Forex Signals Brief August 22: Markets Turn to Services, Mfg. PMIs

The theme of dollar weakening persisted, supported this time by the Bureau of Labor Statistics’ downward revision of non-farm payrolls for the year ending in March. While some argue that the revision might be exaggerated, Goldman Sachs estimates that the actual loss was closer to half of the reported figure, pointing to a weaker labor market and justifying a potential rate cut by the Fed.

The FOMC minutes further solidified this view by highlighting a nearly unanimous agreement on the need to lower rates. Consequently, the dollar reached its lowest levels of the day and the year, though it later recovered by 25 points due to oversold conditions. The pound was only 50 pips away from its 2023 high, and the euro broke through its December 2023 peak. Meanwhile, the USD/JPY dipped as low as 144.50, nearing its lowest close of the year, before briefly bouncing back to 145.18.

Today’s Market Expectations

Today is a Manufacturing and services PMI day, which started with the reports from Australia. The Manufacturing PMI rose from 47.5 to 48.7 points in the previous period, while the Services PMI saw a significant jump from 50.4 points to 52.2 points. The Composite PMI also improved, moving from 49.9 points to 51.4 points. According to the Australian Flash PMI data, the services sector experienced notable growth in August, even as manufacturing remained weak. The increase in the composite output index suggests that the economy is expanding in Q3, supported by higher labor demand.

Yesterday the volatility picked up further, with the USD on the retreat, which we utilized by going long on gold and other currencies against the Buck. There was enough price action in the markets despite the economic calendar being light again, with the FOMC minutes adding further action toward the end of the day. We opened 9 trading signals, however, ending the day with 7 winning forex signals and two losing ones.

Gold Holds Above $2,500

Gold prices have shown strong resilience, with every dip attracting buyers, indicating a solid upward trend that could see the recent breakout extend further. The surge in global demand for safe-haven assets, particularly driven by ongoing global uncertainty, has been a major factor in gold’s rise. Notably, in China, rising premiums reflect an increasing demand for gold as a safe haven. Gold (XAU/USD) hit a new all-time high on Friday, reaching $2,531 on Monday, largely due to the weakening US dollar. Although gold has since pulled back, we took advantage of the dip by issuing a buy signal, which closed at a profit.

XAU/USD – Daily chart

AUD/USD Breaks Above the Range

Similarly, the Australian dollar has shown impressive strength this month. The AUD/USD pair has rallied 4 cents from its lowest point in early August. After briefly dipping below 0.6350, its lowest level since 2024, the pair quickly recovered, gaining more than 4 cents, breaking above the previous range near 0.67, and reaching the 0.6750s yesterday.

AUD/USD – Daily Chart

Cryptocurrency Update

Bitcoin Consolidating Close to $60k 

BTC/USD – Daily chart

Ethereum Keeps Retesting the 20 Daily SMA

Ethereum has also been on a downward trend since March, with lower highs suggesting potential further declines in August. In June, Ethereum’s price plummeted from $3,830 to below $3,000. While buying pressure briefly pushed the price above the 50-day SMA, renewed selling pressure triggered another bearish reversal. The price dipped below the 200-day SMA before rebounding from a low of $2,000 to around $2,600. Currently, buyers are testing the 20-day SMA (gray), signaling a potential battle between bulls and bears.

ETH/USD – Daily chart