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MTrading Team • 2024-02-07

Gold fades bounce off key support amid sluggish markets

Gold fades bounce off key support amid sluggish markets

An absence of major risk-negatives from the Middle East joined the fresh concerns about the rising US debt levels challenging the US Dollar the previous day, as well as weighing on the Greenback of late. In doing so, the traders ignored hawkish comments from the Federal Reserve (Fed) officials suggesting a delay in the rate cuts. That said, a pullback in the yields was an additional challenge for the Greenback on Tuesday.

The US Dollar’s pullback joined the upbeat New Zealand employment report to fuel the NZDUSD the most among the G10 currency pairs. However, fears surrounding China challenged commodity buyers. With this, Gold fades bounce off the $2,020 support confluence while Crude Oil also lacks recovery momentum.

Furthermore, equities in the Asia-Pacific zone edged higher and the US stock futures also printed minor gains while tracking a slightly upbeat Wall Street mood. That said, the Treasury bond yields lack upside momentum after hitting a bump the previous day.

In the case of the cryptocurrencies, BTCUSD and ETHUSD both snap a two-day winning streak as the US SEC delays another Ethereum Spot ETF approval.

Following are the latest moves of the key assets:

  • Brent oil fades the week-start rebound from a multi-day low of around $79.00 at the latest.
  • Gold price seesaws around $2,035 after bouncing off the $2,020 support confluence the previous day.
  • USD Index extends the previous day’s pullback from a three-month high to 104.00 by the press time.
  • Wall Street closed with minor gains but the Asia-Pacific stocks recovered. That said, shares in Europe and the UK traded mixed during the initial hour of trading.
  • BTCUSD and ETHUSD both post minor losses after a two-day uptrend to near $43,000 and $2,360 by the press time.
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Mixed clues allowed US Dollar to pare recent gains…

Tuesday’s mixed comments from US Treasury Secretary Janet Yellen joined the sluggish markets and a lack of major data/events to prod the previous advances of the US Dollar and yields. That said, US Treasury Secretary Yellen cited the importance of reducing deficits to stay on a fiscally sustainable path while adding, “US budget does not need to be balanced to be on a fiscally sustainable path.”

On a different level, an update from the New York Federal Reserve (Fed) mentioned America’s rising debt levels but cited the levels were below the pre-pandemic era and put a floor under the US Dollar.

Further, Cleveland Fed President Loretta J. Mester mentioned the good place of the Fed’s monetary policy while showing possibilities of witnessing rate cuts later this year. On the other hand, Minneapolis Fed President Neel Kashkari said that the Fed is not quite there on YoY inflation but getting there. Additionally, Philadelphia Federal Reserve Bank President Patrick Harker praised the US central bank’s decision to hold rates steady while seeing 'real progress' on getting inflation back to 2%.

Elsewhere, Germany’s Industrial orders offered a surprise jump of 8.9% MoM for December versus the revised down prior of 0.0%, as well as the 0.0% expected. However, the Eurozone Retail Sales for the said month disappointed the Euro buyers with -1.1% MoM fall compared to -1.0% expected and 0.3% prior. It should be noted that a slew of European Central Bank (ECB) officials including Vujčić, de Coz and Schnabel crossed wires and the majority of them pushed back the concerns of witnessing immediate rate cuts.

On a different page, the preliminary readings of Japan’s Coincident Index and Leading Economic Index for December came in better than forecast and bolstered the calls for the Bank of Japan’s (BoJ) early exit from the easy-money policies. The same joined a pullback in the Treasury bond yields to allow the USDJPY prod a two-day uptrend.

China continues to test the Asia-Pacific investors as stimulus news allows equity bears from the dragon nation to take a breather but talks that the exchanges said to be restricting stock selling by some hedge funds limited the gains.

Bank of England (BoE) policymaker Swati Dhingra showed her support for the early rate cuts but failed to weigh on the GBPUSD amid a broad pullback in the US Dollar and yields.

It should be noted that the upbeat New Zealand (NZ) jobs report allowed the NZ Dollar to lead the G10 currency gainers versus the US Dollar.

Talking about commodities, a softer-than-expected build in the US weekly oil inventories joined the downbeat US Dollar and looming geopolitical woes to help the Crude oil buyers, as well as favoring the Gold prices recover from a convergence of the 50-EMA and a multi-day-old support line. However, sluggish markets and fears of waning demand from China challenge the commodity buyers.

Overall, a lack of major directives and mixed signals from the fundamentals, as well as technical analysis, prod the previous moves of the US Dollar and yields.

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

A light calendar ahead…

Moving forward, the US Trade Balance figures for December will join a slew of Federal Reserve (Fed) speakers to entertain the momentum traders. Also important to watch will be the German Industrial Production for December and speeches from the Bank of England (BoE) policymakers. It should be noted that the scheduled data/events lack importance and may not be able to offer much entertainment to the traders unless offering a too-drastic outcome. Even so, the market’s consolidation ahead of China's Lunar New Year holidays joins the light calendar to prod the US Dollar bulls and exert downside pressure on the yields, which in turn can help riskier assets.

May the trading luck be with you!