Forex Signals Brief Feb 28: RBNZ and Australia CPI Hold Steady

Yesterday the movement in the FX market was limited, with the yen initially firming up after a higher-than-expected Japanese CPI number. However, this gain faded as moderate US dollar buying offset the yen’s strength. In the afternoon, a major decline in US retail sales for January and a soft US CB consumer confidence report had little impact on the market, as month-end flows dominated the sentiment.

Investors are eagerly awaiting more advanced statistics to gain a better understanding of the trajectory of the US economy. In commodities, gold initially rose while oil prices fell entering US trade, but both positions reversed later in the day. Oil prices rebounded after suggestions that OPEC could extend voluntary production cuts when officials meet next week. Meanwhile, gold prices fell, while yields on government bonds rose gradually and steadily. Some of this increase in yields was attributed to the 7-year bond sale as the auction concluded without major disruptions.

Despite the rise in oil prices, the CAD fell against its counterparts. Domestic news flow was limited, contributing to a flow-driven rise of 30 pips in the USD/CAD pair during North American trade. The euro and pound ended the day steady overall, but there was significant intraday volatility, particularly around the time of the fix. Market participants remained watchful for any developments that could impact these currencies, but overall trading activity was relatively subdued.

Early this morning we had the Australian monthly inflation report, with the CPI rate for January 2024 coming in at 3.4% year-on-year, 2 points below the expected 3.6%. This figure is unchanged from the previous month. Additionally, the month-on-month CPI has shown an increase of 0.4%, compared to a decrease of -0.1% in December.

That was followed by the live meeting, where the Reserve Bank of New Zealand (RBNZ) announced to keep the cash rate unchanged at 5.5%, contrary to expectations of a rate hike by multiple banks. This decision led to a substantial decline in the New Zealand dollar against the US dollar. The RBNZ’s projections indicate that the official cash rate is expected to be at 5.59% by June 2024, revised from the previous forecast of 5.67%. Additionally, the annual Consumer Price Index (CPI) is anticipated to reach 2.6% by March 2025, up from the previous estimate of 2.4%. Reuters reports that maintaining ongoing restrictive monetary policy settings is deemed important by the RBNZ to mitigate the risk of rising inflation expectations. This suggests that the central bank is not willing to cut rates either, but the NZD dived 70 pips right away.

During the European session, the economic calendar is empty, but we have the preliminary US GDP report for Q2. Although, this report is quite old and both the headline GDP QoQ and GDP Price Index QoQ are expected to remain unchanged at 3.3% and 1.5% respectively.

Yesterday the volatility increased somewhat from the previous day and there were a couple of reversals in the forex market. We also saw some unexpected moves in USD/JPY and USD/CAD, where we got caught on the wrong side. So we started the day well with a long-term winning Gold signal, but then had three losses, which we are trying to make up for today.

Following a drop early this month, Gold prices rebounded above $2,000 and have continued to rise. Last week, buyers sought to push the price over the 50 SMA (yellow), but failed several times. However, on Friday, we saw a strong bid in gold, pushing the price over the 50 SMA and shattering the barrier. But, this week, the price went below that moving average again and is trading in a range above $2,030.

EUR/USD continues to consolidate in a range between 1.08 and 1.09, with moving averages acting as resistance at the top. Investors are eagerly awaiting key data releases, especially from the United States later in the week. Despite Tuesday’s US durable goods orders report revealing a larger-than-expected decline in January, the EUR/USD pair did not exhibit a significant reaction.

After breaking above the $50,000 level, Bitcoin continued its upward momentum, surpassing the $55,000 barrier and reaching nearly $57,500 yesterday. This surge suggests bullish sentiment in the market, and if the momentum continues, Bitcoin may attempt to test the $60,000 barrier once again. However, if the price fails to maintain its position above $50,000, it could face some downside pressure. In such a scenario, potential support levels are expected between the $48,000 and $49,000 range. These levels may attract buyers looking to enter the market or add to their positions, potentially helping to stabilize the price. Overall, Bitcoin’s recent price action indicates strong bullish momentum, with a potential retest of the $60,000 level and the all-time high at 69,000 on the horizon.

BTC/USD – 60 minute chart

Ethereum experienced a notable increase in value recently, but yesterday it slowed down. This surge in price comes after Ethereum had fallen below this level last week. Monday’s strong positive momentum propelled the price even higher, suggesting that buyers are maintaining control of the market. The resurgence in Ethereum’s price indicates renewed confidence and bullish sentiment among investors. Despite the recent dip below $3,000, the cryptocurrency has managed to regain its upward trajectory, driven by increased demand and positive market sentiment.

• ETH Buy Signal
• Entry Price: $2,290
• Stop Loss: $2,590
• Take Profit: $1,750