Forex Signals Brief January 2: Rates Cuts Are Here Already As 2024 Gets Underway
Last year started with markets expecting the FED to stop raising rates and reverse policy, which kept the USD soft in Q1 and Q2, but the FED kept continued to keep the hawkisgh tone until recently, based on a strong labour market. However, they started giving dovish signals in Q4 and the USD turned bearish while risk assets turned bullish. So, that’s how 2024 ended, with the USD in retreat and stock markets at record highs.
Last week the volatility was low, being in the Christmass period, however there was enough price action, as traders made their last adjustmnets before the end of the year. Unemployment claims jumped to 218K from 206K previously, beating expectations of 211K while the Spanish CPI (consumer price index) inflation ticked lower to 3.1%, which showes that inflation continues to head toward 2% in the Eurozone.
This means that the European Central Bank will accept the reality and announce the policy shift soon, as the FED did last month, starting to cut interest ratesas well. The Central Bank of Israel lower rates to 4.50% yesterday from 4.75% previously, opening the door for other central banks to start doing so.
This Week’s Market Expectations
Today the economic calendar is light, with only the manufacturing PMI report. The Caixin Manufacturing PMI is expected to slow to 50.4 points as it approaches contraction, which is bad news for commodity dollars, while the final European manufacturing PMI readings are expected to remanin unchaged.
Tomorrow we have the JOLTS Job Openings which are expected to show a slight improvement and the FOMC meeting minutes, which will likely confirm the bearish bias and give the USD another push lower. The Chinese Caixin Services PMI are scheduled for Thursday, as well as the ADP Non-Farm Employment Change and th Unemployment Claims, which are expected to come down to 210K this week. The US and Canadian employment reports will close the week on Friday.
Last week the volatility was low, but the price action was anout for us to open 20trading signals, 5 of which closed in loss while the rest closed in profit, giving us a 75/25% win/loss ratio. The USD continued the decline in the first todays, but then reversed higher in the last rwo trading days, however the liquidity was thin and casgh flows were driving markets around, so you can’t read too much into that.
Gold Facing the 50 SMA After the Retreat
GOLD continued to be bullish last week until Wednesday breaking above the previous high of $2,075 and reaching a three-week high near $2,090 on anticipation that the Federal Reserve will cut rates in early 2024 which has improved risk appetite. However we saw a retreat late last week, with the price falling below the 20 SMA (gray) on the H4 chart. Now sellers are facing the 50 SMA (yellow), so we are preparing to buy a long term buy Gold signal.
XAU/USD – 240 minute chart
GBP/USD Testing the 20 Weekly SMA
GBP/USD plummeted from over 1.31 to 1.20 lows till October, but this pair has found strong demand again in the latter few months of 2023. Despite the weakening of the UK economy, we saw a reversal in November, and the price has been slowly rising since then, with the year ending near 1.30. However, buyers face a significant roadblock because the price was rejected yesterday.
GBP/USD – Weekly chart
Cryptocurrency Update
Bitcoin Keeps Bouncing Off the 20 Daily SMA
BTC/USD has been one of the best-performing assets this year, but it is now in a consolidation period after a 160% surge. Despite the poor state of the economy, the value of Bitcoin has risen above $43,000 and is projected to beat traditional assets. It started at $40,000 in December, but bbuyers have been very active, keeping the entire price optimistic. However, after a substantial decline the day before, buyers reappeared at the 20 SMA (gray) again, which continues to act as support on the daily chart.
BTC/USD – Daily Chart
Ethereum Keeps Making Higher Lows Ahead of the Decnun Upgrade
Cryptocurrencies suffered substantial losses in 2022, with some to lose up to 80% of their market capitalization, with Ethereum plunging from below $5,000. However, this year has been positive for digital currencies, with ETH/USD reaching new highs, demonstrating that the trend has been bullish all year, with moving averages continueing to push the lows higher.
Ethereum – Daily Chart
- ETH Buy Signal
- Entry Price: $1,947.38
- Stop Loss: $1,490
- Take Profit: $2,500
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