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The week we are looking at the following assets and how they performed especially after the CPI Data:
1) US Dollar
3) Japanese YEN
This week we saw CPI data come out at the start of the week. The reading was much stronger than the forecast which resulted in bullish price action. The DXY increased over 2% on the day and all major currencies fell against the Dollar.
GBP/USD has now fallen below $1.14 which is a key level which hasn’t seen activity since 1985. The most recent dip in the Pound came after they reported weak Core Retail Sales data on Friday morning. This pushed Cable below $1.14 support and it is now trading at $1.137 at the time of writing.
USD/JPY is trading at $143.25 and has looked bullish until Japanese officials recently hinted that they may intervene to control the falling Yen. The Finance Minister of Japan, Shunichi Suzuki mentioned that “authorities would take necessary action” if the Dollar continues to gain rapidly against the Yen.
EUR/USD has not had much directional movement and has consolidated around the $1 position. It fell quite significantly from $1.02 down to $0.996 after CPI data on Tuesday but since then has yet to really find bullish or bearish momentum. The markets are pricing in a 75 basis point rate hike which is expected next week Wednesday at the FOMC meeting. The chances of a 100 basis point rate hike have grown substantially from 0% to 25% since CPI data was released.
If we see a full 1% rate hike then expect the Dollar to experience a heavy upside and all other currencies to fall against it.
Gold has been trading as an inverse to USD in recent times. So as the Dollar has strengthened we have seen a sell-off in Gold. Gold started the year at $2000 and now it is trading at $1660, in the same timeframe The Dollar Index has risen from $98 to $109. Short term, Gold has broken major support at $1680 and will look to test the support levels at $1650 and $1600. The Interest rate decision on the 21st of September will have a major effect on the price of Gold as bullish
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