Yesterday’s Market WrapThe major news yesterday was that Fitch, a credit rating agency, downgraded the United States’ credit rating from AAA to AA+. T
Yesterday’s Market Wrap
The major news yesterday was that Fitch, a credit rating agency, downgraded the United States’ credit rating from AAA to AA+. This development led to risk aversion in the markets, resulting in lower stock markets and commodity dollars and increased demand for bonds.
In the foreign exchange market, the Japanese Yen experienced buying interest early in the day, leading to a decline in USD/JPY from 142.90 to a low of 142.25 . However, the pair has recovered as the USD pushed higher. The US dollar remained relatively steady against European currencies during the European session, but the Australian dollar (AUD) and New Zealand dollar (NZD) suffered the most selling pressure due to the cautious risk sentiment.
AUD/USD, in particular, has dropped to its lowest level in two months, reaching 0.6520s, as market sentiment turned more cautious and it broke below the 0.6600 level during Asia trading. Then all eyes turned to US traders to see how they respond to the US ADP jobs report. The ADP employment data showed yet another strong increase in July, which gave the USD another push higher, while crude Oil tumbled lower despite a huge drawdown in EIA inventories.
Today’s Market Expectations
Today started with the Caixin Services PMI from China, which showed that services are also slowing, after manufacturing fell in contraction last month. This will weigh further on risk assets and commodity dollars, which have turned quite bearish recently.
Later on comes the main event, the rate hike by the BOE. Given the ongoing inflationary pressures and strong wages data, it is highly likely that the Bank of England (BOE) will raise the bank rate by another 25 basis points (bps) during its upcoming meeting this week. The decision to raise the interest rate is widely expected. However, the key question will be how much further the central bank needs to act in order to address the inflationary pressures in the economy.
Yesterday the volatility picked up once again as traders wait for more economic data to come, with the combination of the Fitch’s downgrade of the US rating and the release of US ADP employment data contributing to the heightened market activity. We opened 6 trading signals yesterday, 3 of which closed in profit, with a long term winning signal in Gold.
For more detailed updates, please refer to the section below.
GOLD Breaks the 200 SMA
Gold is repeating a bearish pattern as it makes lower highs during the last two weeks, showing that sellers have been in charge during this period. Last week the 200 SMA (purple) turned into support on the H4 chart and we saw a $30 bounce from there from $1,942 to $1,972, although the price reversed lower and yesterday we saw another crash to the previous low, where sellers met the 200 SMA again, which held the decline.
XAU/USD – 240 minute chart
AUD/USD Heads for 0.65
AUD/USD turned weaker after the RBA’s decision to keep rates unchanged at 4.10%, while the data from China has been showing increased weakness. This accelerated the decline in this pair and we decided to open a sell forex signal here, which eventually closed in profit as sellers remain in control until the end of the day. So, we have turned bearish on this pair and are thinking of selling retraces higher.
Cryptocurrency Update
BITCOIN Bounces Back up Above $29,000
BTC/USD – Daily chart
We decided to open another buy Bitcoin signal on Monday, playing the range again, buying BTC/USD just above $30,000:
- Entry Price: $28,600
- Stop Loss: $27,000
- Take Profit: $31,300
The 100 Daily SMA Holds for ETHEREUM
Ethereum made a strong bounce and moved above $2,000 earlier this month as buyers remained in charge. We have had quite a few long term buy Ethereum signals since the trend has been bearish since the beginning of 2023, with the lows getting lower. Although since then the pressure has been to the downside, but Ethereum has still shown more resilience than Bitcoin. So, we decided to open a buy ETH signal on Monday after the retreat, so we’re betting on moving averages to act as support and hold the retreat and the 100 SMA (green) seems to be holding.
ETH/USD – Daily chart
- Entry Price: $1,860
- Stop Loss: $1,740
- Take Profit: $2,020
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