USD/CAD Price Analysis – Jan 09, 2024
Daily Price Outlook
During the European session on Tuesday, the USD/CAD currency pair sustained its upward rally, reaching near 1.3350. The reason for this upward trend can be attributed to the stability of the US dollar. The dollar remained steady in Asia after a slight dip from recent highs. Investors are cautious about potential rate cuts in 2024, leading to some profit-taking. Despite this, the dollar remains robust, and attention is focused on Thursday's inflation data, which might not support the idea of a quick rate cut by the Fed in March 2024, given recent positive job market data.
Meanwhile, crude oil prices steadied on Tuesday after sliding in the previous session, as markets weighed Middle East tensions against demand worries and rising OPEC supply. This supports the Lonnie and contributes to the USD/CAD currency pair losses.
Fed's Cautious Stance and Potential Impact on USD/CAD Pair
It is worth noting that the dollar index stabilized in Asia after a recent drop, driven by uncertainty about potential interest rate cuts in 2024. Despite the dip, the dollar retained most of its recent gains as investors leaned towards it ahead of Thursday's CPI inflation data. The expected mild inflation increase, combined with strong job data, challenges expectations of a Fed rate cut by March 2024. Atlanta Fed President Bostic and Fed Governor Bowman's cautious stance suggest a less aggressive approach, influencing market sentiment and potentially putting pressure on the US Dollar.
Therefore, the cautious Fed stance may weaken the US Dollar, potentially impacting the USD/CAD pair. Investors favoring the Canadian Dollar (CAD) due to reduced USD confidence could lead to a decline in the USD/CAD pair.
Geopolitical Developments and Economic Data Impact on WTI Oil and USD/CAD Pair
Moreover, West Texas Intermediate (WTI) oil is near $71 per barrel due to concerns about the Israel-Gaza conflict expanding regionally. US Secretary of State Antony Blinken's visit to Tel Aviv for discussions with Arab leaders adds to the geopolitical tension. Meanwhile, in Canada, the upcoming releases of trade balance and building permit data might impact the Canadian Dollar (CAD).
A forecasted decline in trade balance and building permits suggests potential shifts in imports, exports, and construction activities. Oil prices steadied, influenced by Middle East tensions and OPEC supply dynamics. Despite concerns, the market predicts oil trading between $75 and $80 per barrel, barring unforeseen Middle East escalations.
Therefore, the geopolitical tensions and potential economic shifts in Canada may impact the USD/CAD pair. Increased concerns favoring the Canadian Dollar (CAD) due to stable oil prices and potential positive economic data could lead to a decline in the USD/CAD pair.
USD/CAD - Technical Analysis
As of Tuesday, January 9, the USD/CAD pair is exhibiting a slight upward movement, trading at 1.3340, a 0.05% increase from the previous day. This subtle rise reflects a cautiously optimistic market sentiment towards the US Dollar against the Canadian Dollar.
In the current market scenario, the USD/CAD pair navigates through a series of technical levels that define its potential path. The pivot point for the pair is set at 1.3265. Resistance levels are identified at 1.3335, followed by higher ceilings at 1.3430 and 1.3504, which could act as barriers to further upward movements. On the flip side, the pair finds immediate support at 1.3156, with subsequent support levels at 1.3089 and 1.3022, offering potential safety nets in case of a downtrend.
The Relative Strength Index (RSI) for the pair stands at 53, indicating a marginally bullish sentiment, yet not overly so. The Moving Average Convergence Divergence (MACD) records a value of -0.0005 with a signal line at 0.00148, suggesting a mixed outlook with no clear directional momentum. The current trading price is just below the 50-Day Exponential Moving Average (EMA) of 1.3360, indicating a neutral to slightly bearish short-term trend.
The USD/CAD pair shows a double top pattern extending resistance at 1.3395, a critical level that traders are monitoring closely. This pattern typically suggests a potential reversal or a pause in the upward momentum, warranting caution among investors.
Considering the above technical analysis, the overall trend for USD/CAD appears cautiously optimistic but remains neutral. For traders, a prudent strategy might involve initiating a buy position above 1.33432, targeting profits at 1.34481, and placing a stop loss at 1.33067. This approach takes into account the current technical landscape, with an emphasis on the near-term resistance and support levels.
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EUR/USD Price Analysis – Jan 08, 2024
Daily Price Outlook
The EUR/USD currency pair continued its downward rally and remained well offered around the 1.0930 level. The downward trend can be attributed to the bullish US dollar and disappointing German Retail Sales data, which came in worse than expected, falling to 2.4% YoY from a 0.1% drop in the previous reading.
Investors will closely watch Germany's Trade Balance and Eurozone Retail Sales for November on Monday. Later this week, the US Consumer Price Index (CPI) comes out on Thursday, followed by the US Producer Price Index (PPI) for December on Friday.
Federal Reserve's Cautious Stance and Strong Job Data Impact on USD and EUR/USD Pair
It's worth noting that the Federal Reserve is shifting its stance, leaning towards a more cautious approach due to easing inflation, although aggressive rate cuts aren't a sure thing. Investors are eagerly awaiting Thursday's US inflation data for further insight. The expected rise in the Consumer Price Index (CPI) is 3.2% YoY, with the Core CPI easing to 3.8% YoY. However, Friday's US labor data created uncertainty about the anticipated March interest rate cuts. Nonfarm Payrolls (NFP) for December surpassed expectations, with 216,000 jobs added, exceeding the consensus of 170,000. This unexpected jobs boost has left markets questioning the Fed's next move.
Therefore, the Fed's cautious stance and unexpected strong US job data may bolster the USD against the EUR. Traders will closely monitor the inflation figures for potential shifts in the EUR/USD pair.
Potential Impact of Eurozone Economic Indicators on EUR/USD Pair
Moreover, investors are keenly eyeing November's Eurozone Retail Sales on Monday, anticipating a -0.3% monthly decrease compared to October's 0.1%. The annual rate is expected at -1.5%, a slight dip from October's -1.2%. The recent gloomy German Retail Sales report indicates potential downside risks for the Eurozone.
On Friday, Germany's Retail Sales in November took a hit, dropping more than expected to -2.4% YoY. The monthly numbers were particularly bleak, falling sharply to -2.5% MoM compared to the previous 1.1% increase. Besides this, the Eurozone's Consumer Prices Index for December went up by 2.9% YoY, and the Core figure rose by 3.4%, both below what was predicted. This news indicates some economic challenges, especially in retail, and could impact broader Eurozone trends.
Therefore, the downbeat Eurozone and German retail sales, coupled with lower-than-expected consumer price increases, may put downward pressure on the Euro (EUR) against the US Dollar, affecting the EUR/USD pair.
EUR/USD - Technical Analysis
The EUR/USD pair, as of January 8, is trading at 1.09348, showing a minor decline of 0.07%. This movement indicates a consolidation phase, evident in the 4-hour chart. Key price levels include a pivot point at 1.0957, with immediate resistance at 1.1035 and further resistance at 1.1123 and 1.0788. Support levels are identified at 1.0695 and 1.0604, critical for short-term trading decisions.
The technical indicators provide a nuanced view. The Relative Strength Index (RSI) is at 43, suggesting a neutral to slightly bearish sentiment. This level indicates neither overbought nor oversold conditions. The Moving Average Convergence Divergence (MACD) stands at -0.002, pointing to a mild bearish momentum as it remains below the signal line. Additionally, the pair's position slightly below the 50-Day Exponential Moving Average (EMA) at 1.0939 supports a short-term bearish outlook.
Chart patterns do not clearly define the trend direction, but candlestick analysis could offer short-term trading insights. For instance, doji candles might signal market indecision, while a bullish engulfing pattern could indicate potential upward movement.
In conclusion, the overall trend for EUR/USD is neutral to bearish. Traders should watch the support and resistance levels closely. A prudent strategy could involve a short position below 1.09699, targeting 1.08802 for profit-taking, and placing a stop-loss at 1.10318. This approach aligns with the market sentiment and technical indicators, offering a structured method for navigating the current market dynamics.
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GBP/USD Price Analysis – Jan 08, 2024
Daily Price Outlook
The GBP/USD currency pair failed to extend its upward trend and dropped to around the 1.2708 level. The reason for its declining streak can be attributed to high Treasury bond yields and a bullish US dollar. Notably, the lowered possibility of quick interest rate cuts by the Federal Reserve, driven by a strong US economy and positive job reports, is underpinning the US dollar. In contrast to this, recent upbeat economic indicators from the United Kingdom (UK) are likely to help the GBP/USD pair limit its deeper losses. According to the UK Consumer Credit data, individuals' borrowing showed improvement in November. Additionally, the S&P Global/CIPS Composite PMI for December demonstrated positive signs, including an increase in Services PMI.
UK Economic Positivity Boosts GBP, but Gloomy Outlook Raises Concerns for GBP/USD Pair
Furthermore, the UK's positive economic signs, such as improved borrowing in November and a rise in Services PMI for December, likely boosted the British Pound (GBP). However, the uptick in the GBP was short-lived due to a gloomy economic outlook. Investors are concerned about the Bank of England (BoE) having to make difficult choices because of possible risks of a recession and high inflation. Many people want the BoE to act fast, and UK business leaders are asking them to lower interest rates quickly. The Institute of Directors' survey also supports these worries, as it shows that British directors are feeling less optimistic about the country's economic future.
Therefore, the positive economic signs in the UK lifted the British Pound (GBP) against the US Dollar (USD). However, concerns about a gloomy economic outlook and calls for lower interest rates may introduce challenges for the GBP/USD pair in the near term.
Federal Reserve's Unlikely Rate Cut Amidst Strong US Economy and Positive Job Reports Pressures GBP/USD Currency Pair
It's important to mention that investors are lowering their expectations for the Federal Reserve to cut interest rates quickly because of the strong US economy and positive job reports. The robust economy, combined with some Fed officials talking tough, is keeping bond yields high, helping the US Dollar and putting pressure on the GBP/USD currency pair. In December, the job report was better than expected, with 216K new jobs and a steady unemployment rate of 3.7%. Despite a small drop in the services sector, the overall economic signs are good.
So, because the Federal Reserve is unlikely to quickly lower interest rates, thanks to the strong US economy and good job reports, the GBP/USD currency pair is going down.
GBP/USD - Technical Analysis
As of January 8th, the British Pound against the US Dollar (GBP/USD) is exhibiting subtle fluctuations, currently down by a marginal 0.13%, trading at 1.27032. This minor change indicates a tug of war between bullish and bearish sentiments in the forex market.
The GBP/USD pair finds its pivot point at 1.2791, a key level that could determine its immediate market trajectory. The pair faces immediate resistance at 1.2862, followed by higher resistance at 1.2950. These resistance zones are crucial, as overcoming them could signal a shift towards a bullish market trend.
Conversely, support levels are situated at 1.2630, 1.2540, and 1.2469. These levels are essential in preventing further depreciation of the Pound against the Dollar. A breach of these support levels could intensify the bearish pressure.
The Relative Strength Index (RSI) for GBP/USD stands at 52, slightly above the neutral threshold, indicating a lean towards bullish market sentiment. The Moving Average Convergence Divergence (MACD) also shows a bullish signal, with its value crossing above the signal line.
The currency pair is trading near its 50-Day Exponential Moving Average (EMA) of 1.2697, a critical juncture that suggests a potential balance between short-term bullish and bearish trends. Chart analysis does not reveal any significant patterns at this stage, keeping the market outlook neutral.
In summary, the GBP/USD pair presents a balanced market outlook. The currency pair's future movements hinge on its ability to break through the mentioned resistance or support levels. The current market sentiment is cautiously optimistic, but traders and investors are advised to watch these key levels closely, as shifts in these technical indicators could swiftly change the market's direction.
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GOLD Price Analysis – Jan 08, 2024
Daily Price Outlook
Despite growing concerns about a slow economic recovery in China and the risk of further escalation of geopolitical tensions in the Middle East, the Gold price (XAU/USD) failed to halt its downward trend and dropped further around the 2,030 level. However, the reason for its strong bearish trend can be attributed to the ongoing uncertainty about the Federal Reserve's (Fed) rate-cut trajectory, which, in turn, held back traders from making aggressive bets in the non-yielding yellow metal.
Looking ahead, there's no major economic news expected from the US on Monday. However, the direction of the US dollar depends on a speech by Atlanta Fed President Raphael Bostic and bond yields. Gold prices could be influenced by overall market feelings.
Fed's Hawkish Stance and Strong Economic Indicators Diminish Gold's Appeal
It's worth noting that investors are tempering their hopes for the Federal Reserve to quickly cut interest rates due to the strong US economy and recent positive job reports. However, the resilient economy, along with some Fed officials making hawkish statements, is keeping Treasury bond yields high, supporting the US Dollar and putting pressure on Gold prices. The December job report surpassed expectations, with 216K new jobs and a steady unemployment rate of 3.7%. Despite a dip in the services sector, overall economic indicators remain strong.
Therefore, the reduced likelihood of quick interest rate cuts by the Federal Reserve, driven by a strong US economy and positive job reports, is pressuring Gold prices downward as high Treasury bond yields and a strong US Dollar dampen the appeal of the precious metal.
Heightened Geopolitical Tensions and Economic Concerns Propel Gold's Safe-Haven Appeal
Furthermore, the market mood is unstable due to concerns about a sluggish economic rebound in China and potential geopolitical tensions in the Middle East. This has led to a generally weaker conditions in the stock markets, potentially boosting the appeal of the safe-haven Gold. Traders are cautious, awaiting Thursday's release of US consumer inflation figures before deciding on the next move for Gold.
Meanwhile, the situation in China and the Middle East may bolster Gold's appeal. Notably, Hezbollah's rocket attack on Israel, following the assassination of Hamas leader Saleh al-Arouri, adds to geopolitical tensions.
Therefore, the uncertain market sentiment due to China's economic concerns and heightened geopolitical tensions in the Middle East is likely to boost the appeal of safe-haven Gold, potentially leading to an increase in its price.
GOLD (XAU/USD) - Technical Analysis
Gold (XAU/USD) has seen a modest decline in the early trading hours of January 8th, with its price dropping by 0.45% to $2,036. The precious metal is navigating a complex technical landscape, reflected in various technical indicators and chart patterns on a four-hour timeframe.
The pivot point for gold currently stands at $2,050, serving as a crucial marker for its short-term direction. Resistance levels are observed at $2,075, $2,104, and $2,104. These levels are essential as they represent potential ceilings that gold needs to breach to sustain an upward momentum.
Conversely, gold finds immediate support at $1,995, followed by $1,965 and $1,937. These support levels play a critical role in preventing further declines in the gold price. A breach below these levels could signal a more profound bearish trend.
The Relative Strength Index (RSI) for gold stands at 39, indicating a bearish sentiment without entering the oversold territory. This suggests that the market is leaning towards caution. Additionally, the Moving Average Convergence Divergence (MACD) value of -5.001, crossing below the signal line, also supports a bearish outlook.
Gold is currently trading below its 50-Day Exponential Moving Average (EMA) of $2,042, reinforcing a short-term bearish trend. Chart analysis reveals no significant patterns at this time, leaving the market direction largely dependent on the mentioned technical levels and indicators.
In summary, the overall trend for gold appears bearish, particularly below the $2,038 level. Traders and investors might consider a sell position below this mark, with a take-profit target at $2,017 and a stop loss at $2,055. Market participants are advised to monitor these key technical levels closely, as they will likely dictate gold’s price movements in the near term.
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GOLD Price Analysis – Jan 05, 2024
Daily Price Outlook
Gold prices (XAU/USD) failed to sustain their upward trend and dropped below the $2,050 level. However, the reason for their sluggish movement can be attributed to traders' caution in placing aggressive bets and a preference to wait for the release of the official monthly employment details from the United States (US). In the meantime, the widely known Nonfarm Payrolls (NFP) report will be in the spotlight, providing clarity on the Federal Reserve's future policies and influencing the short-term direction of gold. Furthermore, the reduced bets for more aggressive policy easing by the Fed are also playing a major role in undermining the gold price. In contrast to this, geopolitical risks, along with China's economic woes, continue to weigh on investors' sentiment and offer some support to the safe-haven gold price, limiting its deeper losses.
Strong US Dollar and Gold Prices Under Pressure Amid Economic Data and Fed Expectations
It's worth noting that traders have scaled back their expectations for the Fed to cut interest rates in 2024 from six times to four, thanks to positive US economic data. The recent Automatic Data Processing (ADP) report revealed that 164,000 jobs were added in December, beating the expected 115,000. Additionally, the US Department of Labor reported a drop in Weekly Jobless Claims to 202,000, surpassing expectations. While the US Dollar bulls are cautious, eagerly awaiting the official Nonfarm Payrolls (NFP) report, predictions suggest 170,000 new jobs in December. This crucial data will influence the Fed's policy and impact the USD and gold prices.
Therefore, the positive US economic data and reduced expectations for Fed rate cuts have made US Dollar strong, which kept the gold prices under pressure. Traders eagerly await the Nonfarm Payrolls report, as its outcome may influence gold prices.
Gold Faces Limited Downside Amid Positive US Labor Data
As mentioned above, the positive US labor market reports on Thursday made investors less hopeful about major US central bank interventions. This support for higher US Treasury bond yields acts as a boost for the US Dollar, keeping a lid on gold price gains. Despite this, the downside for gold seems limited due to the cautious market mood, which favors the precious metal's safe-haven appeal. The XAU/USD (Gold/US Dollar) pair remains close to a recent low reached on Wednesday, but uncertainties in the market could provide some support for gold.
GOLD (XAU/USD) - Technical Analysis
Gold's technical analysis on January 5th indicates a tentative market, with the metal trading at $2,043.36, showing no significant change in the last 24 hours. The key pivot point at $2,033 marks a critical juncture for potential movements. Resistance levels at $2,048, $2,068, and $2,083 outline the upper barriers, while support levels at $2,013, $1,992, and $1,972 provide cushions for bearish trends.
The Relative Strength Index (RSI) at 43 indicates a bearish sentiment, leaning towards oversold conditions. The Moving Average Convergence Divergence (MACD) at -0.452, significantly below the signal line of -5.444, suggests strong downward momentum. Moreover, Gold's trading below its 50-Day Exponential Moving Average (EMA) of $2,053 reinforces a bearish outlook.
Chart analysis shows no significant patterns suggesting a reversal or continuation of the trend, indicating a wait-and-see approach among investors.
In summary, the overall trend for Gold seems bearish, with a short-term strategy focusing on a sell stop at $2,035, targeting $2,017, and a stop loss at $2,054.
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EUR/USD Price Analysis – Jan 05, 2024
Daily Price Outlook
The EUR/USD currency pair extended its upward trend, gaining positive traction for the second consecutive day on Friday. It is currently hovering above the mid-1.0900s as traders are eagerly anticipating crucial macro data from both the Eurozone and the United States (US) for significant impetus. However, the market sentiment remains optimistic as investors closely monitor economic indicators for potential market-moving cues.
Eurozone Inflation Data and US Nonfarm Payrolls Impact EUR/USD Pair
It's important to mention that the Eurozone will release its flash inflation figures, followed by the crucial US Nonfarm Payrolls (NFP) later in the North American session. These data points will heavily impact market expectations for the European Central Bank (ECB) and the Federal Reserve (Fed) policies, influencing the short-term direction of the EUR/USD pair.
In the meantime, the Euro got a boost after unexpectedly positive revisions of Eurozone PMIs on Thursday, causing investors to dial back expectations for aggressive ECB rate cuts. Currently, there's about 156 basis points of expected easing from the ECB this year, slightly less than Wednesday's 166 bps. This, coupled with a subdued US Dollar, is helping the EUR/USD pair.
Factors Supporting Stability in the US Dollar Amid Reduced Rate Cut Expectations and Cautious Market Sentiment
Moreover, the US Dollar's downside is limited due to fewer expectations for the Federal Reserve to quickly slash interest rates in 2024. This sentiment strengthened after a positive US labor market report on Thursday. Consequently, US Treasury bond yields are holding firm. Besides, the current cautious market sentiment, leaning towards safer assets, might keep the US Dollar in a stable position, as it's often seen as a safe-haven.
EUR/USD - Technical Analysis
On January 5th, the EUR/USD pair exhibits cautious trading, slightly down by 0.09% at 1.09353. This movement reflects a delicate balance in market sentiment. The current pivot point at 1.07951 is crucial for future trends, with immediate resistance levels at 1.09636, 1.12086, and 1.13821, presenting possible upward barriers. Support levels at 1.05501, 1.03766, and 1.02081 are key to preventing further declines.
The RSI at 51 suggests a neutral to slightly bullish sentiment. The MACD value of -0.00190, below its signal line, indicates potential bearish momentum. The pair's position relative to the 50-Day EMA at 1.08717 suggests a balanced trend.
No specific chart patterns are currently observed, implying market uncertainty. The overall trend for EUR/USD remains neutral with a short-term bearish inclination. A trading strategy involving a sell below 1.09436, targeting profits at 1.08932 with a stop loss at 1.09833, may be appropriate under current conditions.
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S&P500 (SPX) Price Analysis – Jan 05, 2024
Daily Price Outlook
The S&P 500 (SPX) continued its downward trend, extending its losing streak in the early days of 2024. As a benchmark for the broader U.S. stock market, the index lost 0.34%, closing at 4,688.68 points. This marks the worst start to a year since 2015, prompting concerns among investors who closely follow the January Barometer theory. According to this theory, the market's performance in January serves as a predictor for its trajectory throughout the rest of the year.
Investors kept a close eye on the job market, with a resilient labor report dampening expectations for early interest-rate cuts. The potential for Federal Reserve rate reductions had been a key factor driving the market's late 2023 gains, but the minutes from the December policy meeting did not offer clear indications regarding the timing of any easing.
Market Sentiment and Uncertainty Surrounding Interest Rates Amidst Strong Employment Data
According to the CME Group’s FedWatch tool, traders saw a 66.4% chance of at least a 25-basis point rate cut in March and a nearly 92% probability for May. However, a strong ADP National Employment report revealed that U.S. private employers hired more workers than anticipated in December, suggesting ongoing strength in the labor market.
Despite concerns about a softening job market, the official employment data, scheduled for release on Friday, remained uncertain. Peter Cardillo, Chief Market Economist at Spartan Capital Securities, noted that the recent market movement might be a technical adjustment following a significant rally.
The job market is important for investors. A report from ADP National Employment said that in December, private employers added 164,000 jobs, more than expected, showing the job market is still strong. But a weekly report from the Labor Department showed more Americans than expected filed for unemployment.
Hence, the uncertainty around interest rates and mixed economic signals have led to a technical adjustment in the market, contributing to a 0.34% decline in the S&P 500. The Nasdaq Composite (IXIC) also slipped 0.56%, while the Dow Jones Industrial Average (DJI) managed a slight gain of 0.03%.
S&P500 (SPX) - Technical Analysis
As of January 5th, the S&P 500 Index (SPX) reveals a subtle yet significant shift in market sentiment, closing at 4688.69, a decrease of 0.34%. The pivot point is identified at $4,614, marking a crucial level for potential directional shifts. Resistance levels at $4,703, $4,859, and $4,949 suggest hurdles for bullish momentum, while support levels at $4,456, $4,366, and $4,276 could prevent further declines.
The Relative Strength Index (RSI) at 53 indicates a neutral market mood, while the MACD at -14.13, significantly below the signal line of 54.30, implies potential for a downward trend. Additionally, the index's position near its 50-Day Exponential Moving Average (EMA) of $4,589 suggests a balanced market trend.
The absence of a clear chart pattern implies a cautious approach among investors. Overall, the market outlook for SPX appears neutral to slightly bearish. A sell limit strategy at 4697, with a take profit at 4636 and a stop loss at 4739, could be a prudent approach considering the current market conditions and technical indicators.
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GOLD Price Analysis – Jan 04, 2024
Daily Price Outlook
Gold prices (XAU/USD) have sustained their upward trajectory, remaining bullish around the $2,050 level. This surge can be attributed to anticipations of a Federal Reserve rate cut in March, coupled with escalating geopolitical tensions. Following the Federal Reserve's meeting on December 12-13, during which policymakers deliberated on the economy, US bond yields initially experienced an uptick. However, they subsequently receded as officials reached a consensus that inflation was manageable, and they were cautious not to adopt overly stringent measures, fearing potential harm to the economy.
Consequently, in light of this cautious market sentiment, a growing number of investors opted to acquire precious metals such as gold, particularly around the $2,030 mark on Thursday.
However, the markets remain uncertain about the timing of the Federal Reserve's decision to lower interest rates. Richmond Fed President Thomas Barkin remarked on Wednesday that the option of raising interest rates is still on the table. This statement has prompted a slight uptick in US Treasury bond yields, bolstering the US Dollar and restraining the ascent of gold prices.
Despite this, the bets on the Federal Reserve lowering rates in March, coupled with global tensions, are helping gold prices rebound from a one-week low. The December FOMC meeting minutes suggest policymakers think interest rates are likely near their highest point. They see progress in managing inflation but are cautious about keeping rates low longer if needed. The minutes didn't clarify when rate cuts might start in 2024.
Richmond Fed President Thomas Barkin is confident in a smooth economic landing but hasn't ruled out rate hikes. The 10-year US bond yield below 4.0% supports the dollar and limits gold gains. The US manufacturing sector decline is slowing, according to the ISM, but still remains in contraction. The JOLTS report shows a drop in job listings to the lowest since March 2021.
It's important to mention that the chance of rising tensions in the Red Sea and China's economic challenges is boosting the demand for safe-haven assets, such as gold. China's latest official PMI indicates a ongoing drop in manufacturing without any improvement by the end of 2023. Although a private survey suggests a quicker growth in China's factory activity in December, overall business confidence for 2024 remains low.
Impact of Red Sea Tensions and China's Economic Challenges on Gold PricesIt's important to mention that the chance of rising tensions in the Red Sea and China's economic challenges is boosting the demand for safe-haven assets, such as gold. China's latest official PMI indicates a ongoing drop in manufacturing without any improvement by the end of 2023. Although a private survey suggests a quicker growth in China's factory activity in December, overall business confidence for 2024 remains low.Thus, the increased tension in the Red Sea and China's economic difficulties are making more people turn to safe-haven assets, which is positively affecting the price of gold.
GOLD (XAU/USD) - Technical Analysis
Gold is presently navigating near the 50-Day Exponential Moving Average (EMA) of $2,048, which could play a pivotal role in determining its short-term direction. The overall trend appears mixed, with potential for both bullish and bearish movements, depending on how the asset interacts with these key levels and indicators in the coming sessions.
Conversely, support levels are found at $1,992, $1,972, and $2,083, offering potential floors against bearish trends. The Relative Strength Index (RSI) stands at 39, hinting at a bearish sentiment, while the MACD's value at -3.2 against a signal line of -6.0 could indicate possible shifts in momentum.
Gold (XAU/USD) is showing a nuanced technical outlook as it enters Thursday's trading session. The metal's price has seen a modest increase, currently at $2043, reflecting a 0.08% rise. Key resistance levels are identified at $2,032, $2,048, and $2,069, which are crucial for bullish progress.
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AUD/USD Price Analysis – Jan 04, 2024
Daily Price Outlook
The Australian Dollar (AUD) struggled to stop its losing streak on Thursday, facing persistent downward pressure against the US Dollar (USD). However, the primary factors contributing to this trend include a ongoing risk-off sentiment and a general bearish session in the commodity complex. In the meantime, the softer-than-expected Judo Bank Purchasing Managers Index (PMI) data further added to the challenges for the Aussie Dollar. It should be noted that the country's services sector witnessed a contraction in December, with the Judo Bank Services PMI reporting a reading of 47.1, falling short of market expectations. The Composite PMI also decreased to 46.9, marking the fastest pace of services contraction since the third quarter of 2021.
Judo Bank Economist Matthew De Pasquale Optimistic About Stable Economic Slowdown in Australia
Economist Matthew De Pasquale from Judo Bank shared his views on Australia's economy. He mentioned that recent data over the past two months suggests a slowdown in the country's economy. However, he noted that the slowdown doesn't seem to be getting worse. Despite challenges for households due to higher interest rates, important economic measures like output and new orders are in line with the Reserve Bank of Australia's expected gradual economic slowdown.
De Pasquale's insights, indicating a slowing but not worsening Australian economy, bring stability to the AUD/USD pair. Following the RBA's predicted soft landing scenario, it might ease some pressure on the Australian Dollar.
Global Factors and US Economic Indicators Shape AUD/USD Trajectory
On the other hand, the broader global factors also plays a significant role in shaping the trajectory of the AUD/USD pair. The US Dollar Index (DXY) remains on a positive trajectory, strengthened by improved US Treasury yields. This was seen as another key factor that kept the AUD/USD pair down. However, the positive momentum in the dollar may find support from the better than expected ISM Manufacturing PMI report, showing an increase to 47.4 in December. However, challenges persist in the US labor market, with JOLTS Job Openings contracting. The December minutes from the Federal Open Market Committee (FOMC) indicate a cautious approach, suggesting that the policy rate may have reached its peak in the current tightening cycle.
Traders are closely watching upcoming US labor market data releases, including ADP Employment Change and Initial Jobless Claims, for further cues on the AUD/USD pair's direction.
Therefore, the positive trajectory of the US Dollar Index (DXY) and improved US Treasury yields exert upward pressure on the USD, impacting the AUD/USD pair.
Resilient Chinese Services Data Offers Hope for AUD/USD Stabilization
The AUD/USD pair faced some challenges recently, but there's a good news. China's services data improved, with the Caixin Services PMI for December going up to 52.9. This exceeded what the market expected (51.6) and the previous figure (51.5). This positive news from China could help prevent the Australian Dollar from dropping too much. Even though Australia's services sector is facing difficulties, the strong economic signs from China might help keep the AUD/USD pair steady.
Hence, the improved Chinese Services PMI, surpassing expectations, offers a ray of hope for the AUD/USD pair. This positive development may potentially mitigate losses for the Australian Dollar, as resilient Chinese economic indicators contribute to stabilizing the pair.
AUD/USD - Technical Anaylsis
The Australian Dollar (AUD/USD) is experiencing a slight uptick in its value, currently trading at 0.6736, indicating a 0.1% increase. As it enters Thursday's session, the currency pair faces critical technical levels. The pivot point is established at $0.6683, with immediate resistance observed at $0.6731, followed by $0.6772 and $0.6820.
Conversely, support levels are at $0.6631 and $0.6582, with a further line at $0.6861. The Relative Strength Index (RSI) sits at 39, suggesting a bearish sentiment. The MACD value is narrowly below the signal line, indicating potential shifts in momentum.
The 50-Day EMA at $0.6745 will be a key level to watch, as it may dictate short-term price movements. Overall, while the AUD/USD shows a modest gain, its trend remains cautious, with a focus on these pivotal technical levels for future direction.
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USD/JPY Price Analysis – Jan 04, 2024
Daily Price Outlook
The USD/JPY currency pair has sustained its upward trend, attracting additional bids above the 143.50 level. The driving force behind this upward movement can be attributed to the devastating earthquake in central Japan, which is perceived as a significant factor undermining the domestic currency. This, coupled with the ongoing recovery of the US Dollar (USD) from a multi-month low, supported by a further increase in US Treasury bond yields, is strengthening the USD/JPY pair.
On the flip side, concerns about a potential escalation of geopolitical tensions in the Middle East and a sluggish economic recovery in China are dampening investor sentiment. This is evident in the generally weaker tone observed in equity markets. Additionally, the growing conviction that the Bank of Japan (BoJ) may deviate from its ultra-loose policy settings is providing support to the safe-haven Japanese Yen (JPY).
Meanwhile, the Japanese Yen (JPY) is expected to avoid substantial losses due to anticipated changes in the Bank of Japan's (BoJ) policy. This shift is likely to happen around April following March's annual wage negotiations, with the possibility of an earlier move in January. In contrast, the Federal Reserve (Fed) is projected to carry out a series of interest rate cuts in 2024, possibly commencing as early as March. This could curtail the rise in US bond yields and the strength of the US Dollar (USD).
Traders Exercise Caution Ahead of NFP Report, Eyeing Economic Indicators for Insight
Looking forward, traders are cautious about making big bets and are waiting for clarity on the Federal Reserve's future policies. The focus is on Friday's release of the Nonfarm Payrolls (NFP) report for insights. Traders are closely monitoring these indicators to gauge the job market and anticipate potential market moves.
USDJPY Pair Gains Amid Yen Weakening and Policy Divergence Expectations
Furthermore, the Japanese Yen experienced a weakening trend against the US Dollar, influenced by various factors, including the seventh consecutive contraction in the au Jibun Bank Japan Manufacturing PMI, which plummeted to a low of 47.9 in December. Despite this, the Yen finds some support from expectations of a shift in policy alignment between the Bank of Japan (BoJ) and the Federal Reserve (Fed) in 2024.
The recently released FOMC minutes indicated consensus on maintaining controlled inflation, although they lacked clear indications of potential rate cuts, thereby supporting US bond yields and the Dollar. In the US, the ISM Manufacturing PMI showed a slight improvement, and job listings dropped to 8.79 million in November. Investors are eagerly anticipating the US ADP report and the pivotal Nonfarm Payrolls (NFP) report scheduled for release on Friday.
Therefore, the USDJPY pair experienced gains as the Japanese Yen declined against the US Dollar. Factors include poor Japan Manufacturing PMI, expectations of policy divergence, and the FOMC minutes favoring the Dollar.
USD/JPY - Technical Analysis
The USD/JPY pair exhibits a bullish trend on Thursday, January 4, as it trades at 143.226, marking a 0.25% increase. The currency pair faces significant technical levels, with the pivot point at 141.43. Immediate resistance is observed at 142.52, followed by higher levels at 143.97 and 145.16.
In contrast, support lies at 139.94, 138.74, and 137.35. The Relative Strength Index (RSI) at 67 suggests bullish sentiment, nearing overbought conditions. The MACD at 0.2380 signals upward momentum, indicating potential bullish trends.
The pair's position above the 50-Day EMA of 142.97 further supports the current bullish outlook. However, traders should monitor key resistance levels for signs of a reversal or continued bullish trend.
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