Forex Signals Brief December 1: Will Powell End the Week With Hawkish Threats?
Yesterday the Chinese manufacturing and services PMI numbers were disappointing, showing that the second-largest economy on the planet hasn’t recovered yet. However, the talk for more stimulus kept the sentiment bullish during the Asian session until the European session started. The Euro turned out to be the weakest currency yesterday, driven by a weak Eurozone inflation report.
The US dollar made a strong reversal after some hawkish comments from FED’s Williams and Daly whoe are close to Powell, which was a minor surprise, but month-end flows could have had some impact as well. Markets are now expecting a rate cut in May, but that’s still far and there is still plenty of economic data to come until then.
The PCE inflation numbers and the unemployment claims figures were in line with expectations, while regional manufacturing remained solid. That was the highlight of the day, together with crude Oil which ended up down closing the day near $75. There were many OPEC leaks which induced volatility. OPEC decided to cut, but the cuts are ‘voluntary’ which the market didn’t really like, dumping crude Oil after all the confusion.
Today’s Market Expectations
Today starts with Caixin manufacturing numbers from China, which are expected to show a very slight improvement in activity, but remain in contraction. Although after yesterday’s disappointing manufacturing and services PMI, traders are more skeptical and a negative reading would add further to yesterday’s negative sentiment in financial markets. That will be followed by the Swiss GDP report which is expected to show a 0.1% expansion in Q3 after stagnating at 0.0% in Q2.
In the US session, we have the Canadian employment report, with the unemployment rate predicted to tick higher to 5.8% from 5.7% previously, with 14K jobs added versus 17.5K previously. The Bank of Canada is not expected to hike anymore, especially following last week’s inflation numbers, in which all inflation indices fell further and Governor Macklem maintained the central bank’s “wait and see” mode.
Later on, the US ISM Manufacturing PMI is predicted to rise to 47.6 points in November from 46.7 in October, which would still mean that this sector is in contraction for more than a year. Last Friday’s S&P Global US Manufacturing PMI missed expectations and fell back into recession, so traders are skeptical about this as well. Then FED chairman Jerome Powell will close the week, and trades fear some hawkish remarks before the end of the week, after some strong comments from other FOMC members yesterday.
Yesterday the USD reversal picked up further pace, sending the buck almost 100 pips higher across the board after showing some weakness early in the day. We were long on the USD in different forex trades so we got caught on the wrong side after the reversal, although we did get the first trade hitting the take profit target early in the morning.
GOLD Holding the Gains Well
Gold has been in demand for two months now, with the price heading toward the all-time high and reaching $2.050 on Wednesday, before making a reversal lower and retreating to $2.030 yesterday. We have been long on Gold as geopolitical tensions remain high and the global economy remains weak, but we might see a reversal now since buyers keep shying away from the all-time high.
XAU/USD – 240 minute chart
- Gold Buy Signal
- Entry Price: $2,042.33
- Stop Loss: $20,28.33
- Take Profit: $2,050.33
Will the 200 SMA Hold As Support for AUD/USD?
Despite declining economic growth in Australia, the Australian dollar has recently shown resiliency, although yesterday we saw a decent retreat after the disappointing Chinese services and manufacturing PMI numbers. The economic collapse appears to continue, so risk sentiment turned negative which sent commodity dollars down. The FED on the other hand made some hawkish remarks, which added further to the decline, but it stopped right at the 200 daily SMA (purple).
AUD/USD Daily Chart
Cryptocurrency Update
BITCOIN Continues to Trade in a Tight Range Close to $38,000
The pressure in the cryptocurrency market is still on the upswing, with Bitcoin challenging recent highs after reaching beyond $38,000. Moving averages have turned into support, especially the 20 SMA (gray) which has been supporting the price on the daily chart, which is a good place to go long on BTC as well. We noticed a pullback last week, with the price falling below $37,000, prompting us to open a buy BTC signal, then Bitcoin bounced more than $1,000 higher Tuesday, indicating that the price is approaching our take profit goal.
BTC/USD – Daily chart
ETHEREUM Remains Above $2,000
Following some great news for the digital market, Ethereum jumped more than $300 and crossed $1,800 due to the bullish atmosphere in the cryptocurrency industry. It’s incredible how the $1,700 support zone has transformed into resistance, and how the 50 SMA (yellow) has done the same. ETH/USD surpassed $2,000 earlier this month, signaling that buyers have taken control and that we should have gained from our previous Ethereum tip. However, because the 20 SMA is acting as support, we decided to open another ETH signal in response to last week’s decline.
Ethereum – Daily Chart
- ETH Buy Signal
- Entry Price: $1,947.38
- Stop Loss: $1,490
- Take Profit: $2,500
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