Forex Signals Brief October 31: BOJ Meeting and US PCE Inflation

Yesterday it started with the CPI inflation report from Australia, which came below expectations, sending AUD/USD some 30 pips lower, however the retreat in the USD during the day sent this pair close to 0.66. We also had the German and Spanish CPI figures which came slightly above expectations, helping keep the Euro bullish.

The U.S. dollar initially strengthened on stronger-than-expected ADP numbers, alleviating worries after a softer JOLTS report. However, it dipped following the release of lower-than-anticipated Q3 GDP figures, despite robust consumer spending and higher PCE inflation within the GDP data.

Oil prices surged amid reports of a potential OPEC production delay, which helped the Canadian dollar rebound from its yearly lows, although the rise was choppy. Later, the dollar weakened as rates declined and tech stocks fell, led by a 10% drop in AMD shares, which pressured the broader chipmaking sector; Alphabet’s 3.5% gain provided some offset.

Today’s Market Expectations

Today the Bank of Japan maintained its short-term interest rate target at 0.25% in a unanimous decision. CPI and GDP forecasts reflect modest adjustments: the core CPI forecast for FY 2025 was revised down to 1.9% from 2.1%, while core-core CPI for FY 2024 was raised slightly to 2.0%. The BOJ’s GDP forecast for FY 2025 was also revised up to 1.1%. In its quarterly report, the BOJ emphasized that real interest rates remain low and signaled potential rate hikes if the economy and prices align with forecasts. The bank remains focused on achieving a stable 2% inflation target, noting moderate economic recovery with some ongoing weaknesses. Underlying inflation is expected to align with the 2% target in the latter part of the FY 2024–2026 period.

In the Eurozone, the Flash CPI is expected at 1.9% year-over-year, with Core CPI at 2.6%, suggesting a modest uptick. With the European Central Bank already leaning dovish, only a particularly soft report would likely prompt additional easing. Conversely, a stronger CPI could reduce the current 16% probability of a 50-basis-point rate cut in December. Additionally, the Eurozone unemployment rate is projected to hold steady at 6.4%.

For the U.S., PCE data is anticipated to show a slight decline year-over-year to 2.1%, and month-over-month figures may rise modestly to 0.2%. Core PCE year-over-year is also expected to ease slightly to 2.6%, while the month-over-month number could increase to 0.3%. With CPI and PPI data already factored in, these numbers are unlikely to influence the Fed’s anticipated 25-basis-point rate cut at the November meeting.

In labor data, Initial Jobless Claims are forecasted at 233K, slightly up from last week’s 227K, while Continuing Claims are expected to decrease slightly to 1,880K. However, recent distortions from hurricanes and labor strikes have contributed to fluctuations in Continuing Claims, which hit cycle highs recently.

Yesterday the volatility was high again and it worked in both direction, with quite a few reversals in most forex pairs during the day, which offered many trading opportunities. We opened 8 trading signals, 6 of which closed at the end of the day, three of were winning forex signals and three losing trades.

Gold Within Reach of $2,800

Gold continued its upward trend today, reaching $2,774 following weaker-than-expected U.S. JOLTS job openings data. Political factors, including the upcoming U.S. presidential election, are also bolstering gold’s rise, with projections suggesting it may approach $2,800 and possibly even $3,000. On the H4 chart, smaller moving averages, such as the 20 SMA (gray) and 50 SMA (yellow), are providing solid support, indicating strong buying pressure.

XAU/USD – H4 Chart

USD/CAD Heading for 1.40

The USD/EUR exchange rate, which has been trending lower in October, fell to the 1.0760s last week. After the JOLTS report, the pair initially dropped but quickly rose above 1.08. Resistance from the 50 SMA (yellow) is still holding on the H4 chart, yet the recent data sparked renewed efforts to counter the downtrend, signaling a potential bullish breakout.

USD/CAD – Weekly Chart

Cryptocurrency Update

Bitcoin Stays Above $70K

BTC/USD – Daily chart

Ethereum Finds Support at the 100 SMA

Ethereum has also shown strong buying momentum, with prices breaking above the 100-day SMA to reach $2,700 in October. After a minor dip on Tuesday, Ethereum found support at the 50-day SMA, maintaining its position above $2,500 and reflecting resilience within its current upward trend.

ETH/USD – Daily chart