Last Week’s Market WrapLast week was characterized by agitation, as traders’ attention was on the Jackson Hole Symposium where central bankers meet ev
Last Week’s Market Wrap
Last week was characterized by agitation, as traders’ attention was on the Jackson Hole Symposium where central bankers meet every year, but the BRICS Summit as well. The FED had brought back the data dependency back to the table, which has turned the USD bullish throughout this month. This week the USD also ended up higher after all, but the uptrend was not as straightforward as in previous weeks, with investors fearing a policy change signal from FED’s Jerome Powell, but also from ECB’s Lagarde, as signs for an economic recession in the Eurozone kept increasing this week.
Initially, the attention was on China, with the People’s Bank of China leaving the 5-year Loan Prime Rate unchanged at 4.20% while lowering the 1-y Loan Prime Rate from 3.55% to 3.45%, while the BRICS Summit started on Tuesday. There was no USD substitute currency on the agenda, but member countries accepted to expand with other countries such as Iran, Saudi Arabia etc.
The economic data showed further deterioration in the global economy, with services and manufacturing PMI reports missing expectations, and services fell in contraction in Europe, while they remained just above water in the US. Although the employment sector remained in decent shape as unemployment claims showed.
That gave Jerome Powell a reason to keep the threatening rhetoric, although I don’t expect any more hikes from the FED. But they will likely keep the higher-for-longer position. He said that they will decide the next move based on the data and the FED will proceed ‘carefully’ when deciding to hike again or hold steady,which sent the UD lower initially and then up where it closed the week.
This Week’s Market Expectations
This week we’re back to trading the economic data which starts with Retail Sales from Australia today, followed by the US CB Consumer Confidence and JOLTS Job Openings tomorrow, both of which are expected to soften further. On Wednesday we have inflation reports from Australia, Germany and Spain which are expected to show a mixed picture around the globe, but the overall trend remains in decline. The US Prelim GDP for Q2 will be released later that day but there’s no expectation of a change.
On Thursday we will see the Chinese Manufacturing PMI and Non-Manufacturing/Services PMI, both of which are expected to show another slowdown in activity, but services should stay above water just like in the US. The Eurozone CPI Flash Estimate and core CPI are expected to continue the cooling trend which is another bearish factor for the Euro, while the US Core PCE Price Index will be released in the afternoon. On Friday the Canadian GDP and US employment report will close the week.
We have been mostly long on the USD in recent weeks as buyers have been in charge, while risk assets have been in retreat and kept that strategy for most of the week. But there were quite a few reversals this week which caught us up a few times. Although, we ended the week well in profit, with 22 trading signals in total, 7 of which closed in loss while the other it the take profit targets, giving us a 67/33% win/loss ratio.
For more detailed updates, please refer to the section below.
MAs Turning Into Resistance for GOLD
It seems like the bearish trend still persists in Gold despite the bullish retrace last week. Gold has been making lower highs, which is a strong sign of a bearish trend. Sellers have pushed the price below all moving averages and earlier this month XAU/USD slipped below $1,900, which opened the door for further losses. But, last week we saw a retrace higher as the uncertainty ahead of two summits increased. But the 200 SMA (purple) and the 50 SMA (yellow) turned into resistance on the daily chart, so after two doji candlesticks, we predict further downside for Gold this week.
XAU/USD – Daily minute chart
Remainign Short on EUR/GBP As the 200 SMA Holds
Both the Eurozone and the UK have witnessed a contraction in their respective service sectors, indicating a decline in overall economic activity. These developments have caused traders to revise their expectations concerning a potential interest rate hike by the European Central Bank (ECB) in September, with the likelihood now estimated at around 50%. Furthermore, previously optimistic predictions regarding the peak level of interest rates set by the Bank of England (BOE) have been revised downward. This adjustment in forecasts has resulted in a delay in the expected timing of these rate changes.
Regarding the EUR/USD exchange rate, it initially remained close to the 1.0860 level but subsequently dropped to 1.08. On the other hand, the decline in the value of the British Pound (GBP) was more pronounced, leading to an increase in the EUR/GBP exchange rate. Despite the 200-day Simple Moving Average (SMA) serving as resistance and rejecting the price, a decision was made to initiate a sell signal for EUR/GBP. This choice aligns with the prevailing bearish trend in this currency pair.
Cryptocurrency Update
BITCOIN Failing at the 50 SMA
BTC/USD – H4 chart
We’re looking to open another buy Bitcoin signal on Monday, playing the range again, buying BTC/USD around $26,000
ETHEREUM Breaks the 200 Daily SMA
Ethereum also crashed lower last week, following the SpaceX rumours and the Evergrande bankruptcy. It failed to hold the gains after climbing above $2,000. Despite the prevailing bearish trend that has persisted since the beginning of 2023, characterized by a series of progressively lower lows, Ethereum has exhibited a greater degree of resilience compared to Bitcoin. Although ETH wasn’t spared during this crypto crash and ETH/USD fell below $1,600, but the 200 SMA (purple) held as support on the weekly chart. So, we are thinking about going long on Ethereum again.
ETH/USD – Daily chart
- ETH Buy Signal
- Entry Price: $1,671.79
- Stop Loss: $1,371
- Take Profit: $1,971
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