Forex Signals Brief November 7: BOE Rate Cut and FED Meeting Minutes on Agenda Today

Yesterday the economic calendar was light so markets had time to digest US elections, while today the BOE meeting and the FOMC minutes will highlight the day. The final Services PMI readings from the Eurozone came slightly higher for October, while UK Construction PMI and Canadian Ivey index came below expectations, however, traders had already embarked the Trump trade.

The market’s reaction to Trump’s victory closely matched expectations. Treasury yields increased, reflecting optimism around pro-business policies. The U.S. dollar strengthened significantly, with USD/JPY gaining 3 cents while the euro fell 2 cents against the dollar. U.S. equities also rallied, with the Russell 2000 up 5.8%, the S&P 500 rising 2.5%, and the Nasdaq gaining 3%, as major indices reached record highs for the second day in a row.

BITCOIN followed suit, benefiting from the improved risk appetite among investors. GOLD was one of the day’s biggest losers, dropping $100 to the $2,650 range. This decline was driven by higher interest rates, a stronger dollar, and diminished concerns over a contested election. Bonds found some relief, with better-than-expected demand in the latest Treasury auction offering minor support. Meanwhile, WTI crude oil closed at $72, ending the day unchanged after initially declining and then rebounding later in the session. These movements showcase an overall positive sentiment toward risk assets and a strong U.S. dollar.

Today’s Market Expectations

Japan’s Labor Cash Earnings for September grew by 2.8% year-over-year, in line with August’s rate but missing the 3.0% forecast. Real Cash Earnings, however, fell by -0.1%, extending a two-month decline as inflation pressures reduce purchasing power, underscoring potential headwinds for consumer spending.

The Bank of England (BoE) is expected to lower interest rates by 25 basis points, reducing the bank rate to 4.75%. This follows a streak of underwhelming UK economic data, including a drop in the central bank’s primary services inflation measure from 5.6% to 4.9%. After the UK budget announcement, market expectations for another consecutive cut in December have diminished, though stronger data could raise the chances of a December cut above the current 20% probability.

In the U.S., labor data has been affected recently by disruptions from hurricanes and strikes. Continuing Claims, which had been improving for two months, reached cycle highs in recent weeks. However, these distortions are now fading, with Initial Claims stabilizing within the 200K–260K range set since 2022. Last week, Continuing Claims dropped to 1.862 million, down from 1.888 million, while this week’s Initial Claims are expected to come in at 223,000, up slightly from 216,000.

The Federal Open Market Committee (FOMC) is also projected to lower rates by 25 basis points, targeting a range of 4.50–4.75% for the federal funds rate. The U.S. economy has shown resilience, with some signs of acceleration since the latest rate cut, leading the market to dial back on more aggressive rate-cut expectations. Now, three cuts are anticipated in 2025, rather than four, as the Fed is expected to pause earlier.

Yesterday the volatility was immense, with the USD, stock markets and cryptocurrencies surging higher, while other majors declined. We opened nine trading signals, all of them closed as prices kept moving around. We ended up with 7 winning forex signals in the end, and two losing trades.

Gold Decline Stalls at the 100 Daily SMA

In 2024, gold prices surged nearly 30%, rising from $2,000 to around $2,790, largely due to political and economic instability. However, prices have since pulled back, trading around $2,652 yesterday. The 50-day SMA on the daily chart held firm, suggesting potential support, though it’s unclear if this pullback will persist or if the broader bullish trend will resume.

XAU/USD – Daily Chart

USD/JPY Jumps 3 Cents Higher

The USD/JPY pair has shown strong upward momentum since early August, gaining 12 cents from below 140 to about 153 between mid-September and October. After briefly declining by two cents, the USD recovered as election results pointed toward a Donald Trump victory, further boosting the currency. The Republican win added strength to the USD/JPY, pushing it towards 155. Support was also found at the 100-day SMA following the Bank of Japan’s recent rate hike announcement, as buyers stepped in and drove the pair upward.

USD/JPY – H4 Chart

Cryptocurrency Update

Bitcoin Returns to $70K Again

BTC/USD – Daily chart

Ethereum Falls Below $2,500

Ethereum has also seen strong buying interest, surpassing its 100-day SMA to trade above $2,700. It initially dipped below $2,500 but quickly regained support above its 50-day SMA, confirming its upward trend. With Trump’s election win, Ethereum turned bullish again, pushing above $2,500 over the weekend and rising higher today.

ETH/USD – Daily chart