Yesterday’s Market Wrap
The highlight yesterday was the Bank of Canada meeting, which produced a 0.50% rate hike. That was smaller than the 0.75% hike markets were anticipating and Macklem’s comments on risks of over-tightening while giving signs of a slowdown in the economy hurt the CAD. That sent USD/CAD 100 higher, although it reversed back down as the USD weakness continued.
The smaller-than-expected rate hike from the BOC proved right to those who were hoping for a coordinated pivot from global central banks over these two weeks. This helped fuel a broad USD fall and a decent bid in the bond market. The market is sensing that the FED might slow down soon. At some point, the pendulum may swing back to worries about inflation but for now, there’s some room in the middle for dollar softness.
AUD/USD were outperformers yesterday in part due to higher-than-expected Q3 CPI inflation figures which were released in the morning, but also because of growing hopes for stimulus in China. Stocks and equities also rose yesterday, but it won’t last long until recession fears exceed the positivity coming from central banks pausing rate hikes.
Today’s Market Expectations
Today the GfK report showed that the consumer climate remains deeply negative in Germany as prices keep increasing, while the unemployment rate in Spain remains above 12%. But, the highlight of the week is coming later on, with the European Central Bank expected to raise rates by 75 bps (basis points), which would take them to 2.00%, although after the slowdown from the BOC yesterday, traders remain cautious about the ECB today, especially on the future path of rate hikes, so we will cover that event and the press conference from Christine Lagarde.
Yesterday was a tough day, as risk sentiment improved suddenly before the BOC smaller rate hike and after it, which signaled a reversal in the central bank playbook of this year. Risk assets surged higher with EUR/USD moving above parity, while cryptocurrencies also jumped higher.
Continuing to Trade GOLD As It Heads Higher
Gold seems to have turned bullish, after showing bullish signals in the last two weeks, although this is more of a dollar move, which has been retreating considerably. Moving averages have turned from resistance into support on the H1 chart, and yesterday we saw another jump higher. We opened three Gold signals, two of which closed in profit while one closed in loss.
XAU/USD – 60 minute chart
AUD/USD has been really bearish in recent months, losing nearly 10 cents from top to bottom, but it reversed higher last week and yesterday we saw another surge. The improvement in risk sentiment helped buyers but the higher consumer inflation in Australia also helped. We had a sell trade here, which evaporated during the surge.
AUD/USD – 240 minute chart
Cryptocurrencies have been bullish in recent days, attempting to jump higher and yesterday they managed to pop up, with Ethereum peaking above $1,500 in the evening. We highlighted on our crypto signals report yesterday that there could be a bullish breakout in the crypto market and the jump higher came later, but they need to push higher in order to be considered bullish.
BITCOIN Breaking Above the Range
Bitcoin was trading in a range for nearly two months, which stretched from $18,000 lows up to around $20,500. The highs were even getting lower but in the last two days, we have a strong bullish signal move as risk sentiment improved. We booked profit on our BTC signal and opened a sell BTC signal below the resistance level. Buyers have pushed above it, but the climb stalled below $21,000 yesterday.
BTC/USD – H4 chart
ETHEREUM Approachin6 $1,500
Ethereum was trading in a range for a month too, although last week we saw sellers take a stand and give this crypto a push lower. But, the decline stopped at $1,160 and buyers returned again. They pushed above the 200 SMA (purple) and in the last two days, we have seen a really strong move, with ETH/USD approaching the $1,600 level.