Forex Signals Brief October 11: US Inflation PPI and Canada Employment Closing the Week

After a quiet start to the morning, the U.S. session saw a surge in market activity, spurred by several key data releases. In the foreign exchange market, the dollar initially rose on the back of higher-than-expected CPI inflation figures but then dipped following jobless claims data. However, a closer look at these data points revealed some caveats that effectively dampened their impact.

Meanwhile, the British pound attracted attention due to a report from The Guardian suggesting that the ruling Party plans to raise capital gains taxes. Although this may have weighed on the pound, the broader move was likely driven more by U.S. factors, as the euro remained relatively stable even as the pound declined. After dropping to a one-month low of 1.302os, the GBP/USD pair rebounded, gaining about 40 pips later in the session as did most currencies against the USD.

Today’s Market Expectations

According to the Canadian Labour Market Survey, September is expected to see an addition of 28K new jobs, up from 22.1K in August. The unemployment rate is also projected to tick up slightly to 6.7% from August’s 6.6%. Market expectations currently price in an 83% chance of a 25 basis point rate cut at the next meeting. However, given the ongoing trend of softer inflation, a disappointing jobs report could increase the likelihood of a 50 basis point cut.

On the U.S. front, the Producer Price Index (PPI) year-over-year is forecasted at 1.6%, a slight drop from the prior 1.7%, with a month-over-month increase of 0.1% compared to the previous 0.2%. Core PPI is expected to rise to 2.7% year-over-year from the previous 2.4%, while the monthly figure is seen at 0.2%, down from 0.3%. Even if the PPI data falls short of expectations, it is unlikely to prompt the Fed to consider a 50 basis point rate cut for November. There remains a possibility that inflation could surprise on the upside or become more persistent at elevated levels, influencing the Fed’s rate outlook.

Yesterday markets were quiet until the release of the US CPI inflation report, although that didn’t have as much impact on the USD as the Unemployment Claims which showed a jump, reinvigorating employment fears. As a result we opened more trading signals at 14 in total, although only half of them closed, so we ended the day with 5 winning forex signals and two losing one.

Gold Bounces Off the 20 Daily SMA

Gold, after reaching record highs in late September, has been on a downward trend. However, yesterday’s rebound could indicate a turning point. The price fell to $2,600 but found support at the 20-day SMA, halting the decline. Yesterday, gold prices rose by $25 to above $2,630. Technical indicators, such as the stochastic oscillator, suggest that the metal may be preparing for a reversal as it enters oversold territory, with the 20-day SMA holding firm as support. Although the XAU/USD chart points toward a potential move back to record highs, much will depend on overall market sentiment and any developments in Middle Eastern geopolitical tensions.

XAU/USD – Daily Chart

The 200 Weekly SMA Keeping GBP/USD Supported for Now at 1.30

The GBP/USD pair had a sharp reversal last week, dropping by about 4 cents under persistent selling pressure. Fresh USD buying yesterday drove the pair further down, breaking through the 50-day SMA at 1.31 and nearly hitting 1.30, highlighting the bearish momentum. The next key support level is the 200-week SMA (purple), which has held up so far. The U.S. CPI news initially pushed the pair lower, resulting in a 30-pip drop. However, GBP/USD rebounded shortly after, as U.S. jobless claims rose unexpectedly to 250K, providing some short-term support for the pound.

GBP/USD – Weekly Chart

Cryptocurrency Update

Bitcoin Dips and Returns Above $60k Again

BTC/USD – Daily chart

Ethereum Remains Subdued by MAs

Ethereum has seen a similar pattern since March, facing strong selling pressure. Although ETH/USD saw a slight recovery near the 50-day SMA by June, it then hovered around the $2,200 range. Currently, the 50-week SMA is acting as resistance, while the 100-week SMA is offering solid support above the $2,500 mark, suggesting that the cryptocurrency may remain range-bound amid broader economic uncertainties, with ETH having trouble pushing above the 50 SMA.

ETH/USD – Weekly chart