Gold buyers focus on $2,690 and Fed signals

Market momentum

The risk outlook in Asia is positive, fueled by optimism from China’s stimulus, upbeat OECD forecasts for 2024, and expectations of more rate cuts from the US Federal Reserve. However, the overall sentiment remains cautious as traders await Fed Chair Jerome Powell’s speech and the US Core PCE Price Index. Additionally, mixed geopolitical news from the Middle East and concerns about China’s ability to boost its economy through monetary policy are testing the optimism ahead of this week’s key data and events, especially with month-end and quarter-end consolidations approaching.

US Dollar consolidates monthly/quarterly losses

Concerns about Israel's ground invasion of Lebanon and challenges in China could give the US Dollar its first weekly gain in three weeks. That said, The DXY gained significantly after the US government passed a bill to avoid a shutdown through December. However, the Greenback continues to underperform for the month and quarter due to dovish Fed expectations. On Thursday, the US Dollar Index (DXY) remains mostly steady as traders await Fed Chair Powell’s speech and the US Core PCE Price Index, the Fed's preferred inflation measure.

Major currencies dwindle, Antipodeans edge higher

As month-end and quarter-end consolidations challenge buyers of EURUSD and GBPUSD, USDJPY bulls may maintain control amid cautious market optimism and fresh doubts about potential rate cuts from the Bank of Japan (BoJ).

It should be noted that the Antipodeans, namely the AUDUSD and NZDUSD remain on the front foot on China stimulus and expectations of delays in the rate cuts from the respective central banks. That said, USDCAD fades bounce off February 2024 even as the Crude Oil slumps amid supply fears and ignores a heavy draw in the weekly inventories.

Everyone loves Gold

Gold buyers are celebrating it all whether it's global economic and geopolitical uncertainty, China’s stimulus, or expectations of lower rates from major central banks. That said, the precious metal hovers around the all-time high while reversing the previous day’s retreat from the record top of $2,670. However, the month-end and quarter-end positioning, as well as the pre-data anxiety, tests the upside bias ahead of this week’s top-tier data/events.

Crude oil bears are weighed down by fears that OPEC+ will flood the market with supplies, coupled with economic uncertainties among major players that could dampen energy demand. As a result, crude is largely ignoring geopolitical tensions in the Middle East, hurricane concerns, a softer US Dollar, and news of stimulus from China.

Cryptocurrencies tease buyers

Bitcoin (BTCUSD) and Ethereum (ETHUSD) have reversed Wednesday’s losses and are on track for weekly and monthly gains. However, uncertainty surrounding the US Presidential Elections and chain data challenges crypto optimists, especially as the US Dollar recovers some of its prior losses.

Latest moves of key assets

• WTI Crude oil extends the previous day’s losses, declining more than 2.0% intraday to $68.00 by the press time.
• Gold picks up bids to reverse the previous day’s retreat from an all-time high, near $2,660 as we write.
• The USD Index lacks upside momentum around 100.90 after reversing from the yearly low the previous day.
• Wall Street closed mixed but the Asia-Pacific shares edged higher. On the same line, European and British equities also remain on the front foot of late.
• BTCUSD and ETHUSD both reverse the previous day’s losses while bracing for weekly and monthly gains to around $63,700 and $2,620 respectively.

Busy days ahead…

Looking ahead, a busy schedule of key data and events will engage market players on Thursday and Friday. Among them, monetary policy announcements from the Swiss National Bank (SNB), US Durable Goods Orders, and the final US Q2 GDP readings will be the immediate catalysts to watch. However, the main focus will be on Fed Chairman Jerome Powell’s speech on Thursday and Friday’s US Core PCE Price Index, which is the Fed's preferred measure of inflation. Additionally, Thursday’s US Initial Jobless Claims, European Central Bank (ECB) President Christine Lagarde’s speech and Friday’s Eurozone sentiment data for September will add to the market's considerations.

Since the SNB is not expected to change its monetary policy, the USDCHF may stay under pressure near its yearly low due to the Swiss Franc's (CHF) haven appeal. However, Powell’s hawkish stance and strong US Core PCE Price Index could help the pair stabilize.

On the other hand, EURUSD may not gain from the Eurozone sentiment data for September, as worries about potential rate cuts from the ECB are largely confirmed. Still, expectations of two more 0.50% Fed rate cuts from the Fed may keep Euro buyers hopeful at the yearly high, unless unexpected developments arise.

Similarly, GBPUSD will depend on US factors for direction but may remain stable whereas USDJPY could continue a two-week uptrend unless the US Dollar drops significantly.

Meanwhile, buyers of the Australian, New Zealand, and Canadian Dollars can feel optimistic due to China’s stimulus and a risk-on sentiment, unless the US Dollar makes a strong recovery following Powell’s speech and Fed inflation data, which seems unlikely.

Gold prices are poised for a potential all-time high as uncertainty about major central banks and economic growth drives traders to this traditional safe haven. However, an upward resistance line from December, near $2,690, along with an overbought RSI and possible market consolidation at the end of the month/quarter, could pose challenges for XAUUSD bulls.

In the end, crude oil may face difficulty gaining traction due to concerns about OPEC+ supplies and global economic growth. However, equities and cryptocurrencies could stay strong, driven by expectations of lower rates in the near future.

Predictions for Key Assets

• Recovery Expected: USDCAD, USDJPY, US Dollar, Silver
• Further Downside Likely: AUDUSD, NZDUSD, GBPUSD
• Mostly Sideways Expectations: BTCUSD, ETHUSD, Nasdaq, Gold, DJI30, USDCNH
• Slow & Gradual Fall Expected: DAX, FTSE 100, EURUSD, Crude Oil

May the trading luck be with you!