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MTrading Team • 2024-05-10

Gold confirms falling wedge to recall buyers as US UoM Sentiment, inflation expectations loom

Gold confirms falling wedge to recall buyers as US UoM Sentiment, inflation expectations loom

The market sentiment remains firmer early Friday amid hopes of witnessing more challenges to the Fed’s hawkish bias, especially after recently downbeat US jobs data. Also allowing the risk assets to shine are talks about China’s more stimulus and the latest prints of upbeat growth numbers from the US, Eurozone, and the UK.

Amid these plays, the US Dollar dropped the most in a week before paring losses ahead of this week’s key data. Even so, the US Dollar Index (DXY) braces for the first weekly gain in three. That said, The Treasury bond yields pick up bids to pare previous losses whereas equities edge higher.

EURUSD rises for the fourth consecutive day while GBPUSD also extends the previous day’s heavy gains after upbeat UK growth numbers.

USDJPY reverses Thursday’s retreat from the weekly high whereas USDCAD snaps a two-day losing streak with eyes on the monthly prints of Canadian employment report.

Moving on, AUDUSD braces for the first weekly loss in three while reversing prior gains but the NZDUSD stays on the way to posting a three-week uptrend despite today’s losses.

Gold also prepares for a heavy weekly gain after declining in the last two consecutive weeks on confirmation of the falling wedge bullish chart formation. Further, Crude Oil also eyes the weekly upside while extending recovery from a two-month low.

Elsewhere, BTCUSD and ETHUSD both stay on the negative side for the week despite the previous day’s recovery. The latest weakness in the crypto market could be linked to the US SEC’s harsh stand and the traders’ consolidations of gains marked in early 2024.

Following are the latest moves of the key assets:

  • WTI Crude oil rises for the third consecutive day, approaching $80.00 by the press time.
  • Gold jumps to a three-week high surrounding $2,360, up for the second consecutive day at the latest.
  • The USD Index pares the previous day’s losses around 105.30 while bracing for the first weekly gain in three.
  • Wall Street closed with mild gains and the Asia-Pacific shares edged higher. Further, British and European shares trade mixed during the initial trading hour.
  • BTCUSD and ETHUSD both remain pressured for the day near $62,900 and $3,035 as we write.
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US Dollar eyes first weekly gain in three despite Thursday’s fall…

On Thursday, the stronger prints of the US Weekly Initial Jobless Claims and Continuing Claims supersede hawkish Fed talks to drive down the US Dollar. That said, the greenback fell alongside bond yields and helped the risk trades to push higher, which in turn allowed commodities and Antipodeans to brace for weekly gains.

Meanwhile, fresh fears of the US-China tension and comments from US Treasury Secretary Janet Yellen seem to tame the US Dollar weakness ahead of the preliminary readings of the US UoM Consumer Sentiment Index and 5-year Consumer Inflation Expectations.

Bloomberg came out with the news suggesting US President Joe Biden’s administration’s planning to unveil the tariffs on Chinese electric vehicles (EVs) after a review the next week. The update also cited likely news levies for China-made batteries and solar equipment.

On the other hand, US Treasury Secretary Yellen said that the US inflation has come down substantially but is not yet where it needs to be. The same keeps the odds of a sooner Fed rate cut low.

It’s worth noting that San Francisco Fed President Mary Daly said that she still sees a really healthy labor market and inflation that is too high while adding, “Fed policy is restrictive but it may still take time to bring inflation down.”

The US Dollar’s weakness joined comments from European Central Bank (ECB) Vice President Luis de Guindos to help EURUSD snap a two-day losing streak, as well as allow the Euro pair to post the biggest daily gains in a week. That said, ECB’s de Guindos stated, “ECB path of rates beyond June does not want to be precommitted.” The policymaker also said that the number of future rate cuts will depend on multiple factors including salaries and possible adjustment in financial markets.

On the other hand, GBPUSD marked a volatile day before closing with hefty gains despite mixed signals from the Bank of England (BOE). The “Old Lady”, as the BoE is informally known, left the benchmark interest rates unchanged while pushing back the rate cuts. However, the economic projections and comments from BoE Chief Economic Huw Pill suggesting the reductions in rates over the next few months challenged the optimism about the British Pound (GBP).

Earlier on Friday, the UK’s first readings of the Q1 2024 GDP showed that the nation emerged from the jaws of recession with 0.6% QoQ increase versus -0.3% prior. With this, the Cable pair ignores softer prints of the Industrial and Manufacturing Production details to extend the previous day’s gains.

USDJPY bucked the trend while snapping a three-day uptrend amid a downtick in the headline US Treasury bond yields, as well as verbal intervention from Japan. It’s worth mentioning that softer household spending and sentiment data from Japan joined the US Dollar rebound, as well as doubts about the Bank of Japan’s (BoJ) further rate hikes, renewed the Yen pair’s upward trajectory early Friday.

NZDUSD and AUDUSD drop the most among the G10 currency pairs amid pessimism for China and the US Dollar’s corrective bounce ahead of this week’s key data. In doing so, the NZDUSD ignores upbeat prints of New Zealand Business NZ PMI for April, from 46.8 to 48.9. Furthermore, USDCAD dropped in the last two consecutive days before posting a corrective bounce of late. In doing so, the Loonie pair cheers the upbeat performance of Canada’s key export item Crude Oil while ignoring dovish comments from Bank of Canada (BoC) Governor Tiff Macklem. On Thursday, BoC’s Macklem said, “Higher rates will continue to restrain household spending.”

The prices of crude oil and Gold extend the previous day’s gains despite the US Dollar’s latest rebound. The reason could be linked to the market’s fresh bout of confidence backed by US job clues, as well as softer yields. That said, Crude oil rises for the fourth consecutive day as week-on-week losses of the US Dollar join heavy energy import from China, Middle East tensions and a draw in the US stockpiles. Further, Gold price confirmed a falling wedge bullish chart formation, suggesting a gradual run-up toward the fresh record high.

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

Multiple catalysts to offer a busy Friday…

After a slew of dull days and light calendars, the momentum traders are likely to witness an active day that is already started with the UK’s Q1 2024 GDP. Also important to watch will be the first readings of the US UoM Consumer Sentiment Index and the Consumer Inflation Expectations. Furthermore, Canada’s monthly jobs report and multiple central bankers’ speeches from Europe, the UK, and the US. It should be noted that the late Friday’s readings of China inflation data and next week’s US inflation clues will also be important to take care of while trading.

Above all, traders will seek clues of softer inflation, steady employment, and soft-landing to support the respective currencies. In the absence of this could redirect the buyers toward the US Dollar.

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