Forex Signals Brief March 22: Powell to Close A Loaded Week

Yesterday started with the employment report from Australia, which was quite strong, showing 117K new job gains, while the unemployment rate fell 4 points to 3.7% from 4.1%. However, that didn’t save AUD/USD from reversing lower and giving back most of the gains from the previous days, however, it held better than other major currencies.

The Eurozone and UK Services and Manufacturing PMI figures came in mixed, which didn’t help much, while the Swiss National Bank delivered a surprise rate cut of 25 basis points, from 1.75% to 1.50%, which sent USD/CHF around 140 pips higher, as the SNB starts the policy easing cycle.

The trading day in the US began with lower yields and a mixed performance from the US dollar (USD). Early in the US session, the Bank of England announced its decision to maintain interest rates steady. However, the accompanying statement and remarks from the central bank were dovish in nature. This dovish tone served to strengthen the USD and weaken the British pound (GBP) against other currencies.

As the trading day progressed, US economic data releases came in generally stronger, further supporting the USD. Overall, the combination of the dovish stance from the Bank of England and stronger US economic data contributed to the relative strength of the USD against other currencies. Traders continued to monitor central bank actions and economic data releases for further insights into currency market movements.

Today started with the Japanese Core CPI Year-on-Year (Y/Y) data released early this morning, which was anticipated to increase to 2.8% from the previous reading of 2.0%. There was no consensus on the other measures. Previous readings indicated the Headline CPI Y/Y at 2.2% and the Core-Core CPI Y/Y at 3.5%. Depending on the forward guidance provided by the Bank of Japan (BoJ) at its policy decision, a beat in the Core CPI Y/Y figure is likely to result in a larger market reaction. If the actual data exceeds expectations, it could lead to a stronger response, with the Japanese yen gaining strength across the board.

The UK headline year-on-year (Y/Y) retail sales come next and the are expected to decline by 0.4%, contrasting with the previous reading of +0.7%. On a month-on-month (M/M) basis, retail sales are projected to decrease by 0.1%, compared to the previous increase of 3.4%. For core retail sales, the Y/Y figure is anticipated to be -0.3%, down from the previous reading of +0.7%. On a M/M basis, core retail sales are expected to increase by 0.5%, contrasting with the previous growth of 3.2%. Recent retail statistics, such as the BRC Retail Sales, showed a year-on-year increase of 1.0%. However, the accompanying report noted that easing inflation and weak consumer demand contributed to a deceleration in retail sales growth. While spending was boosted by January deals in the first two weeks of the month, this trend did not continue throughout January.

Later in the US session, we have the retail sales from Canada, with both the headline and core sales expected to show a 0.4% decline for January. FED chairman Jerome Powell will close the day, and he is expected to deliver opening remarks at a Fed Listens event, in Washington DC. Although, we’ll see if he touches the monetary policy.

Yesterday the volatility increased dramatically, following the FOMC the previous day. The USD crashed after the FED and we were short on the Buck in AUD/USD and EUR/USD, but yesterday we saw a reversal in most assets which caught us on the wrong side.

GOLD experienced a decline last week after reaching a record high earlier in the month. However, it has stabilized within a specific range this week, with the XAU/USD pair settling at $2,152, establishing a support zone. Despite repeated buying indications against this support level, the price has consistently returned to it, suggesting a potential break below $2,150 this week. Indeed, the XAU/USD pair fell below this support level recently. However, despite testing the $2,150 support level, the price of gold managed to remain above it. On Wednesday, following the Federal Reserve (FED) conference, the XAU/USD pair saw another increase, pushing gold past the $2,200 mark. But yesterday sellers returned, however the 50 SMA (yellow) held as support.

GBP/USD experienced a significant increase of approximately 100 pips following the Federal Reserve (FED) meeting yesterday. However, the rally in GBP/USD appears to be far from over, especially with the Bank of England (BOE) meeting scheduled for today. The pair closed the day around 1.28, indicating continued bullish momentum. However, today’s price action took a different turn compared to yesterday, despite the release of UK Services and Manufacturing data. The BOE’s stance became more dovish, leading to a decline in the GBP. This decline was further exacerbated by the strength of the USD. Consequently, the GBP/USD pair plummeted by 150 pips, resulting in the formation of a bearish engulfing daily candlestick. A bearish engulfing candlestick pattern typically signals a reversal of the previous bullish trend, suggesting that further downward movement may be expected in the GBP/USD pair.

GBP/USD – 240 minute chart

Last week, Bitcoin (BTC) and Ethereum (ETH) both exhibited significant volatility in the cryptocurrency market. Bitcoin surged to a new all-time high above $73,000 early in the week, while Ethereum continued its upward trajectory, surpassing the critical milestone of $4,000. However, despite the initial bullish momentum, both cryptocurrencies experienced negative reversals after reaching their respective peaks. Bitcoin faced selling pressure towards the end of the week, causing its price to dip below $65,000 on Saturday. Nevertheless, BITCOIN saw a reversal in its price trajectory yesterday, with the selloff coming to an end. This reversal brought the price back towards the $70,000 level, indicating renewed buying interest in the cryptocurrency. But the 100 SMA (green) stopped the climb yesterday, so BTC is trading between these two MAs now.

BTC/USD – 240 minute chart

The consistent upward momentum in Ethereum’s price, despite occasional retracements, indicates the strength of its underlying trend. The ability of ETHEREUM to find support above the 50-period Simple Moving Average on the H4 chart underscores the importance of this technical level in guiding price movements. Although Ethereum experienced a bearish reversal after surpassing the crucial $4,000 milestone, the support provided by the 50-period SMA attracted buyers, leading to a rise in its price. The recent peak at $4,100 demonstrates the resilience of Ethereum’s upward trend, further supported by its ability to rebound from retracements and find support at key technical levels.

ETH/USD – 240 minute chart