Yesterday’s shopping package
The market’s focus shifted to Jerome Powell after the US dollar weakened following the ISM service cut last Friday, although he did not touch on monetary policy and rate hikes. Traders took that as a reassuring sign that the US dollar continued to decline on Tuesday, while risk assets continued their bullish trend. But they paused on Wednesday as we neared the release of US December consumer inflation numbers.
Headline CPI was expected to slow to 6.5% yoy, while core CPI yoy was expected to decline to 5.7%. They declined as expected, but the core CPI MoM showed an increase at the same pace as it did in November, from 0.2% to 0.3% last month. As a result, the dollar initially rose around 50pps, but pulled back as traders focused on the broader inflation picture. So, gold briefly popped above $1,900 as the stock markets closed out another dodgy day.
Today’s market expectations
Today we had many economic figures from the United Kingdom, such as the November GDP report, construction output, services index 3 m / 3 m, manufacturing production, etc., and most of them were negative. France’s final CPI showed another 0.1% drop in December, a sign that inflation in the eurozone is easing. The focus, however, will be on US prelim UoM consumer sentiment and UoM inflation to see if US consumers feel better as gas and energy prices ease in the afternoon.
Markets were quiet yesterday until the release of the dollar inflation report, with traders expecting a softer report, slightly leaning towards risk assets. After the CPI numbers were published, the volatility picked up and we closed a total of five trades, one losing signal and four winners.
Long-term retention. Gold
Gold continues to rise higher and after quickly entering the 100 SMA (green) on the daily chart yesterday, the price rose above $1,900 after the release of the US CPI inflation numbers. The price then pulled back, but the moving averages recaptured and buyers continued to add. We had two buy gold signals, both of which hit the profit target.
XAU/USD – 60 minute chart
USD/CAD Overbought at 200 SMA
USD/CAD turned bearish earlier this year, as the USD resumed its decline and we decided to open a long-term sell signal here as seen on the H4 chart below. The price moved above the 20 SMA (gray) but sellers came back yesterday and we took profit on this trade.
USD/CHF – 240 minute chart
Crypto currency update
Cryptocurrencies continue to show buying pressure and momentum is increasing. We’ve seen some good buying pressure this week as risk sentiment remains positive on softer US inflation, while the US dollar weakens and buyers dominate cryptocurrencies.
Profit booking is on. Bitcoin
Bitcoin has been trading in a range since early November as the price strengthened after the ETX crash, but now it seems to be making a major reversal. We have seen some good moves in the last couple of days and yesterday the price reached the profit target in BTC/USD.
BTC/USD – 60 minute chart
ETHEREUM pushing above the 200 SMA
As the highs continue to decline, Ethereum continues its bearish trend in the larger timeframe charts, but yesterday buyers pushed above the 200 daily SMA (purple). This is an important break because ETH/USD has not been above this level since early April last year.