Gold fades bounce off key support as traders await US statistics

Market overview

Investor optimism is waning early Thursday as worries about a global economic slowdown mix with caution ahead of key US data. Adding to the uncertainty are mixed signals from central bankers and a quiet Asian trading session. With this, the US Dollar is under pressure due to a dovish stance from the Fed and weak early indications for Friday’s US employment report.

Recent catalysts

On Wednesday, disappointing US JOLTS Job Openings and the Fed Beige Book raised concerns about a slowdown in the US economy and softer job growth. This, along with mostly dovish comments from Federal Reserve officials, has put pressure on the US Dollar. However, growing worries about China’s trade tensions and uncertain updates on the Israel-Hamas situation have made it difficult for the Greenback to weaken further. Amid these plays, the US Dollar Index (DXY) has reversed its previous gains from the yearly low and experienced its biggest daily drop in nearly two weeks.

EURUSD, GBPUSD lack recovery moves amid growth fears

The EURUSD and GBPUSD pairs haven’t benefited much from the US Dollar’s weakness, as recent economic data and updates from the Eurozone and the UK have been disappointing. Despite this, both currency pairs are still on track to post weekly gains, though they’ve lost some upward momentum recently. Germany's Kiel Institute now predicts a contraction for the German economy in 2024, and the Federation of German Wholesale, Foreign Trade, and Services (BGA) has warned that German exporters are struggling with a downturn in foreign trade.

USDJPY bears are in control

In contrast to EURUSD and GBPUSD, the USDJPY pair has benefited most from the US Dollar’s weakness, reflecting the Bank of Japan’s (BoJ) hawkish stance and recent positive data from Japan. However, the Yen pair is under pressure, trading at its lowest level in a month and falling for the third straight day. This is because BoJ Board Member Takata indicated early Thursday that the bank plans to gradually move away from its long-standing easy policy if economic data meets expectations.

AUDUSD, NZDUSD ignore softer US Dollar amid risk-off mood

The Australian and New Zealand dollars are showing their sensitivity to risk and dependence on China, and both are set to end the week with losses despite the weaker US Dollar. Earlier, Reserve Bank of Australia (RBA) Governor Michele Bullock stated that the board likely won't cut rates soon if the economy performs as expected. His comments didn't boost the AUDUSD, as traders remain cautious amid uncertainties about the US Dollar, trade tensions, and geopolitical issues involving China, Russia, and the Middle East. Similarly, the NZDUSD is under pressure due to a gloomy economic outlook for New Zealand.

USDCAD snaps four-week downtrend as Oil drops, BoC cuts rates

The USDCAD bears don’t benefit from the US Dollar’s weakness due to falling crude oil prices and the Bank of Canada’s 0.25% rate cut, which was anticipated. Crude oil is heading for its largest weekly loss since late April amid mixed signals about OPEC+ plans to boost output. This drop in oil prices reflects broader economic pessimism, despite a higher-than-expected draw in weekly oil inventories.

Gold struggles ahead of data

Gold prices have reversed earlier declines and are showing modest gains recently. This rebound is supported by a softer US Dollar and increased demand for safe-haven assets during uncertain times. Key factors driving gold's rise include a dovish Fed stance, concerns about a global economic slowdown, and rising geopolitical tensions. However, tensions with China, a major gold consumer, along with pre-NFP market consolidation, are putting pressure on gold buyers.

Cryptocurrencies stay pressured on mixed signals

Despite the US Dollar’s weakness and increased crypto trading volumes, Bitcoin (BTCUSD) and Ethereum (ETHUSD) buyers are struggling. On-chain data suggests traders are uncertain. Additional challenges for Bitcoin and Ethereum include worries about Donald Trump’s potential win in the US Presidential Elections and uncertainty about the US SEC’s future regulations for the crypto industry.

Latest moves of key assets

• WTI Crude oil licks its wounds at 10-month low, mildly bid near $69.30 at the latest.
• Gold defends the previous day’s recovery around $2,500 despite showing indecision on the weekly chart.
• The USD Index stays pressured toward 101.00 after falling the most in a fortnight the previous day.
• Wall Street closed mixed and so did the Asia-Pacific shares. European and British equities, however, remain pressured of late.
• BTCUSD and ETHUSD both remain depressed around $56,800 and $2,400 respectively, bracing for the second weekly loss at the latest.

US employment clues are the key

Looking ahead, Thursday’s US ISM Services PMI and ADP Employment Change for August, along with the weekly US initial Jobless Claims, will provide clues about market direction before Friday’s US employment report for August. Additionally, watch for Eurozone Retail Sales for July and Canada’s job numbers for August.

Forecasts suggest that US economic activity and price pressures may ease while the job market improves. Early indicators point to weaker US employment conditions and softer price pressures, which could signal a soft landing for the US economy. If the upcoming data aligns with these downbeat forecasts, the US Dollar might reverse its recent gains, potentially boosting gold prices towards new highs.

However, EURUSD, GBPUSD, and USDCAD may not benefit much from a weaker US Dollar, while USDJPY could see gains for bearish traders. AUDUSD, NZDUSD, and cryptocurrencies may face further downside pressure unless the US data is significantly disappointing.

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!