Gold bears keep the reins despite recent rebound

Fresh speculations of the Federal Reserve’s (Fed) interest rate cuts favored the risk appetite for the Gold buying the previous day. However, a lack of major data/events and a cautious mood ahead of Friday’s US PPI and UoM CSI allows the US Dollar to defend weekly gains. The same challenge the XAUUSD’s rebound from a multi-day low, suggesting the bullion sellers’ dominance despite the previous day’s stellar recovery.

While the US Dollar edges higher, currencies like the Euro and the British Pound (GBP) fail to lure bulls amid mixed data at home and chatters of sooner rate cuts from the European Central Bank (ECB) and the Bank of England (BoE). Further, USDJPY ignores the hopes of witnessing a sooner end to the Bank of Japan’s (BoJ) ultra-easy policy while tracing firmer yields and remaining firmer for the third consecutive week, staying firmer at the highest level in three months.

It should be noted, however, that Crude oil fails to justify a firmer Greenback amid geopolitical tensions in the Middle East and OPEC’s optimism about future demand. In doing so, the energy traders ignore the IEA’s downbeat oil demand forecasts.

Moving on, the AUDUSD defends recovery from a multi-month low whereas the NZDUSD reverses the previous weekly gains amid dovish RBNZ concerns.

On a different page, BTCUSD bulls take a breather at the highest level since November 2021 as multiple US banks and funds apply for the spot ETFs. On the same line the ETHUSD braces for the biggest weekly gains since early April 2023 while poking the highest level in 21 months amid broad optimism about spot ETF approvals and due to the bullish on-chain matrix.

Following are the latest moves of the key assets:

• Brent oil buyers take a breather around $82.90-83.00 after rising the most in a week the previous day.
• Gold price struggles to defend recovery from a two-month low, dicey near $2,005 at the latest.
• USD Index prints the first daily gains in three, mildly bid near 104.40 as we write.
• Wall Street closed with mild gains while the Asia-Pacific stocks edged higher. That said, shares in Europe and the UK also print minor gains during the initial hour of trading.
• BTCUSD seesaws near the multi-month high surrounding $52,500 while ETHUSD retreats from the highest level since May 2022 to $2,820 by the press time.

US Dollar eyes weekly gains and challenges commodity buyers…

Although the US Dollar reversed most of the US inflation-led gains in the last two days, the Greenback remains on the way to posting a weekly gain as the US central bank officials hesitate to favor the rate cuts in 2024 while soft landing chatters gain momentum.

Talking about the data, the US Retail Sales marked the heaviest fall since March 2023 and allowed traders to reconfirm the Federal Reserve’s (Fed) rate cuts in 2024 even if the March action appears off the table. Not only the Retail Sales but also the core figures and Industrial Production were also supportive of the traders’ dovish bias, which in turn pushed the US Dollar Index (DXY) towards posting the biggest daily loss in a fortnight. It should be noted that a downward revision to the US Q4 GDP by the Atlanta Fed’s GDPNow model, from 3.4% to 2.9%, also allowed the Greenback to fall.

However, upbeat manufacturing gauges from the Federal Reserve Banks of Philadelphia and New York, as well as the lowest Weekly Jobless Claims in four, puts a floor under the Greenback and triggers the corrective bounce early Friday. On the same line could be the headlines suggesting that Hamas rejects Israel’s offer for a three-month ceasefire & exit of leaders from Gaza.

Additionally, Federal Reserve (Fed) officials also tried to push back sellers but failed to gain major acceptance. Fed Governor Christopher Waller mentioned that the dollar is likely to remain the world's reserve currency. Following that, Atlanta Fed President Raphael Bostic also ruled out the urgency of the Fed rate cuts even as the former US Federal Reserve (Fed) Economist Claudia Sahm stated that the Fed is needlessly delaying rate cuts while also adding "the risks are real".

On the other hand, NZDUSD ignores recovery in the NZ Manufacturing gauge, as well as the RBNZ Governor’s rejection of rate cuts, whereas AUDUSD justifies its risk-barometer status amid the dovish RBA talks.

Elsewhere, BoE officials tried promoting economic optimism and tested the hawkish bias but failed to match the means and kept the GBPUSD pressured for the week. On the same line, EURUSD also stayed depressed as ECB President Christine Lagarde appeared less hawkish and the newswire cites a report favoring the changes in the ECB’s tone in March, as well as rate cuts afterward. Moreover, BoJ Governor Kazuo Ueda repeated previous comments of favoring the higher rates on reaching the inflation targets whereas Japan Finance Minister Suzuki’s verbal intervention weighed on the JPY prices.

The commodity basket is less interesting while posting mixed clues as Gold braces for the weekly loss amid the firmer US Dollar but the Crude Oil ignores IEA’s fears of lesser energy demand and rather concentrates on OPEC’s optimism to brace for the second consecutive weekly gains.

• Strong buy: USDCAD, USDJPY
• Strong sell: Crude Oil, US Dollar, GBPUSD
• Buy: BTCUSD, ETHUSD, Nasdaq, Gold
• Sell: DAX, FTSE 100, BTCUSD, AUDUSD, EURUSD

Second-tier US data to offer the last directions of the week

Looking ahead, US housing numbers will join the Producer Price Index (PPI) and the first readings of the University of Michigan’s (UoM) Consumer Sentiment Index (CSI) to entertain the momentum traders. Also on the calendar are speeches from the mid-tier central bankers from the US and the UK.

That said, most of the data forecasts advocate the Fed’s rate cuts during mid-2024, which in turn might test the US Dollar bulls. However, a surprising strength in the outcomes will highlight the policymakers’ defense of the “higher for longer” rate bias and can challenge the commodities, as well as the Antipodeans.

May the trading luck be with you!