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US stocks surged on Wednesday, as the release of softer-than-expected inflation data bets the Federal Reserve could pivot to a smaller pace of hikes, while some market watchers take a grain of salt on the view and thought officials may still be a long way from their goal, 2% in the price increase.
The July Consumer Price Index (CPI) brought a sigh of relief to those with unstoppable inflation concerns, and swaps are now suggesting a move of 50 basis points as more likely in September than a repeat of the 75 bps increases that officials opted to implement at their past two meetings. In fact, the CPI surprise is just one piece of the intricate puzzle officials are playing with, as food prices in the US soared the most in July since 1979, keeping the cost of living painfully high even as lower gasoline costs offered some relief to consumers.
The benchmarks, S&P 500, Nasdaq 100, and Dow Jones Industrial Average surged on Wednesday as the critical US CPI indicated softer than expected results. All eleven sectors in S&P 500 stayed in positive territory and six out of eleven sectors rose more than 2% for the day, as Materials and Consumer Discretion performed the best among all groups, advancing with 2.88% and 2.87% respectively on Wednesday. The Dow Jones Industrial Average climbed 1.6%, Nasdaq 100 increased 2.8%, and the MSCI world index went up 1.8% on a daily basis for the day.
Main Pairs Movement
US dollar dropped on Wednesday, following a cooler-than-expected inflation report for July that raised expectations of a less hawkish interest rate hike cycle than previously anticipated by the Federal Reserve. The DXY index dropped to a level below 105.2 when critical data was released and fell deeper to a daily-low level below 104.7 during the middle of the US trading session. After the corrective pullback, the greenback oscillated in a range between 105.0 to 105.4.
The GBP/USD advanced with a 1.15% gain on a daily basis for the day. The cables attracted fresh transactions and reached a level above 1.225 as investors’ risk sentiment has improved dramatically following a significant decline in the US inflation rate. However, on the UK front, bulls are waiting for GDP due on Friday, and the economic data is likely to drop to 2.8% from the previous figure of 8.7%. Meanwhile, EUR/USD also surged to a monthly-high level above 1.036 amid a weak safe-haven greenback across the board. The pair rose with a 0.84% gain on a daily basis.
Gold slid on Wednesday, as the improvement in investors’ risk appetite. XAU/USD touched a refreshed monthly-high level to nearly US$1,808 mark while the announcement of US consumer data which the whole world focused on, then pullback and wavered in a range of US$1,788 to US$1,792 marks as a broader risk-on in the global market.
Technical Analysis
EURUSD (4-Hour Chart)
The EUR/USD pair surged on Wednesday, regaining upside momentum and touched a daily top above the 1.036 mark during the US session after the release of upbeat CPI data. The pair is now trading at 1.03522, posting a 1.35% gain on a daily basis. EUR/USD stays in the positive territory amid renewed weakness witnessed in the US dollar, as the greenback collapsed to multi-week lows in the sub-105.00 region and provided strong support to the EUR/USD pair. The US CPI declined to 8.5% on a yearly basis in July, which came in lower than the market’s expectations and acted as a tailwind for riskier assets. For the Euro, the energy crisis and elevated inflation remain a key focus for the growth outlook in the Eurozone, which might limit the upside for the EUR/USD pair.
For the technical aspect, the RSI indicator is 55 as of writing, suggesting that the pair is facing heavy bullish pressure as the RSI stays in the overbought zone. As for the Bollinger Bands, the price moved out of the upper band so a strong trend continuation can be expected. In conclusion, we think the market will be slightly bearish as the RSI is entering overbought levels. The pair might witness some short-term technical corrections before climbing higher toward the next resistance at 1.0438.
Resistance: 1.0438, 1.0484
Support: 1.0158, 1.0082, 0.9991
GBPUSD (4-Hour Chart)
The GBP/USD pair rallied on Wednesday, adding to its intraday gains and touched a daily high above the 1.226 mark in the US session amid a weaker US dollar across the board. At the time of writing, the cable stays in positive territory with a 1.37% gain for the day. The softer US CPI data today seems to have pushed back market expectations for a larger Fed rate hike move at the September policy meeting and exerted heavy bearish pressure on the safe-haven greenback. However, investors still expect more tightening from the Federal Reserve but the doors are open to less aggressive action, which means a rate hike of at least 50 basis points is still on the table. For the British pound, the fears of a possible recession and the BoE’s gloomy outlook could act as a headwind and cap the upside for the cable.
For the technical aspect, the RSI indicator stands at 68 as of writing, suggesting that the pair remains bullish in the short run as the RSI heads north almost vertically. For the Bollinger Bands, the price regained strong upside momentum and moved out of the upper band, therefore a continuation of the upside trend can be expected. In conclusion, we think the market will be bullish as the pair is heading to test the 1.2277 resistance line. The risk will remain skewed to the upside if the pair break above the aforementioned level.
Resistance: 1.2277, 1.2309, 1.2381
Support: 1.2186, 1.2068, 1.1940
XAUUSD (4-Hour Chart)
As the US dollar came under heavy selling pressure amid the softer-than-expected US CPI report on Wednesday, the pair XAU/USD witnessed some buying but then retreated to the US$1,793 area to surrender most of its daily gains during the US trading session. XAU/USD is trading at US$1,797.42 at the time of writing, rising 0.16% on a daily basis. The post-US CPI broad-based US dollar sell-off and diminishing odds for a larger Fed rate hike have both acted as a tailwind for the dollar-denominated gold, as the odds for a 75 bps Fed Rate hike move in September tumble to just 35% now. However, the risk-on market mood and the strong rally in the US equity markets should limit the gains for the safe-haven metal.
For the technical aspect, the RSI indicator stands at 64 as of writing, suggesting that the upside is more favoured as the RSI indicator remains above the mid-line. For the Bollinger Bands, the price continued to rise toward the upper band, therefore the upside traction should persist. In conclusion, we think the market will be bullish as the technical indicators head firmly higher within positive levels. On the upside, a break above the US$1,812 resistance could open the door for additional gains.
To provide a more favorable trading environment to our clients, VT Markets will modify the contract size of the following products:
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Stocks retreated on Tuesday, as a downbeat outlook from a giant chipmaker, Micron, added to recession fears. Investors were unwilling to make any risky moves before Wednesday’s pivotal inflation reading, which is forecasted to cool a bit while remaining at high levels. The report will come on the heels of recent jobs figures underscoring slid wage growth and US productivity data highlighting another surge in labour costs that could further complicate the Federal Reserve’s decision to tame inflation. Timing the peak of inflation is difficult, especially after June’s CPI print turned out to be hotter than expected. It’s also worth noting that Bitcoin resumed its slump, ending a four-day winning streak as volatility continued to whipsaw the crypto world.
The benchmark, S&P 500 and Dow Jones Industrial Average both slid on Tuesday, amid undermining risk sentiment ahead of the release of a key consumer index. Seven out of eleven sectors stayed in the negative territory, as Consumer Discretion and Information Technology performed worst among all groups, fell with 1.54% and 1.00% losses respectively on Tuesday. However, Energy and Utilities sectors outperformed all the other groups, rising 1.77% and 1.06% respectively for the day. The Dow Jones Industrial Average declined 0.2%, Nasdaq 100 dropped 1.1%, and the MSCI world index fell 0.5%.
Main Pairs Movement
US dollar changed a little bit down on Tuesday, as thin summer trading and risk appetite dwindled ahead of critical inflation figures that could offer clues on how hawkish the Federal Reserve will be in its interest rate hike in September. The DXY index had drifted lower from the start of the trading session, but then rebounded to oscillate in a range of 106.1 to 106.4 level as stock markets slid on profit warnings, inflation concerns and data showed US worker productivity fell sharply in the second quarter.
The GBPUSD remained almost unchanged for the day. The cables edged higher amid some greenback selling in the first half of Tuesday, then faced selling pressure and lost all the gains earlier as pessimism in UK economic data and the hawkish stance of the Fed. Meanwhile, EURUSD attracted fresh transactions and touched a daily high level of nearly 1.025 as a weak US dollar across the board during the Asia trading session, then corrective pullback to 1.021 ahead of the CPI index. The pairs advanced with a 0.16% gain on a daily basis on Tuesday.
Gold surged on Tuesday, as global recession concerns weigh on investors’ sentiment and benefit safe-haven metal. XAU/USD touched a one-month high of US$1800 during the US trading session as bad news was announced from US stock markets and investors remained cautious ahead of the CPI report.
Technical Analysis
EURUSD
The EUR/USD pair advanced on Tuesday, preserving its bullish strength and extending the previous rebound toward the 1.022 area as investors await the key US CPI data. The pair is now trading at 1.02214, posting a 0.29% gain on a daily basis. EUR/USD stays in the positive territory amid a weaker US dollar across the board, as the sour market sentiment failed to lift the safe-haven greenback higher. Investors remain cautious ahead of the release of the US Consumer Price Index on Wednesday, which would set the tone for the Federal Reserve’s September meeting. For the Euro, the latest news showed that Russia has suspended oil flows via the southern leg of the Druzhba pipeline, which acted as a headwind for the shared currency and limit the upside for the EUR/USD pair.
For the technical aspect, the RSI indicator stands at 55 as of writing, suggesting that the upside is losing strength as the RSI keeps moving toward the mid-line. As for the Bollinger Bands, the price failed to touch the upper band and witnessed some selling, therefore the bearish momentum should persist. In conclusion, we think the market will be bearish as long as the 1.0246 resistance line holds. Technical readings in the chart skew the risk to the upside, as the technical indicators retreated toward their midlines.
Resistance: 1.0246, 1.0287, 1.0438
Support: 1.0150, 1.0111, 0.9991
GBPUSD
The GBP/USD pair edged higher on Tuesday, failing to extend its upside movements and dropped toward the 1.208 mark to erase most of its daily gains in the US session amid the rebound witnessed in the US dollar. At the time of writing, the cable stays in positive territory with a 0.09% gain for the day. The negative shift witnessed in risk sentiment is helping the greenback to find demand and exerted bearish pressure on the GBP/USD pair. For the British pound, the Bank of England Deputy Governor Dave Ramsden’s hawkish comments on Tuesday have underpinned the cable, as he said that it’s more likely than not that BoE will have to raise bank rate further even if a recession forces it to start lowering the policy rate.
For the technical aspect, the RSI indicator is at 46 as of writing, suggesting that the downside is more favoured as the RSI stays below the mid-line. For the Bollinger Bands, the price lost its upside traction and dropped below the moving average, therefore a continuation of the downside trend can be expected. In conclusion, we think the market will be bearish as long as the pair failed to break above the 1.2121 resistance line. On the downside, sellers could show interest if the pair falls back below 1.2027 support and additional losses could be expected.
Resistance: 1.2121, 1.2188, 1.2277
Support: 1.2027, 1.1940, 1.1897
XAUUSD
As the US dollar remained on the back foot throughout the day despite the cautious market mood on Tuesday, the pair XAU/USD preserved its upside strength and extended the rebound toward the US$1,800 area during the US trading session. XAU/USD is trading at US$1,797.05 at the time of writing, rising 0.44% on a daily basis. The modest US dollar weakness and sour market sentiment both provided support to the dollar-denominated gold, as the growing fears about a global economic downturn continued to weigh on investors’ mood. However, the Fed rate hike expectations might limit the upside for the precious metal as markets are now pricing in a 70% chance for a 75 bps Fed rate hike move at the September meeting following the upbeat US jobs data last Friday.
For the technical aspect, the RSI indicator is at 64 as of writing, suggesting the pair’s bullish outlook in the near term as the RSI indicator remains above the mid-line. For the Bollinger Bands, the price continued to rise toward the upper band, therefore a continuation of the upside trend could be expected. In conclusion, we think the market will be bullish as the pair is testing the US$1,794 resistance line. The pair could likely break above that level and extend its upside movements toward the US$1,811 mark.
US stock declined on Monday and failed to hold onto gains. S&P500 erased a rally that reached 1% earlier in the day, while the Nasdaq 100 underperformed after an advance that briefly drove the tech 20% above its June low. Nvidia tumbled almost 6.5% with a release of a gloomy forecast. Mounting risks of more aggressive interest rate policy and slowdown economic growth have sparked earnings downgrade.
The latest survey from the Fed Bank of New York showed that consumers’ expectations for US inflation would sharply decline over the coming years, with the dropping price of oil playing a key role in those results and likely contributing to a lower headline rate of inflation for July released on Wednesday. Still, almost all inflation measures are running well above the Fed’s 2% target.
The benchmark, S&P500 slid with a 0.12% loss on daily basis, although it gained 1% growth at the beginning of the trading session. However, six out of eleven still stayed in positive territory, as Real Estate performed best among all groups, rising 0.71% for the day, while Information Technology got the worst performance and fell 0.88% on Monday. The Dow Jones Industrial Average almost remained not changed, Nasdaq 100 declined by 0.4%, and the MSCI World index rose 0.1% for the day.
Main Pairs Movement
US dollar eased on Monday, giving back some gains it made following Friday’s blockbuster U.S. jobs report. Investors stayed aside to look ahead to Wednesday’s inflation data for more clues about Federal Reserve’s next steps. The DXY index dropped sharply in the first half of Monday and touched a daily-low level below 106.1, then regain fresh transactions and rebound to the 106.4 level.
The GBP/USD has little changed up for the day, as investors await US CPI data and the release of UK Gross Domestic Product (GDP) released on Friday. The cables mildly climbed to a daily high level around 1.214 before the US trading session, then confronted huge selling pressure and oscillates in a narrow range of 1.206 to 1.208 from the late New York session. Meanwhile, EURUSD wavered between 1.018 to 1.020 after strong downside traction during the US trading session. The pairs little advanced with a 0.14% gain on Monday.
The Gold rose with a 0.76% gain on daily basis on Monday, amid a weak US dollar across the board and retreating US bond yields. XAUUSD managed to attract fresh buying and builds on its steady intraday ascent through the early New York session, and touched a daily high above $1786 marks. It’s also worth noting that, WTI and Brent oil surged by 1.97% and 1.82% respectively, which would be a sign of consumer data announced on Wednesday.
Technical Analysis
EURUSD (4-Hour Chart)
The EUR/USD pair edged higher on Monday, regaining upside momentum and rebounded from the 1.015 area that it touched last Friday amid a better market mood. The pair is now trading at 1.02167, posting a 0.36% gain daily. EUR/USD stays in the positive territory amid a weaker US dollar across the board, as the retreating US Treasury bond yields and firmer equities both exerted bearish pressure on the safe-haven greenback. Investors are now accessing the better-than-expected US job data, which increases the speculation of a more aggressive policy tightening by the Fed in the next months. The probability of a 75 bps rate hike next month is now at nearly 68%. For the Euro, the Eurozone Sentix Investor Confidence index came in at -25.2 in August, which failed to ease off recession fears in the Eurozone.
For the technical aspect, the RSI indicator is 54 figures as of writing, suggesting that the upside is more favoured as the RSI stays above the mid-line. As for the Bollinger Bands, the price preserved its upside traction and climbed above the moving average, therefore the bullish momentum should persist. In conclusion, we think the market will be bullish as the pair is heading to test the 1.0246 resistance line. A break above that level would skew the risk to the upside.
Resistance: 1.0246, 1.0287, 1.0438
Support: 1.0150, 1.0111, 0.9988
GBPUSD (4-Hour Chart)
The GBP/USD pair advanced on Monday, extending its recovery and touching a daily top above the 1.213 mark in the early US session amid the risk-positive market atmosphere. At the time of writing, the cable stays in positive territory with a 0.40% gain for the day. The US dollar struggled to capitalize on Friday’s upbeat NFP report as the falling US Treasury bond yields made it difficult to find demand. The market focus now shifts to the US CPI data this Wednesday, which might provide fresh impetus for the GBP/USD pair. For the British pound, the BoE’s gloomy economic outlook continues to act as a headwind for the pair. Meanwhile, the policy gap between the Fed and BoE could continue to widen and undermine the cable amid the hawkish stance of the Fed’s policy tightening outlook.
For the technical aspect, the RSI indicator is 47 figures as of writing, suggesting that the downside is preserving strength as the RSI keeps heading south. For the Bollinger Bands, the price witnessed fresh selling and failed to climb above the moving average, therefore some downside tractions can be expected. In conclusion, we think the market will be slightly bearish as long as the 1.2154 resistance line holds. On the upside, technical recovery could stretch higher toward 1.2198 if the pair starts using that level as support.
Resistance: 1.2154, 1.2198, 1.2277
Support: 1.2027, 1.1940, 1.1830
XAUUSD (4-Hour Chart)
As the US dollar came under bearish pressure amid the retreating US bond yields on Monday, the pair XAU/USD regained upside momentum and refreshed its daily high near the $1,790 level during the US trading session. XAU/USD is trading at 1788.91 at the time of writing, rising 0.74% daily. The risk-on flows have returned at the start of the week after market reaction to the upbeat US jobs data fades. Investors are now waiting for the latest US consumer inflation figures, which would influence Fed rate hike expectations and play a key role in driving the near-term USD demand. Markets are now pricing in a nearly 70% probability of a 75 basis points rate increase in September.
For the technical aspect, the RSI indicator is 59 figures as of writing, suggesting the pair’s bullish outlook in the near term as the RSI indicator keeps rising. For the Bollinger Bands, the price preserved its upside traction and crossed its moving average into positive territory, therefore a continuation of the upside trend could be expected. In conclusion, we think the market will be bullish as the pair is heading to test the 1794 resistance line. A break above that level might favour the bull and open the door for additional gains in the near term.
In the week ahead, inflation-related data will dominate the headlines.
The Consumer Price Index (CPI) and Producer Price Index (PPI) data from the United States and Gross Domestic Product (GDP) data from the UK are expected to provide further clues on the durability of inflation pressures in both countries.
In June of 2022, consumer prices in the United States increased 1.3% month-on-month, the most significant rise since September 2005. This caused an increase in the annual inflation rate to 9.1%, its highest level since November 1981.
Producer prices for final demand in the US leapt 1.1% month-on-month in June of 2022, their biggest rise in three months, with analysts forecasting a slower PPI date at 0.9%.
Meanwhile, the British economy unexpectedly expanded 0.5% month-on-month in May 2022 as shown in the GDP, recovering from a 0.2% contraction in April and rising 1.7% above its pre-coronavirus pandemic levels in February 2020.
British consumers feel more confident about their finances but remain worried about job security and prospects, suggesting a slow recovery for retailers following the Covid-19 lockdown.
The University of Michigan Consumer Sentiment rose to 51.5 in July 2022 from a record low of 50 in June, indicating that consumers are beginning to feel more confident about their finances again following a recession that started at the end of 2020, with fears over whether or not there would be enough food supplies.
US stock notched a weekly gain on Friday, as a release of an unexpectedly strong jobs report, which alleviated recession fears but cleared the path for the Federal Reserve to raise interest rates in a more hawkish way at its next meeting. The report validated the Fed’s view of a resilient economy that can withstand additional interest rate hikes and also forced investors to recalibrate their expectations of the next interest rate policy, a 75 bps hike is the more likely scenario at the September meeting. Some investors have resumed shunning global stocks in favour of bonds while corporate earnings, combined with thin liquidity that is common in the summer, took the stock market on a ride this week, and many firms beat the forecast and proved they could handle high inflation and a gloomy economic outlook.
The benchmark, S&P500 slid with a 0.16% loss on a daily basis after falling as much as 1.1% during the trading session. Six out of eleven sectors stayed in negative territory, as Consumer Discretion and Communication Service performed worst among all groups, falling 1.66% and 0.88% respectively while the Energy sector rose with a 2.04% gain on Friday. However, the Dow Jones Industrial Average rose 0.2%, Nasdaq 100 dropped 0.8%, and the MSCI world index rose 0.3%.
Main Pairs Movement
The US dollar rallied on Friday after a surprisingly strong job on the US payrolls report suggested the Federal Reserve may take a more aggressive interest rate hike policy. The DXY index surged with a 0.84% gain on a daily basis, and climbed to a daily high level above 106.9 after a report showed nonfarm payrolls increased by 528k jobs last month, which is the largest gain since February.
The GBP/USD dropped with a 0.72% loss on a daily basis for the day, as an unexpected powerful NFP report led to advances in the greenback across the board, weighing heavily on its peers. It’s worth noting that, the Bank of England raised the rate by the most in 27 years to fight runaway inflation in a dovish 50bp hike to 1.75%, and said that a long recession was coming, highlighting the bleak outlook for the UK economy and the pound. Meanwhile, EUR/USD touched a daily low of nearly 1.014 level, and the pairs declined with a 0.61% loss on Friday.
The Gold fell with a 0.88% loss on a daily basis, as the US dollar is strong across the board, and XAUUSD touched a daily low of $1765 marks during the US training session. The investors need to keep their eyes out for the consumer and producer index next week.
Technical Analysis
EURUSD (4-Hour Chart)
The EUR/USD pair tumbled on Friday, witnessing heavy selling and dropped to a daily low below the 1.015 mark after the release of US Nonfarm Payrolls for July. The pair is now trading at 1.01580, posting a 0.86% loss on a daily basis. EUR/USD stays in the negative territory amid renewed strength observed in the US dollar, as the upbeat US jobs report provided a strong boost to the safe-haven greenback and undermined the EUR/USD pair. The US Nonfarm Payrolls rise by 528K in July, which came in better than the expectations of 250K and showed the growth momentum in the US jobs market. On top of that, the higher-than-expected NFP results also reignited the perception of a more aggressive policy tightening by the Fed in the next months. For the Euro, the increasing speculation of a potential recession in the Eurozone continued to exert bearish pressure on the shared currency.
For the technical aspect, the RSI indicator is 42 figures as of writing, suggesting that the downside is more favoured as the RSI stays below the mid-line. As for the Bollinger Bands, the price witnessed fresh selling and crossed below the moving average, therefore the bearish momentum should persist. In conclusion, we think the market will be bearish as the pair is heading to test the 1.0150 support line. A break below that level could lead the pair toward the 1.011 mark.
Resistance: 1.0289, 1.0438, 1.0486
Support: 1.0150, 1.0111, 0.9991
GBPUSD (4-Hour Chart)
The GBP/USD pair slipped on Friday, extending its previous slide and dropping sharply to a two-week low below the 1.202 level amid a stronger US dollar across the board. At the time of writing, the cable stays in negative territory with a 0.83% loss for the day. The upbeat US Nonfarm Payrolls that was released earlier in the European session has revived bets for a larger interest rate hike at the September FOMC policy meeting. There is now a 70% probability of a 75 basis points hike at the next policy meeting amid more hawkish comments by several Fed officials this week. For the British pound, the gloomy outlook for the UK economy and the comments from the BoE that a long recession is coming in the fourth quarter of this year both acted as a headwind for the cable.
For the technical aspect, the RSI indicator is 37 figures as of writing, suggesting that the pair is facing bearish pressure but the RSI has rebounded toward the mid-line. For the Bollinger Bands, the price rebounded after falling out of the lower band, therefore some upside traction can be expected. In conclusion, we think the market will be slightly bullish as long as the 1.2007 support line holds. The rising RSI also reflects bull signals. On the downside, sellers could take action if 1.2007 support fails.
Resistance: 1.2178, 1.2277, 1.2317
Support: 1.2007, 1.1933, 1.1830
XAUUSD (4-Hour Chart)
As the US dollar continued to find demand amid the stronger-than-expected US employment report on Friday, the pair XAU/USD came under heavy selling pressure and slumped to a daily low below the $1,767 level at the start of the US trading session. XAU/USD is trading at 1777.82 at the time of writing, losing 0.73% on a daily basis. The renewed strength witnessed in the US dollar continued to undermine the dollar-denominated gold, as investors have lifted their bets for a larger Fed rate hike move at the September meeting. However, the growing fears of recession and China-Taiwan tensions should limit the downside for the precious metal after the news showed that China conducted missile strikes in the Taiwan Strait.
For the technical aspect, the RSI indicator is 50 figures as of writing, suggesting the pair’s indecisiveness in the near term as the RSI indicator stays near. For the Bollinger Bands, the price regained some upside traction and rose toward the moving average, therefore a continuation of the upside trend could be expected. In conclusion, we think the market will be slightly bullish as long as the 1771.12 support line holds. A break below that level might favour the bear and open the door for additional losses.
Successful trading doesn’t happen overnight. You need to learn many concepts and strategies to build a good foundation on which you would base your decisions every trading day.
In technical analysis, the moving average is one of the most crucial indicators you need to know about and learn.
What is a moving average?
A moving average is a type of calculation used for analysing data points through a series of averages from different subsets that belong to an entire data set.
The moving average of an instrument is calculated to create an updated average price that will help analysts determine any short-term price fluctuations that could affect trading. It is also a useful technical indicator of a trend and its direction, so you’ll know if you should buy, sell, or pass.
Gold (H1) with 3 exponential Moving Average 12 (Red), 24 (Yellow), 72(Green)
What are the types of moving averages?
There are two basic forms of moving averages: Simple Moving Average (SMA) and Exponential Moving Average (EMA).
Simple Moving Average (SMA)
SMA is a straightforward process of summing up past data points in a set and dividing the total by the number of periods. Traders use this technical indicator to determine when they should join and leave a market on a trading day. With the SMA method, a trader can identify support and resistance prices, which are crucial in knowing when to buy or sell.
Exponential Moving Average (EMA)
EMA, on the other hand, relies on the most recent price points, so it’s more responsive to current price fluctuations. EMA starts by summing up the security’s closing prices for a given period and dividing that by the number of periods. Then, the multiplier is calculated using the formula:
(Multiplier = [2/ (10+1)] – 0.1818)
After that, EMA is calculated by taking the period from the initial EMA up to the most recent period using the multiplier, the price, and the previous period’s EMA value.
The formula for this is:
Current EMA = [Closing Price – EMA (Previous Time Period)] x Multiplier + EMA (Previous Time Period)
What are the benefits of using a moving average?
Although using the moving average method may take some time, many traders have been using it for years as it helps them make the right decisions with their trade. For one, this strategy keeps your analysis straightforward on a price chart by cutting down unnecessary data.
If you look at the moving average, you’ll know if the price is moving up or down. This move can help you decide whether to buy, sell, or sit the market out for a while.
Technical analysts also use the moving average to determine support or resistance in the long term. In an uptrend, the moving average can serve as the support where the prices bounce from. In a downtrend, the moving average will act as the resistance where the price hits and drops again.
2 Common Uses of Moving Average
Using Moving Averages as Trend Indicators
The most common use of Moving Average is to determine where the trend is moving, whether Downtrend, Uptrend or Reversal.
There are 2 ways to do this:
Solely with 1 moving average
Some traders use only one Moving Average by looking at the candles (price). If the price moves above the Moving Average, sloping higher, they believe the trend is an uptrend.
EURUSD (H1), 24 EMA (Red).
If the price moves below the moving average, sloping down, they believe the trend is a downtrend.
EURUSD (H1), 24 EMA.
Using 2 Moving Averages
Other traders use 2 Moving Averages (slower- and faster-moving averages) and the candles (price) to know where the market is going and if there is a potential reversal.
If the candle (price) moves above the 2 Moving Averages and the faster-moving average is above the slower-moving average, they believe the trend is an uptrend.
EURUSD (H1), 24 EMA as faster Moving Average (Red) and 72 as slower Moving Average (yellow)
If the candle (price) moves below the 2 Moving Averages and the faster-moving average is below the slower-moving average, they believe the trend is a downtrend.
EURUSD (H1), 24 EMA as faster Moving Average (Red) and 72 as slower Moving Average (yellow)
Using 2 Moving Averages allows traders to determine when a trend has a potential reversal. If there’s a cross between the moving averages, there’s a possible reversal, or at least the trend is slower.
EURUSD (H1), 24 EMA as faster Moving Average (Red) and 72 as slower Moving Average (yellow)
Using Moving Averages as Support and Resistance Levels
Another common use of a Moving Average is to find the support and resistance levels in a moving trend.
Usually, traders use 2 Moving Averages.
If the candle (price) moves above the 2 Moving Averages and the faster-moving average is above the slower-moving average, they believe the trend is still an uptrend. Then we can use the Moving Averages as the Support levels.
EURUSD (H1), 24 EMA as faster Moving Average (Red) and 72 as slower Moving Average (yellow)
If the candle (price) moves below the 2 Moving Averages and the faster-moving average is below the slower moving average, they believe the trend is a downtrend. Then we can use the Moving Averages as the Resistance levels.
EURUSD (H1), 24 EMA as faster Moving Average (Red) and 72 as slower Moving Average (yellow)
Conclusion
If you want to learn all about moving averages, it’s a must to study this method and ask for advice from traders who have been using it for a while. You can also tap into the expertise of a Forex broker for guidance.
Of course, it would be highly beneficial to join a community for trading updates, market changes, and strategies to help you maximise your trading day and earn the best returns from your investment.
The price of gold continues to consolidate its recent run to new four-week highs ahead of the crucial US NFP report.
The yellow metal is supported by rising demand for safe havens in the midst of fears of a recession.
In the face of the impending bear cross, the XAU/USD currency pair is eyeing $1,800 as the next potential upside goal.
The price of gold has reached a monthly high and is currently trading just below the $1,800 level. This comes as bulls take a breather following the recent increase in price and in anticipation of the all-important US Nonfarm Payrolls report. The markets witnessed a temporary safe haven bid in the US dollar in the midst of mounting recession risks, particularly after the Bank of England (BOE) projected one later this year. However, dismal weekly Jobless Claims data dragged the USD lower, causing the recession risks to have a negative impact. The United States Department of Labour reported that the number of people filing initial claims for state unemployment rose by 6,000 to a total of 260,000 in the week that ended on July 30. This number is hanging close to an eight-month high. The financial markets are anticipating that if the figures continue to grow, it may be an indication that the largest economy in the world is about to enter a period of recession. The demand for safe havens shot through the roof, and investors rushed to buy gold as a classic safe haven investment.
In the middle of worries about economic expansion and positive corporate earnings reports, the value of the United States Dollar (USD) continued to weaken, which helped the price of gold to gain strength. The focus has now shifted to the data on the labour market in the United States, where it is anticipated that the economy created a measly 250,000 jobs in July, compared to the previous month’s gain of 372,000 jobs. Any sign of weakness in the US employment sector is likely to revive lower expectations of further Fed tightening, which will lead to a decline in the value of the dollar. As a result, the bullish trend that has been seen in stocks and the price of the precious metal measured in USD could continue.
On Thursday, the price of gold managed to finish the trading day at $1,790, which was higher than the crucial downward-sloping 50-day moving average.
The way is now clear for a second rise to the figure of $1,800, which, if achieved, will bring into play the horizontal trendline resistance connecting the high reached on July 5 at $1,812 in the price action. This means there will be less of a barrier for gold to overcome on its way to the next Resistance Levels at $1,808.
Stochastic Indicator for a period of 5 days showing a stronger Gold to rise to chase the overbought levels, which means that the possibility of it going up is quite high but is still limited to the Resistance Levels. Stochastic Indicator for a period of 5 days showing a stronger Gold to rise to chase the overbought levels.
Gold’s daily support levels are at $1,752, $1,734, and $1,697, while its daily resistance levels are at $1,808 and $1,828, respectively.
Insights 
VT 
