Forex Signals Brief November 20: UK Inflation Expected to Increase
Today the UK CPI inflation is expected to show an increase, going in line with other inflation reports around the world, such as the increase in Canadian inflation yesterday.
Risk sentiment turned negative following news that Ukraine had launched long-range ATACMS missiles at Russia, sparking a bout of risk aversion. This shift led to mixed performance for the US dollar yesterday, with the DXY index spiking higher during the European session before reversing and trending lower in the US trading hours.
In economic data, US housing starts came in at an annualized pace of 1.311 million, falling short of the 1.330 million estimate and below the previous month’s revised 1.353 million. Building permits also missed expectations, registering 1.416 million versus the anticipated 1.430 million, and lower than the prior month’s revised figure of 1.428 million.
In Canada, inflation data exceeded forecasts. The headline CPI rose 0.4%, surpassing the expected 0.3%, while core CPI climbed 0.3%, compared to the prior 0.1%. This stronger-than-expected inflation data, coupled with broader risk aversion, contributed to downward pressure on the USDCAD, which fell back below the 1.40 level during today’s session.
Today’s Market Expectations
The UK inflation report is the key focus today, with the CPI month-over-month figure expected to show a rise to 0.5%, up from 0.0% previously. Year-over-year CPI is projected to increase to 2.2%, compared to 1.7% in the prior reading. Core CPI year-over-year is forecast to remain steady at 3.2%. In the previous report, UK inflation figures came in significantly below expectations, with services inflation dropping to 4.9% from 5.6% in the prior month. This added to concerns about weaker economic momentum. Adding to the uncertainty, recent labor market data has been soft, and GDP growth has also underwhelmed. Currently, markets are assigning only a 22% probability of another 25 basis point rate cut in December. However, that likelihood could increase if inflation data once again falls short of projections.
Yesterday the sentiment was negative in financial markets early in the day, sending risk currencies down, but reversed later, sending the USD down in the US session. As a result, many traders got whipsawed by the quick direction shift twice. However, we ended the day with 5 winning forex signals and four losing ones, after opening 11 trades yesterday.
Gold Bounces Off the 100 Daily SMA
GOLD , after falling sharply from $2,790 in late October to a two-month low last Thursday, has begun to recover. Although it briefly tested the 100-day SMA at $2,550, it did not close below the critical $2,600 level and has since rebounded above it. This week’s bullish momentum aligns with a reversal pattern hinted at by Friday’s doji candlestick. This resurgence suggests that gold may be resuming its upward trend, potentially marking the end of its recent corrective phase.
XAU/USD – Daily Chart
EUR/USD Hesitates at 1.06 Resistance
Meanwhile, in the currency market, the EUR/USD pair experienced volatility. Following ECB Executive Board member Panetta’s remarks on potential negative rates, the pair climbed above 1.06 earlier today but failed to sustain gains, falling back during the European session. If the key 1.05 support level breaks, the pair could target the 1.0440 zone as the next area for sellers to test. The ongoing struggle to hold above 1.06 underscores persistent bearish pressure.
EUR/USD – H4 Chart
Cryptocurrency Update
Bitcoin Retreats Below $90K Again
In the cryptocurrency space, Bitcoin and Ethereum have demonstrated significant price swings. Bitcoin, after plunging from over $70,000 to just above $50,000 during its sharp summer dip, staged a robust recovery fueled by post-election optimism. It reached a record high of $93,750 on Wednesday, inching closer to the $100,000 psychological milestone. Despite a brief drop below $90,000, Bitcoin’s strong rebound yesterday underscores improved market sentiment.
BTC/USD – Daily chart
Ethereum Retreats but Holds Above $3,000
Ethereum recovered from a dip below $2,500, regaining upward momentum to hit $3,450, exceeding its 50-day simple moving average. While both assets remain prone to market corrections, their recent performance signals renewed investor confidence and bullish potential in the digital asset space.
ETH/USD – Daily chart
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