipped to $2,624 by Monday. Despite this decline, the 50 SMA on the H4 chart offered strong support. Growing tensions in the Middle East, such as Israeli troops entering Lebanon and an Iranian missile strike, briefly pushed XAU/USD higher, though it didn’t set a new peak and fell back during the European session. However, this support at the 50 SMA level encouraged traders to resume buying gold.

XAU/USD – H1 chart

EUR/USD Falls Below 1.10

The EUR/USD pair saw significant gains in June and July, climbing from below 1.07 to 1.12. This rally indicated strong buyer interest in the Euro during that period. After a pullback in August, EUR/USD revisited higher levels and remained around 1.12 until last week. However, buyers couldn’t sustain this momentum, and the pair turned bearish, falling below 1.10 as it struggled to overcome a resistance zone,

EUR/USD – Weekly Chart

Cryptocurrency Update

Bitcoin Falls to $60,000 on Risk Aversion

BTC/USD – Daily chart

Ethereum Returns Below $2,500 

Ethereum has been declining since March, dropping from $3,830 to below $3,000 by June. Persistent selling pressure has brought prices down to $2,200 before a temporary rise above the 50-day average. The 100-week SMA now provides solid support, keeping ETH/USD above $2,500, while the 50-week SMA acts as resistance.

ETH/USD – Weekly chart