Yesterday the focus shifted away from the US dollar, which showed broad strength upon the country’s return from a holiday, to developments in European central banks. The Swiss National Bank (SNB) made headlines by cutting interest rates for the second time, a move aimed at counteracting recent franc weakness. This decision coincided with renewed political risk aversion, which had previously subsided.
However, the euro did not benefit from these dynamics, declining by 40 pips during the day and closing near its lows. Increased risk aversion played a role in this decline, compounded by Nvidia shares initially rising 3% but closing down 3.5%, marking an outside reversal on the charts. Meanwhile, the Japanese yen remained under pressure, declining for the sixth consecutive day and heading towards its lowest level in 34 years. The SNB’s actions contributed to this trend, but the broader market sentiment that inflationary pressures may be fading also weighed on the yen.
This sentiment suggests challenges for the Bank of Japan (BOJ) in raising interest rates. Moreover, concerns over issues at a Japanese bank further exacerbated market anxieties, prompting heightened scrutiny for potential currency interventions, particularly with USD/JPY hovering around the 160.00 mark, just over 100 pips away. In the realm of commodity currencies, the USD/CAD pair managed to overcome the strength of the US dollar and weakness in commodity prices. This resilience was partly bolstered by a tighter US oil inventory report, which pushed oil prices to a six-week high, supporting the Canadian dollar against the greenback. The interplay of these factors underscored a complex trading day influenced by both economic data and geopolitical developments across global markets.
Today’s Market Expectations
The day started with the National Core CPI inflation from Japan.
Today will center around the release of Flash PMIs, a significant event that typically draws attention from markets, particularly focusing on the US data:
- Eurozone Manufacturing PMI is anticipated to rise to 48.0 from the previous reading of 47.3, indicating a potential improvement in the manufacturing sector.
- Eurozone Services PMI is expected to increase to 53.5 compared to the previous 53.2, suggesting continued expansion in the services sector.
- UK Manufacturing PMI is forecasted at 51.0, slightly lower than the prior figure of 51.2, indicating stable manufacturing activity.
- UK Services PMI is expected to edge up to 53.2 from the previous 52.9, reflecting modest growth in the services industry.
- US Manufacturing PMI is projected to decrease slightly to 51.0 from 51.3, indicating a potential slowdown in manufacturing growth.
- US Services PMI is anticipated to decline to 53.5 from 54.8, suggesting a possible moderation in the services sector.
Yesterday risk assets such as stock markets and commodity dollars retreated, while the USD turned bullish, so we remained long on the USD which proved to be a good strategy, but got caught during the decline in stock markets. We opened eight trading signals, ending the day with four winning and four losing signals.
Gold Returns Above MAs
Gold experienced a significant surge on Wednesday, soaring to $2,340 before encountering resistance at the 100-day Simple Moving Average (SMA), which prompted a subsequent decline in its price. Technical indicators suggest further potential declines, with initial support expected around the 200-day moving average of $2,290. Additionally, the monthly low of $2,286.70 stands out as a crucial short-term support level. Despite recent retracements, gold prices remain bolstered by ongoing global tensions and uncertainties. Political instability in Europe and turmoil in the Middle East have contributed to a more optimistic outlook for gold, underscored by its gains on Friday. These geopolitical factors continue to play a pivotal role in supporting the precious metal’s appeal as a safe-haven asset amidst global economic and political uncertainties.
XAU/USD – Daily chart
AUD/USD Remains in Consolidation Mode
Following the release of disappointing US Consumer Price Index (CPI) inflation data last Wednesday, the AUD/USD pair saw a significant rally, breaking above the 200-day Simple Moving Average (SMA). However, the price quickly retreated back into its previous range and started trending towards the lower end. Support levels around the 100-day SMA (red) on the daily chart briefly halted the downward movement. This week, as the AUD/USD pair bounced back from lower levels, extending its winning streak over three days, buyer interest revitalized. The pair surged to multi-session highs, testing levels in the upper-0.6600s. Improved sentiment in riskier markets, ongoing weakness in the US dollar (USD), and continued market adjustments following the Reserve Bank of Australia (RBA) meeting were key factors driving this upward momentum.
Cryptocurrency Update
MAs Turn Into Resistance for Bitcoin
The price of Bitcoin fell below $65,000 this week, falling by more than $5,000 from the highs above $70,000. This decline coincided with significant institutional withdrawals and increased activity from large whale investors. Throughout the downturn, key technical indicators such as the 20-day Simple Moving Average (SMA) were breached, leading us to close our sell Bitcoin signal with a $6,000 profit. Now moving averages have been broken and they have turned into resistance, so we’re waiting to by BTC lower.
MAs Still Keeping Ethereum Bullish
Since the launch of its ETF, Ethereum (ETH) has experienced fluctuations, reaching a high of $3,832.50. This surge was driven by increased market confidence following the SEC’s positive stance on spot Ether ETFs. Ethereum’s price has risen by 25% from its previous highs, reflecting strong investor interest and market demand. Despite this optimistic trend, Ethereum’s price recently dipped below $3,500. However, there was a bullish turnaround over the weekend, suggesting that Ethereum’s price may rise again, supported by the 100-day Simple Moving Average (SMA).
