Forex Signals Brief November 15: Markets Focused on US Retail Sales After Yesterday’s Miss in the CPI

Markets have been waiting for the US October CPI since last week and the report shook the markets, even though headline CPI was only 0.1% lower than expectations. But the market reaction was significantly stronger as traders closed the book on the potential of another FED hike and priced in a 90% chance of a reduction in interest rates on May 1. That sent the US dollar lower across the board, initially declining by 60 pips after the CPI news and then proceeded to tumble almost 200 pips lower against all currencies.

GBP/USD surged 215 pips higher to break beyond 1.2500, as EUR/USD approached 1.09. The commodity dollars were the greatest gainers, with the NZD/USD jumping above 0.6000 and the AUD/USD surging above 0.6500 ahead of some significant China data today which we explain below, and the Xi-Biden summit this week.

Bonds were a big driver, with rates falling to recent lows, sending Gold around $30 higher to $1970. Five-year notes are back to where they were in August, undoing some of the market assistance that the FED has been praising, while 10-year Treasury yields fell below 4.50%.

Today starts with the wave price index report from Australia. The Australian Wage Price Index for Q3 is predicted to rise 1.3% vs 0.8% in the previous quarter and 3.9% versus 3.6% in the previous year. The RBA recently raised interest rates by 25 basis points, citing unusually sustained service inflation. The central bank left the door open for additional tightening, stating that “whether further tightening of monetary policy is required to ensure that inflation returns to target in a reasonable time frame will depend on the data and the evolving assessment of risks.”

The UK CPI inflation which will be released next is predicted to decline to 4.8% on an annualized basis from 6.7% before, while the MoM figure is expected to be 0.1% from 0.5% previously. The Core CPI YoY number is projected to be 5.8% vs. 6.1% previously, while the MoM figure is forecast to be 0.4% vs. 0.5% previously. The Bank of England has held interest rates unchanged for two straight sessions, and it will be more difficult for them to do so again if this week’s employment and inflation data exceeds forecasts.

The US Retail Sales which will be the highlight of the day, have been fairly hot in recent months, but the data this time around is likely to indicate a fall of -0.1% M/M vs. 0.7% before. Although the data is unlikely to affect the Fed’s attitude, overly hot readings will not be tolerated.

Yesterday markets were quiet during the US session but the volatility picked up after the US CPI inflation report showed a larger-than-expected decline for October, sending the USD crashing lower and safe havens surging higher. We opened several trading signals, with three of them closing yesterday, two of which reached the take profit target while one closed in loss.

 GOLD Stops at the 50 SMA After Breaking the 20 SMA 

Following last week’s price movement, GOLD fell further on Monday, reaching its lowest level since October 19. Since the beginning of last week, investors have been fleeing non-interest-bearing gold due to confusing signals from Federal Reserve officials over the rate-hike trajectory. Concerns about the escalation of the Israel-Hamas conflict have subsided, reducing Gold’s appeal as a safe haven, and Gold faced the 200 SMA (purple), from which it bounced, but the bounce stopped at the 20 SMA (gray). Although yesterday we saw a surge higher which took the price above the 20 SMA but it stopped right at the 50 SMA (yellow).

• Gold Buy Signal
• Entry Price: $1,964.17
• Stop Loss: $1,950.17
• Take Profit: $1,972.17

Yesterday during the US session AUD/USD made a significant turnaround upward as risk sentiment improved massively in financial markets and US bond rates lost more than 20 bps, following the soft US CPI inflation numbers for October. The US dollar tumbled nearly 200 pips lower across the board which sent this pair above 0.65 and above the 100 daily SMA, indicating that buyers are in charge and we might see a trend reversal if today’s retail sales from the US are soft too.

AUD/USD – Daily minute chart

Since the Securities and Exchange Commission approved a Bitcoin spot ETF, Bitcoin has continued to benefit from a more optimistic cryptocurrency environment. As a consequence, this cryptocurrency rose late last month, reaching $35,000 before weakening and falling. Despite not losing much ground, buyers grabbed charge and pushed the price up to more than $36,000. BTC is now trading around $35,000, and yesterday we saw another recovery off the 50 SMA (yellow), with buyers stopping just below last month’s high of $38,000. Yesterday we saw a retreat which we decided to buy, so we hope that buyers resume the uptrend soon.

BTC/USD – 240 minute chart

After the SEC approved Bitcoin spot ETFs last month, Ethereum benefited from the good attitude in the crypto market and soared beyond $1,800, gaining more than $300. The zone around $1,700 became support, and it now seems that the 50 SMA (yellow) has also become support, which is fantastic. ETH/USD pushed above $2,000 yesterday, indicating that buyers are in charge and we booked profit on our Ethereum signal.

Ethereum – 240 minute Chart

• ETH Buy Signal
• Entry Price: $1,671.79
• Stop Loss: $1,371
• Take Profit: $1,971