XAUUSD Gold price is moving in the Descending channel and the market has reached the lower high area of the channel
GOLD – Gold Price Below 50-Day SMA on Fed’s Caution on Rapid Rate Cuts
The US said two missiles were fired from Iran-backed Houthi rebels yesterday to support the Palestinian people and against Israel’s activities in the Gaza area. Gold prices moving flat due to war tensions higher in the Red Sea and Gaza area.
Fed’s Hawkish Stance and Positive Equities Cap Gold Upside
Minutes from the January FOMC meeting reinforce expectations of the Federal Reserve keeping interest rates higher for an extended period due to concerns over persistent inflation and a robust US economy. This sustains elevated US Treasury bond yields, acting as a headwind for gold.
Positive equity market sentiment further limits gold’s upside, while geopolitical tensions in the Middle East provide some support to the safe-haven metal. Despite the Fed’s hawkish outlook, the US Dollar (USD) struggles to gain significant strength, lending additional support to gold.
The mixed fundamental backdrop suggests caution before adopting bullish positions on XAU/USD.
Geopolitical Tensions Support Gold Price, Despite Hawkish FOMC Minutes
Recent attacks by Yemen’s Houthi rebels on commercial vessels in the Red Sea and Bab al-Mandab strait are heightening concerns about an escalation of military action in the Middle East, bolstering the safe-haven appeal of gold.
The US Central Command reported two anti-ship ballistic missiles launched by the Iranian-backed Houthi group, which supports Palestinian civilians amid Israel’s military campaign in the Gaza Strip. Ongoing conflict between Israel and Hamas, with no signs of abatement, raises the possibility of a ground invasion in Rafah, where over 1.5 million Palestinians are seeking shelter.
XAGUSD Silver price is moving in the Box pattern and the market has reached the resistance area of the pattern
The US Dollar remains near a two-week low, providing additional support to gold. However, hawkish FOMC meeting minutes restrain significant appreciation.
The January FOMC minutes indicate policymakers require more confidence in decreasing inflation before considering rate cuts, reinforcing expectations of the Fed maintaining higher rates for an extended period. Market expectations for rate cuts have shifted to June, and a weaker 20-year bond auction has contributed to higher yields on long-term US Treasury bonds, limiting the downside for the US Dollar and capping gold’s potential appreciation.
EURUSD – Commerzbank: Premature to Declare Inflation All-Clear in Eurozone
Economists at the Commerzbank said Eurozone has lower inflation due to external prices coming down, but domestic prices are still higher. Businesses have a plan to raise the cost of products in the Eurozone. Inflation will be higher in the coming months in the Eurozone, So rate cuts have to do with proper planning.
EURUSD has broken the Descending channel in upside
Commerzbank: Premature to Declare Victory over Inflation in Eurozone
Despite increasing optimism among ECB representatives about taming inflation, Commerzbank’s economists caution against premature celebration. Examining domestic inflationary pressures and recent company surveys, they argue that it’s too early to declare inflation under control.
Companies Planning Price Increases
While the Euro Area has experienced a significant drop in inflation rates, particularly in Germany, caution is advised. The decline is attributed to a slowdown in external inflationary pressure, with domestic price pressure remaining robust until the end of the previous year.
Moreover, recent Ifo surveys reveal that more companies are indicating intentions to raise prices in the coming months, signaling potential challenges in controlling inflation.
Considering the similar situation in the Euro Area, Commerzbank suggests that underlying inflation may stabilize well above the ECB’s target of 2%.
USDJPY – BoJ’s Ueda: Heightened Trend Inflation, Appropriate Policy Decision Ahead
The Bank of Japan Governor Ueda said inflation is increasing, we make necessary changes only when Wage growth and Household spending have to increase. A 1% rate hike will cause a loss of 40 trillion yen in Japan JGB Holdings. So rate hike is more dependent on the Wage hike must coincide with the inflation rate.
USDJPY is moving in an Ascending channel and the market has reached the higher low area of the channel
Bank of Japan Governor Kazuo Ueda stated on Thursday, “Japan’s trend inflation is heightening, and we will make an appropriate monetary policy decision.
Additional Quotes:
– Service prices are continuing to rise moderately.
– Expect a positive cycle to strengthen where a tight labor market leads to higher wages and household income.
– It is desirable for foreign exchange (FX) to move stably reflecting fundamentals.
– No comments will be made on FX levels.
– FX rates move based on various factors.
– It is desirable for FX to move stably reflecting fundamentals.
– A 1% rise in interest rates will result in a valuation loss of 40 trillion yen on BoJ’s JGB holdings.
USDCHF – Drops to Around 0.8780 on Fed’s Rate Cut Concerns
The Swiss Franc is supported by Swiss trade balance figures that came positive in January month, SNB have more foreign reserves till January month is also positive for the Swiss Franc. SNB may start planning rate cuts in March month due to lowered inflation in the Swiss Zone.
USDCHF is moving in an Ascending channel and the market has fallen from the higher high area of the channel
FOMC Minutes Signal Delay in Rate Cuts; Market Eyes June
The recently released Federal Open Market Committee (FOMC) Minutes indicate policymakers’ hesitancy on immediate interest rate cuts, influenced by higher January Consumer Price Index (CPI) and Producer Price Index (PPI) figures, along with robust February employment data.
Market expectations have shifted away from rate cuts in March and May, with speculation now centered on a potential cut in June, carrying a 52.2% probability according to the CME FedWatch Tool.
Conversely, the market anticipates the Swiss National Bank (SNB) to initiate a rate-cut cycle starting March, driven by declining inflation despite earlier forecasts. The Swiss Franc (CHF) receives support from positive Swiss Trade Balance figures, including a notable increase in January’s trade surplus. Additionally, SNB raised foreign exchange reserves for the second consecutive month in January.
Looking ahead, the Federal Statistical Office of Switzerland is scheduled to release the Employment Level for the fourth quarter of 2023.
USDCAD – Dips to Around 1.3490 Amid Fed’s Rate Cut Caution
The Canadian Dollar moved lowered after the Geopolitical tensions higher in the Red Sea area. Fed Hawkish talks make the US Dollar flat against the Canadian Dollar. Higher rates from the central banks make consumption of Oil at higher prices only. So Demand is slowing across Global levels.
USDCAD is moving in an Ascending triangle pattern and the market has reached the higher low area of the pattern
US Treasury Yields Rise on Fed’s Caution; Rate Cut Expectations Delayed
US Treasury yields increased on Wednesday as the Federal Open Market Committee (FOMC) Minutes expressed a cautious stance on interest rate reductions. The Federal Reserve’s easing cycle appears delayed, influenced by higher-than-expected Consumer Price Index (CPI) and Producer Price Index (PPI) releases post-January meeting, coupled with a robust jobs report.
The FOMC Minutes emphasized the need for further evidence of disinflation to address concerns of upside risks. Current futures funds indicate that about 70% of the market anticipates a rate cut by the Federal Reserve’s June meeting, with a 52.2% probability, according to the CME FedWatch Tool.
The decline in crude oil prices may restrain the Canadian Dollar’s (CAD) upward momentum, limiting losses for the USD/CAD pair. Despite Middle East geopolitical tensions typically boosting oil prices, the impact is moderated by higher global interest rates, dampening oil demand. West Texas Intermediate (WTI) oil price hovers around $77.80 per barrel.
Thursday’s focus includes Canada’s December Retail Sales data and key US economic indicators such as S&P US PMI, weekly Initial Jobless Claims, and Existing Home Sales.
EURGBP – Climbs to Around 0.8570, Awaiting UK and Eurozone PMI
The member of the Bank of England Swati Dhingra said rate cuts have to be implemented in the UK due to the cost of living for Households being higher in the UK. Longer rate hikes can turn the UK into a recession path. The Bank of England Governor Bailey said inflation will be decreased in the near term, we could not wait for inflation to target 2% for rate cuts.
EURGBP is moving in the Box pattern and the market has reached the resistance area of the pattern
BoE Member Advocates Rate Cuts; Euro Faces Caution Amidst Global Expectations
Swati Dhingra, a Bank of England (BoE) member, warns that delaying rate cuts could escalate living costs and lead to a harsh economic downturn in the UK. BoE Governor Andrew Bailey emphasizes the rapid decline in UK inflation, indicating rate cuts without a definitive return to target levels. BoE Deputy Governor Ben Broadbent notes wage growth and services inflation alignment with sustainable inflation at 2%.
Euro faces pressure amid global caution on rate cuts, but China’s 25 bps reduction in its five-year Loan Prime Rate may offer support considering Eurozone exports to China. ECB Current Account and Negotiated Wage Rates show improvement in December and Q4 2023, respectively. ECB President Christine Lagarde highlights wages as a key driver of inflation.
Traders brace for potential volatility with Thursday’s release of Purchasing Managers Index (PMI) data from both the Eurozone and the UK.
AUDUSD – Australia’s Judo Bank PMI Bounces Back to 51.8 in February from 49.0
The Australia Judo Bank revealed the Composite PMI data for January is 50.0 which is higher than expected reading. Services PMI came at 52.8 from 49.1. Australian Manufacturing PMI fell to 47.7 versus 50.1 in the previous reading. Due to higher rates Business sector moving lower, and the Private sectors are largely driven by the Services sector in the first half of 2024.
AUDUSD is moving in an Ascending channel and the market has reached the higher high area of the channel
Australia’s Judo Bank Composite PMI Returns to Growth at 51.8
Judo Bank’s Composite Purchasing Manager Index in Australia has shown growth above 50.0 for the first time since October, reaching its highest level since May of the previous year.
The rebound is driven by the Services PMI, which rose from 49.1 to a nine-month high of 52.8. However, the Manufacturing PMI slipped back into contraction at 47.7 compared to the previous 50.1, with only one instance above 50.0 in the last 12 consecutive prints.
According to Judo Bank, the growth in Australia’s private sector is solely propelled by the services sector in the first half of Q1 2024. Business sector sentiment, although at a three-month low, remains positive.
Judo Bank notes that overall sentiment in the Australian private sector stayed positive in February, but business confidence eased due to lingering concerns about the impact of high interest rates and inflation on sales.
USDINDEX – Axios: Risk of Another US Government Shutdown Over Spending Bills
The US Government can face another Government shutdown because the is because of Freedom caucus team warned about US Spending bills and allocated proper spending plans in the budget for 2024. If no proper planning, there will be 1% board cuts started in the US Government spending plan.
USD index is moving in an Ascending channel and the market has reached the higher low area of the channel
Axios Reports: Freedom Caucus Pushes for Spending Restrictions, Raising Shutdown Risk
According to Axios, the US federal government faces the potential for another shutdown over spending bills. The “Freedom Caucus,” a group of far-right members in the US legislature, advocates for extensive year-long spending restrictions that could lead to a government shutdown.
Key Points:
– The House Freedom Caucus officially advocates for a one-year spending stopgap that may trigger a shutdown if accepted by Speaker Mike Johnson.
– In a recent letter to Johnson, members of the Freedom Caucus express a preference for the spending stopgap if their policy priorities are not addressed through the budget process.
– If a new budget is not in place by April 30, 1% across-the-board cuts will be initiated.
NZDUSD – NZD Trade Balance Drops by 976M in January
NZ Trade balance report came at lower than expected, a 976 million decline in January from a 368 million decline in the previous month. Imports data came at 5.91 billion from 6.22 billion. Exports data came down by 20% to 4.93 billion from 5.85 billion.
NZDUSD is moving in an Ascending channel and the market has reached the higher high area of the channel
New Zealand’s Trade Balance in NZD: January Sees a 976M Drop
In January, New Zealand’s NZD Trade Balance witnessed a decline of 976 million, following the previous month’s revised 368 million decrease (initially -323 million). The annualized trade balance showed a relatively smaller drop at -12.5 billion YoY, compared to the preceding period’s revised -13.62 billion YoY (initially -13.57 billion).
Both Imports and Exports for January grew less than in the previous month. MoM Imports totaled 5.91 billion, down from the previous 6.22 billion. Monthly Exports also declined by almost 20%, registering 4.93 billion compared to the prior 5.85 billion.
NZDCHF – RBNZ Survey: NZ 2-Year Household Inflation Expectations to Reach 3.2%
The RBNZ surveyed inflation expectations of households for 2 years, the reading came at 3.2% from the 3.0% forecasted. So RBNZ may do rate hikes if inflation stays higher for a longer time.
NZDCHF is moving in Ascending channel and market has reached higher low area of the channel
New Zealand’s Household Inflation Expectations Upgraded to 3.2%
According to the latest survey from the Reserve Bank of New Zealand (RBNZ) on Thursday, household expectations for two-year inflation in New Zealand are anticipated to rise to 3.2%, surpassing the previous estimate of 3.0%.
The RBNZ places significant importance on these two-year inflation expectations, considering this timeframe as crucial for the transmission of monetary policy changes.
Don’t trade all the time, trade forex only at the confirmed trade setups.
Get more confirmed trade setups here: forexgdp.com/buy/
