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MTrading Team • 2024-03-01

Gold buyers attack key resistance despite firmer US Dollar

Gold buyers attack key resistance despite firmer US Dollar

Cautious optimism prevails in the market early Friday as traders reassess the odds of the soft-landing in the global economy despite higher rates. Also adding to the positive sentiment could be the headlines from China and preparations for the Fed’s hawkish halts in March and May.

Amid these plays, US Treasury bond yields remain pressured but the US Dollar Index (DXY) stays on the way to reverse the previous weekly losses. That said, Wall Street closed with minor gains but the Asia-Pacific equities and the US stock futures picked up bids heading into the European session.

USDJPY rises the most among the G10 currency pairs while Crude Oil and Gold prices remain firmer. Meanwhile, AUDUSD and NZDUSD print mild gains whereas EURUSD and GBPUSD lack recovery momentum.

Further, BTCUSD and ETHUSD reverse the previous day’s retreat from multi-month highs as crypto traders turn too bullish amid supply crunch woes, as well as due to optimism surrounding the spot ETF approvals.

Following are the latest moves of the key assets:

  • Brent oil prints mild gains around $83.00 while keeping the previous recovery from 200-SMA.
  • Gold price remains firmer at the highest level in a month while poking $2,046 resistance by the press time.
  • USD Index stays defensive above 104.00, reversing the last weekly losses of late.
  • Wall Street closed with minor gains but Asia-Pacific stocks remain firmer. Further, the shares in Europe and the UK also stay on the front foot during the initial hour.
  • BTCUSD and ETHUSD both seesaw near the multi-month high, reversing the previous day’s retreat to around $61,500 and $3,370 at the latest.
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Gold ignores strong US Dollar en route two-week uptrend…

Finance Ministers of the Group of 20 Nations, popularly known as the G20, conveyed the prospect of a global economic soft landing, which in turn favored the sentiment and allowed the Gold price to edge higher despite firmer US Dollar. However, the absence of a joint statement from the G20 tested the optimism and XAUUSD bulls afterward. On the same line, crude oil also ignores fears of higher supplies and talks of easing demand woes to extend the previous day’s recovery momentum.

Talking about the Fed signals, Atlanta Fed President Raphael Bostic reconfirmed the market expectations of witnessing the Federal Reserve rate cuts starting mid-2024 while saying, “It is probably appropriate to reduce the fed funds policy rate in the summertime.” Further, Chicago Fed Governor Alan Goolsbee, a voting member of the FOMC, tried to push back the policy hawks while undermining the latest improvement in the US Core PCE Price Index.

It should be noted that Federal Reserve Bank of Cleveland President Loretta J. Mester backed the baseline forecast of three rate cuts in 2024 and tested the US Dollar bulls. San Francisco Fed President Mary Daly and New York Fed President John Williams also said nothing new while defending the current policy and suggesting a start of the rate cuts in 2024.

Elsewhere, China’s February PMIs from the NBS and the Caixin both signaled a slight improvement in economic activities and put a floor under the prices of commodities and antipodeans. Also helping the sentiment was news suggesting the Chinese Commerce Ministry’s push for more imports and readiness to take qualitative measures to boost the economy. It should be noted that a two-day Two Sessions 2024 will start on Monday and is more likely to unveil strategies favoring the price of Gold and other commodities.

European Central Bank (ECB) board member Fabio Panetta challenged the market sentiment of a delay in the ECB rate cuts by saying that inflation is falling faster than expected. In doing so, the policymaker might have traced the softer German inflation data ahead of today’s key Eurozone CPI and HICP figures. The same joined the firmer US Dollar to weigh on the EURUSD price before today’s corrective bounce.

Elsewhere, hawkish comments from Bank of Japan (BoJ) board member Hajime Takata initially drowned the USDJPY pair before pacifying the bears by ruling out raising rates one after another. Also likely to have challenged the Yen pair sellers is the steepest fall in the Japanese Manufacturing PMI in two years. Additionally, BoJ Governor Kazuo Ueda mentioned that the inflation is dropping back at a rapid pace and also challenged the Yen pair sellers.

While upbeat China PMI joined a retreat in the US Dollar to underpin the AUDUSD pair’s consolidation, a contraction in Aussie manufacturing activity during February tests the bulls. On the same line, NZDUSD licks its wounds while bracing for the biggest weekly loss in six as Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr and Deputy Governor Christian Hawkesby tried defending their “higher for longer” rate bias after announcing a dovish halt in the rates earlier in the week.

  • Strong buy: USDCAD, USDJPY
  • Strong sell: Crude Oil, US Dollar, GBPUSD
  • Buy: BTCUSD, ETHUSD, Nasdaq, Gold

US activity data eyed…

Having witnessed a surprise reaction to the upbeat US inflation clues, Gold traders will pay attention to the US S&P PMIs for February and the ISM data for the said month. Also important will be speeches from a slew of Fed officials. It’s worth noting that the slightly upbeat sentiment could prevail for the rest of the week amid an absence of top-tier data/events and hence the commodities are likely to end the week on a positive side even if the US Dollar is likely to reverse the previous weekly losses.

May the trading luck be with you!