PCE Price Index m/m on Friday came out slightly higher than expected, 0.6% vs. 0.5%, while the annual metric stands at 4.9%, beating expectations by 0.2%, underpinning the consistent growth in strength in the US Dollar. 

It is a heavy week filled with news events to kick off the final quarter of 2022. 

Monday

US manufacturing PMI is in focus, scheduled at 10 am EST

Tuesday

RBA cash rate, analysts are expecting a 50bps hike to 2.85%. 

ECB Lagarde to speak at 11am EST.

Wednesday

NZD cash rate, expect a 50bps rate hike as well

OPEC Meeting – potential reduction of 500,000 barrels per day to 1 million BPD to support oil prices

ADP Nonfarm employment change

Thursday

BOJ Kuroda is to give a speech tentatively. It will be interesting to see what the Japanese has to say as USDJPY is slowly undoing their intervention and creeping up to 145 again as we speak.

Friday

NFP – 315k previous versus 265k forecast, market is expecting a slight slowdown in the labour market

Highlight for the day

The UK is reversing its Mini Budget plan. Kwarteng stressed that the chaotic market last week was due to a global issue, and not his plan. Markets are pricing in a lower rate hike from the BOE after this was announced, down from 200 basis points on 26th September to below 125 basis points now. 

Let’s have a look at how Cable is reacting to the U-turn by the UK government. 

GBPUSD

GBPUSD Daily

GBPUSD M30

The pair has recovered almost all of its losses since it first plunged to its all-time low last Monday. 

On the thirty-minute timeframe, consecutive higher lows have been formed and there was a crossover of the 50 and 200-period simple moving average, signaling bullish intentions. Adding to the confluence is the slope of the bullish trendline is getting steeper, indicating an increase in buying pressure in the short term. 

The pair is attempting to break through 1.1200 resistance right now as the European session is getting ready for Q4 2022 while adjusting to the latest update on UK’s fiscal policy. If the price closes above the resistance successfully, we may be looking at GBPUSD going back to the 1.1300-1.1400 range. 

USDJPY

USDJPY H1

The dollar is slowly but surely rising against the Yen and it looks like a break above 145 is imminent, considering the longer-term bullish trend and also the fundamental factor working in USD’s favor. 

USDJPY Daily

Using Analyst View from Trading Central, we receive a bullish confluence on our view. The immediate resistance to watch out for are 147.00, 152.00, and 155.00 as marked up on the chart. 

Energies

USOIL

USOIL H1

US Crude is up 2.36% since Asia open in anticipation of a production cut that will be finalized in the OPEC meeting on Wednesday.

The pair is now on a minor rally, trying to close above 82.30 resistance. If that is successful, 86.35 will be our first target. Note that the global economic slowdown amidst rising interest rates is still limiting the upside and we are still in a bearish market structure from a bigger picture point of view. 

Ru Yi

Trader, Technical Analyst

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Economic Calendar

FX

GBPUSD

GBPUSD H1

The Cable was sent into the ground in early Asian trading and we could have made 850 pips if we engaged in a short position as discussed in our previous analysis last Friday. 

Weakness in Cable is largely attributed to the strength in the US dollar coupled with the new mini budget by UK’s new chancellor. The markets also believe that this is a policy error, hence the sharp fall in GBP. The BOE raising just 50bps while the Fed raising 75bps and promising more to come surely doesn’t help. 

The pair has since recovered from its record low of 1.03565 and is trading 360 pips above that low. 

Our preference is to wait for a retest of the 50% Fibonacci retracement and look for short opportunities from there. 

There is also massive volatility in GBP across the board. 

GBPJPY M30

GBPJPY has fallen by more than 630 pips during Asia but also recovered nearly 590 pips at the time of writing. 

USDJPY

USDJPY H1

Following up on USDJPY, it is apparent that the dollar is gaining back momentum to push to the upside again. The pair has recovered almost 400 pips of the 543 pips crash. The only thing standing in the way is the broken trendline, acting as short-term resistance. 

Once it breaks to the upside of the trendline, we will be looking for buy opportunities. 

The Japanese government intervened last week but it is insufficient to ignite strength in JPY, whereas USD strength is prevailing. We are not going to shift our bullish sentiment unless the Japanese authority does something significant to their currencies again. 

Precious Metals

Gold

XAUUSD H4 Source: TradingView

XAUUSD M30 Source: TradingView

Gold declined sharply, falling by $15.50, -0.95% during the early Tokyo session but has since recovered most of the losses. After falling to a 29-month low, gold is clinging on to its dear life near $1640. 

A super hawkish fed is no good news for the safe haven. In an environment where hawks are dominant and interest rates are on the rise, the opportunity cost for holding gold increases because of its non-yielding nature. Investors would much rather keep their money in the bank, earning themselves lucrative returns. This will further suppress gold prices.

With that being said, our preference for gold in the short term is bearish. 

We build our case based on a few confluences including

1. Gold is in a bearish market structure. It is now trading in a bearish channel which is very much intact (Image 1). We are expecting a continuation of the higher timeframe trend.
   
2. There were two bullish fakeouts as shown in Image 2 before a breakout to the downside. The fakeouts trapped some buyers and they are now stuck in their long positions if they haven’t been stopped out already.
   
3. The bearish breakout from the consolidation was decisive. Even with the sharp recovery, the gold price is still trading well below ($15 away) the consolidation box.
   
4. Macroeconomics- Rising interest rates and an ever stronger greenback.

Alternative Scenario

If prices close above the pivot at $1667 (the midpoint of the consolidation range), we may expect the price to continue rising until it meets the $1680 key resistance area. 

US Stocks Markets

SP500

SP500 Daily

The stock market did not have an easy week either, losing 4.9% in the previous trading week. Certainly, tight monetary policies are not conducive for stock market performance. 3605 is our next key support and if it breaks, we may be looking at a further decline to 3250 support while fulfilling the descending triangle formation. 

Ru Yi

Trader, Technical Analyst

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Here are some of the major events that took place this week 

• FOMC
• Japan’s Intervention
• BOE rate hike 
• SNB rate hike
• Fed Chair Powell speaks at 2 pm EST to end the week 

The Fed raised interest rates by 75bps to 3.00-3.25% with the Fed Fund Futures signaling a terminal rate of 4.6% in 2023. FOMC is still debating between a 100 and 125-bps rate hike to end the calendar year. A hawkish stance is still firmly maintained, with the Fed reiterating that inflation is still rampant and they will continue to hike rates aggressively until inflation is contained.

On the other hand, BOE raised its interest rates for the 7th time, and this time it is a 50bps hike, bringing the interest rate to 2.25%. However, they have reduced their inflation forecast from 13% by the end of the year to under 11% and there are fears that the UK economy is already in a recession. 

Swiss National Bank raised its interest rate by 75bps to 0.5% yesterday, ending the era of negative rates. This is a response to the heightened inflation rate in Switzerland, which hit a three-decade high of 3.5% last month. The bank is not ruling out further rate hikes. 

Japan couldn’t withstand the increasing pressure that was put on their currency and as a result intervened yesterday. This was after the Bank of Japan stood firm on their loose monetary policy. Not a good timing, especially when the Fed had just in the previous day delivered a third straight 75bps hike and promised more to come. It is a significant event because the last time Japan did this was back in 1998 but the intervention can only be seen as a minor halt to the prolonged slide in Yen. Japan needs to tap into its $1.3 trillion foreign reserves to support the Yen.

USDJPY

USDJPY H2

USDJPY plunged by as much as 543 pips as the news of Japan’s intervention broke out. A minor recovery was seen and the pair is now trading near the 142.30 area. 

From a technical point of view, USDJPY made a fakeout to a high of 145.90 before it sank. The drop also caused another fakeout to a low of 140.34. This is the reason why volatility is both good and bad for traders and we should always stay updated on current news events. 

Fundamentally, a hawkish Fed and a dovish BOJ will only lead to a continued rise in the greenback against the Yen. Thus, we will be looking for long opportunities should the pair find support near 141.50 area. 

GBPUSD

GBPUSD H1

BOE raised rates for 7 times this year. It did nothing to save the GBP from sliding against the US Dollar. 

At the time of writing, GBPUSD is trading at levels that we have not seen in 35 years. 1.1400 was the major support that we all hoped for it to hold but it didn’t.  

Provided that the Fed is going to continue raising rates, we will be looking for opportunities to go short when the pair retest any of the resistance zone marked. 

Gold

XAUUSD H4

Gold has been consolidating in a $25 range for a week now but we did witness two fakeouts above $1680. Those can be seen as added confluences for our bearish outlook on gold with the next target near $1650. Powell speech later may influence how gold close for the week. 

Stocks Market

SP500

SP500 H4

The SP500 did not fare well in an environment where borrowing costs are rising steadily. Capital is being pulled out from risk assets and flows into safer investment avenues like bank savings etc. as the opportunity cost is getting higher for not doing so. 

With that being said, 3750 is a major support that will decide if the index is going to continue its fall or not. The index is currently in a bearish market structure – an expanding triangle formation. 

Cryptocurrencies

BTCUSD H4

Bitcoin is flirting with 18500 key support as we observe a few minor bounces from this area. As mentioned earlier, it is getting less lucrative for investors to put their funds in risk assets, and from that, we can formulate a bearish outlook for Bitcoin. 

If this support does break, there is a big space for Bitcoin to free fall with the next significant support near $13600.

Welf

Trader, Technical Analyst

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To recap this trading week…

OPEC+ on Monday decided to cut oil production by 100bpd in October to support the declining oil prices due to fears of economic slowdowns and renewed China’s lockdown.

RBA increased its interest rate by 50bps, matching market expectations. RBA maintained that more rate hikes will be coming as inflation is expected to peak at the end of the year, but these decisions are not on a pre-set path. 

Canada goes big to tame inflation. BOC raised its interest rate by 75bps to 3.25% as forecasted. From a low of 0.25% in March to a 14-year high at 3.25%, BOC is by far the most aggressive central bank with their tightening and they are not done yet, with further rate hikes expected in the next meetings. 

ECB added a whopping 75bps to its main refinancing rate to 1.25%, the highest level since 2011 in a similar effort to tackle inflation. ECB Lagarde also signaled more incoming rate hikes as inflation soared to 9.1% last month. However, the Euro may be affected more by gas prices. 

ECB Lagarde is expected to give a speech in an hour. EU Economic Summit is taking place today to end the trading week. 

Forex

EURUSD

EURUSD Daily

EURUSD had a nice recovery after it reached a low of 0.9865 and is currently trading 100 pips above parity. Investors are eyeing Lagarde’s speech. A firm hawkish stance from ECB may give some boost to the pair, but the energy crisis is still a major factor to consider. 

Immediate resistance at 1.0115 which might be broken, but will soon be met by the descending trendline. Key support at parity.

USDJPY

USDJPY H4

Governor Kuroda finally say something about the jumbo moves in USDJPY. He told the reporters that BOJ will watch the exchange rate moves carefully after a meeting with the PM. The Finance Minister of Japan also stated that the government is keeping the door open to any options to help contain the rapid movement in its currency. 

As a result, USDJPY has fallen 265 pips from its high of 145 at the time of writing. However, this may be seen as a minor retracement before a continued move up, at least testing the 145 levels again. 

Short-term resistance stays at 145 while support is in the 141.50 area. 

Energies

Crude Oil

USOIL H4

Although crude oil broke out from its bearish channel, it is still lingering around the channel from the other side. It did make a small bounce from the 82.20 support, but recessionary concerns are keeping the bulls in check. China’s covid curbs are also putting some pressure on oil prices. Production cuts in October may play a minor role to bolster oil prices. 

Short-term support is the recently tested 82.20 while resistance is at $87. 

Cryptocurrencies

Bitcoin

BTCUSD Daily

Bitcoin bounced off from its major support at 18500 and in the last 8 hours, we observed a rally of as much as 7.5%. This move may be relatively larger compared to its most recent price movements but it is still not much if we look at the major slump of 42% from 7 June to 18 June. 

We may see Bitcoin continue to range between 22400 and 18500 in a risk-off market provided that most attention are being directed to interest rates, inflation, and tightness in energy supplies.

Welf

Trader, Technical Analyst

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Forex

The RBA is pretty much expected to raise rates by 50 basis points on Tuesday, investors will pay close attention to the possibility of further aggressive 50bps hike in October and November.

The Bank of Canada on the other hand, is looking for 75 bps on Wednesday, While it looks unlikely that BoC will continue to hike interest rate given Inflation appears to have peaked in the region.

The European Central Bank is expected to raise rates again by at least 50 basis points at its upcoming meeting. Euro inflation of  9.1% in August is well above analysts’ expectations and noticeably higher than the 2% target pressuring the ECB to curb it with aggressive rate hike. The rapid rise in cost of living is leading the markets to speculate a rate hike of 75 basis points this coming Thursday.

EURUSD

H4 Chart

EURUSD has been on a downtrend for months, sellers should be cautious on the limited upside on Dollar and market might be forming a bottom at parity (psychological level), forming buy pressure ahead of ECB rate hike on Thursday. ECB’s hawkish shift suggests we might see euro gain.

DXY 

Dollar Index Daily Chart 

Federal Reserve chair Jerome Powell is due to speak on Thursday, traders are to look for whether the Fed is inclined with another 75 basis point hike or if 50 basis point hike is also an option. A hawkish Fed will further push the dollar to 110-115 trading range.

While the dollar’s aggressive rate hike is pressuring other currencies, most of the Fed members expected to see rates well above 3% by the end of the year.

Commodity and Energy 

XAUUSD

Gold has been trending down the 3rd week consecutively. Gold is looking to rebound to 1730s with weakening job growth and higher unemployment rate of  3.7% instead of the forecasted 3.5%. The main deciding factor for gold price in the coming weeks would be the FED’s decision on imposing a third straight rate hike of 75 basis point on 21st Sept. Investors should take note where higher yield increases the opportunity cost of holding gold, making gold unattractive to investors.

US OIL

 

Supply side shortages will likely keep Oil prices above 85.5. OPEC is due to meet on monday with high probability of production cuts talks which might push oil back to last week’s high.

The uncertainty over the demand outlook from sluggish economic growth and Covid curbs by China keeps oil prices in check.  If a strong selloff does happen, oil will find value buyers at $78 range.

Gilbert

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With a lot of uncertainty about the Fed’s imminent monetary policy decisions, the non-farm payrolls report will be pivotal and stays in the spotlight until the end of the week. New jobs for August were expected to decline by almost half after a stellar performance in the previous print, with the consensus being 295k versus 528k in July. 

Let’s shift our focus to how this event will steer the direction of the USD, and the different assets that are related to the dollar.

If the actual comes out lower than the forecast, we can expect the Fed to be less aggressive and raise interest rates by 50bps in their next meeting. On the flip side, if the actual print beat expectations by a significant margin say 350k+, it may swing the argument in favor of a 75bps hike. Furthermore, if the average hourly earnings m/m comes out higher than the expected 0.4%, it may seal a 75bps hike from the Fed. 

Precious Metals

Gold

XAUUSD Daily

After going through an extended loss amounting to approximately $100 since its previous swing high formed in mid of August, gold is now trading near a critical support zone ($1680-$1700). Gold did make a minor recovery (+0.40%) since today’s open amid NFP and it is highly dependent on the upcoming data. 

If we disregard fundamentals and look from a technical point of view, gold is poised for further losses with the momentum in the bears’ favor. 1680 is the last hope for gold buyers and if it breaks, gold may continue to slide until 1650 psychological level. Confluences for sellers include the widening gap between the two moving averages and the solid bearish channel. 

The client sentiment collected from various sources points to a bearish outlook for gold with more than 84% of traders currently net long. It serves as a powerful contrarian indicator to back our technical analysis. 

Please trade with caution as you may still get stopped out due to heightened volatility even if you are right on the eventual direction

US Stocks Market

SP500 Daily

SP500 found support yesterday near the 3950 area after an extended losing streak. There were not many movements in pre-markets as all eyes are on NFP. We do not expect 3950 to hold should the job reports come out stronger than forecasted as the Fed may hike more aggressively which is generally not conducive for the equity markets. 

Forex

USDJPY

USDJPY Daily

USDJPY broke 140 key resistance with conviction before NFP thanks to the ever-stronger dollar. Considering the strong underlying bullish momentum, we can expect a spike to 141.50 area during NFP even if it doesn’t end the week above that level. 

Energies

Crude oil

USOIL H4

Oil bounced off the $87 support on the expectations that OPEC may discuss output cuts during their meeting on 5 September. On the other hand, China’s Covid curbs may come back into play, limiting further price gains. 

Welf

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Recap: Jackson Hole Symposium

Attendees of the symposium sent a unanimous message that inflation should be tackled forcefully, especially in the US and the European economies. Tightening policies will be followed even if they cause collateral damage. Fed Chair Powell, among several other Fed officials, stated that they did not expect to change course, necessarily disabusing the rumors of a “Fed Pivot” next year.

With the central bankers being highly hawkish, let’s look at what happened and what is most likely to happen to different currencies and assets this coming week.

Forex

EURUSD

EURUSD H4

Last Friday, EURUSD rallied to a high of 90 pips above parity before reversing its course sharply and closing at 0.9964. This price action seems to be pricing in the hawkish comments from Jackson Hole and the tendency of a further down move is very likely. 

0.9900 is the final line of support for the pair and it may spell disaster if it breaks. We may be looking at the psychological levels at 0.9800 and 0.9700 for our next downside targets

Need some trading ideas for EURUSD? 

Trading Central Featured Ideas

Not long ago, Trading Central’s algorithm spotted an outside bar pattern and is posting a bearish preference for EURUSD. RSI is also employed as an additional confluence to support the outlook.

USDJPY

USDJPY Daily

We are actually pretty concerned about the Yen as it has never been so weak for the past 24 years. 

Bank of Japan Governor Haruhiko Kuroda also gave a word at Jackson Hole albeit facing contrasting challenges in their home country. The inflation rate is at 2.4% and may approach 3%, caused almost entirely by the international commodity price hike in food and energy. However, it may decline to 1.5% next year and therefore they will continue with their expansionary monetary policies to meet inflation target. 

What does this mean for USDJPY?

Super Hawkish Fed vs Dovish BOJ. The greenback is not going to stop strengthening against the Yen and from the charts we can see that this situation has been going on for quite some time. The pair has been making consistently higher highs and higher lows since its rally started in March this year. With the macroeconomic fundamentals playing in favour of the dollar, USDJPY may soon break its resistance at 139.00 and soar towards the 141.50 area. 

Precious Metals

Gold

XAUUSD H4

Gold continued to dip after losing $20.38 last Friday. It is already down $16 since the market opened today and is poised for further losses considering the strong downwards momentum. Bearish sentiment is solidifying following Powell’s speech and Jackson Hole and a stronger dollar outlook.

The buyers should pray that 1680 can hold or else a fall to the $1500 is in the cards. The next key support levels are marked at 1714 and 1680. 

Energies

Crude Oil

USOIL H4

USOIL rose 1.47% as of writing on the prospect of a supply cut from OPEC and a growth in demand. 

Two bullish factors

• OPEC may reduce output if it is required to support prices 
• Rising natural gas prices in the Eurozone 

However, USOIL may need a more convincing break above the $94 resistance area for a further up move. Otherwise, a slow U.S. growth outlook may keep oil prices in check.

US Stocks Market

SP500

SP500 Daily

The SP500 lost 3.61% last Friday, forcing the index below 4150 support. As the Fed continues to stay hawkish, the equities market may not have much room to rise in the short term. 

Welf

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Jackson Hole, Powell’s Speech, and PCE Price Index in Focus

PCE Price Index is scheduled to be released 90 minutes prior to Powell’s speech. The index is expected to slow down from 0.6% to 0.3% m/m and from 4.8% to 4.7% y/y. A divergence in the data could cause last-minute edits to his speech which may ignite market volatility. Provided that several Fed members have been hawkish as of late, Powell is expected to follow the majority or at least not be on the other end of the spectrum.  

At the time of writing, the probability of a 75bps vs a 50bps rate hike is 62% vs 38%, and therefore, the more dovish Powell is, the more ‘surprised’ the market is going to react.

If there are any changes to the expectation of future rate hikes and their magnitude, we could see weakness in the dollar which may subsequently lead to rallies in stocks and commodities. 

It is also important to note that Jackson Hole takes place over 3 days (including the weekend) which may lead to additional volatility or a gap at the open on Monday.   This is why we do not suggest holding positions over the weekend, depending on your strategy and risk tolerance.

FX

EURUSD

EURUSD H4

Trading volume has slowed down as the market is waiting anxiously for  Powell’s speech, the PCE Price Index, and everything that might be happening at Jackson Hole. Looking at the technicals, the bearish trendline is still intact and prices are still trading below both the 50 and 200-period moving averages. 

While the Euro is trying its best to push the price back above 1.0000, USD strength is not diminishing. EURUSD will be the major pair to focus on with it being the most traded FX pair. 

A break under 0.99000 could signal further downside and we scrolled back more than 20 years on the chart to find the next support at 0.9620. However, each century mark will be acting as psychological levels such as 0.9800 and 0.9700.

Precious Metal

Gold

XAUUSD H4

Trading activity on gold can be seen softening as well ahead of Powell’s speech and Jackson Hole. It is one of the instruments that reacts violently to macroeconomic developments and consolidation is signaling an impending breakout. 

The yellow metal is only up + 0.36% or $6.58 for this entire week which shows indecision among market participants. Personally, I would only look for opportunities near key levels such as 1711 and 1800 to avoid getting trapped by random price spikes. 

A break below 1711 could resume gold’s bearish trajectory while a break upwards of 1800 could push gold’s prices higher. 

US Stocks Market

SP500

SP500 Daily

SP500 gapped down to start the week and proceeded lower to test 4150. Demand kicked in to drive the index back to near weekly’s open, suggesting uncertainty and indecision. If the PCE price index comes out higher than expected, Fed may remain highly hawkish which will cap further up move on equities. 

Energies

Crude Oil

USOIL H4

USOIL broke out from its bearish channel earlier this week following the news that OPEC+ may be inclined towards cutting their production if Iran nuclear deal revives and their oil production returns. 

Crude oil slipped lower in the previous US session but has recovered some ground during Asia. The mood remains cautious as investors are sitting on the sidelines for further clues from the upcoming events (Jackson Hole and Powell’s speech). 

200 period moving average is offering some resistance at the current price near $94 bbl. Future oil prices remain highly dependent on upcoming economic data from China and other key economies but the recent breakout tilts the odds to the upside.

Welf

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Week in Review

England’s CPI

CPI in Britain came out hotter than expected, printing 10.1% YoY versus 9.8% as forecasted by economists. This is especially concerning as it is the first time in four decades that the inflation rate surges past 10 % with some expecting the figure to peak above 15% by early next year. 

BOE raised its interest rates by 50bps earlier this month, its biggest rate hike since 1995, and is expected to maintain its hawkish stance to contain its spiraling inflation. Investors also priced in the interest rate to be as high as 3.75% by around March next year. 

Let’s review the price action on GBPUSD

GBPUSD (Bearish)

GBPUSD H4

After forming a double top pattern with equal highs at 1.2285, the neckline was subsequently broken with ease during the last New York session. The support at 1.1925 is barely holding on as the sellers are attempting to push the price further downwards. 

This shows that the greenback is still having way more strength than the Pound does, even after such as bad CPI figure while US’s inflation on the other hand is seemingly cooling down according to its last CPI data.

FOMC Minutes

The Fed did not drop hints on the pace of interest rate hikes but has begun to recognize that they might have gone too far in curbing economic activity. However, the minutes also stated that there was little evidence to show inflation was slowing down despite a better-than-expected CPI print for July which caused a portion of investors to gravitate back to an expectation of 75bps in the next FOMC Meeting.

Source: Investing.com

The probability of a 75bps rate hike to a target rate of 3.00-3.25 has increased from 25% in the past week to 43%. 

What does this mean for the Dollar?

EURUSD (Bearish)

EURUSD H4

The Fibre was consolidating peacefully in the range between 1.0265 and 1.0115 before the Phily Fed Manufacturing Index was released. This event usually does not cause much volatility but the print yesterday tops estimates and was more than just good. The data come out at 6.2 compared to a forecast of -4.9 and the previous print of -12.3. The index surveys manufacturers in Philadelphia to gauge the general business conditions and the recent data shows that the industry is showing significant growth and improvements which gave a huge boost to the Dollar. 

EURUSD plunged by almost 100 pips following the event and is now trading below 1.01165 support. It seems likely that the pair can continue this bearish move and test parity again as the USD continues to uphold its strength across the board.

Energies

USOIL (Bearish)

USOIL H4 

Crude oil dipped after two winning days as the Asia session began. While strong US manufacturing data reinforced optimism for improved fuel demand in the short term, a likely increase in output by OPEC+ and persistent worries about economic slowdown are capping the upside. 

Technical-wise, we have readjusted our trendline to accommodate the latest price action. Currently, the price is well-contained within the bearish channel with a higher chance of it staying inside instead of a bullish breakout. 

Cryptocurrencies

Bitcoin (Bearish)

BTCUSD H4

Bitcoin did not have the chance to test the 25500 resistance area before it declined. After breaking out of the rising wedge, the coin saw an increase in bearish momentum which signifies sellers being in control. The sentiment continues to be tilted towards the downside as we see Bitcoin plummet as much as 6.15% in the past hour before a minor recovery took place. 

If the bearish impulsive move extends, we could see the previous swing low at 20800 being tested shortly.

Welf

Trader, Technical Analyst

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Economic Calendar

Last week we observe more actions and higher volatility in the markets due to the softer-than-expected US CPI data. Does that mean that inflation has peaked? How will it affect Fed’s monetary policies moving forward? We are eager to find out and only time will tell. In this coming week, we will be focusing on minutes of past central bank meetings including the FOMC and RBA, coupled with the NZD cash rate and the UK’s CPI number. 

USD Outlook

Source: Investing.com

The chart above shows the market’s expectations for future rate hikes. The probability of a 50bps rate hike jumped from 42% last week to 69% this week. This indicates that the market is expecting the Fed to raise rates lower than the previously expected 75bps, which made the greenback plummet briefly last week. 

Forex

EURUSD

EURUSD Daily

USD weakens against most pairs following CPI announcements last week but it managed to recover swiftly. Based on the chart above, the dollar has recouped all losses against the Euro and is trading at a similar level pre-CPI. 

It seems a breakout to the upside for EURUSD is unlikely with the USD being in control and price closed firmly below 1.0265 support. 

Precious Metals

Gold

XAUUSD Daily

Gold sank as the market opened this morning, signaling a stronger dollar. It is now sitting on major support in the 1785 area and it will be key to see if it is able to bounce back.

If it breaks lower, then gold will be making a lower leg and breaking its previous swing low. That could set a bearish tone for the rest of the week. 

Energies

USOIL

USOIL H4

Oil price continued to trade lower as the market opened and it has shed more than 4.5% from its previous high. The slump could very well be due to weaker than expected economic growth in China while Saudi Aramco said it was ready to increase its production.

On the charts, the oil price is coming back down to retest the broken bearish channel with a low probability of it bouncing. If it trades lower we are looking at $87 for the next support level and for the price to continue trading within the channel until significant optimistic news comes out for the oil market. 

Welf

Trader, Technical Analyst

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