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MTrading Team • 2024-02-01

Gold ignores firmer US Dollar to print four-day winning streak

Gold ignores firmer US Dollar to print four-day winning streak

The risk complex improves early Thursday as market players seek solace in the downbeat yields amid hopes of economic sturdiness in the key nations. It’s worth noting, however, that the US Federal Reserve (Fed) Chairman Jerome Powell’s rejection of March rate cuts and positive expectations from the US macros weighed on the sentiment late Wednesday.

Apart from the US catalysts, hopes of witnessing more stimulus from China also favor the market’s mood and the riskier assets, which in turn prod the US Dollar bulls due to the downbeat Treasury bond yields.

With this, the EURUSD and GBPUSD remain pressured but the USDJPY fails to portray the US Dollar’s gains, especially when the bond coupons are down and Japanese policymakers advocate higher wages. Further, AUDUSD drops the most among the G10 currency pairs but the NZDUSD prints mild gains. Additionally, Gold Price rises for the fourth consecutive day while bracing for another attack on a one-month-old falling resistance. That said, crude oil prices remain pressured at a one-week low marked the previous day despite the geopolitical tensions in the Middle East.

On a different page, BTCUSD and ETHUSD both drop amid the market’s preparations for the Bitcoin halving and the reassessment of optimism about Ethereum spot ETF approvals.

Following are the latest moves of the key assets:

  • Brent oil holds lower ground at a one-week low, around $81.00 at the latest, after falling heavily the previous day.
  • Gold price portrays a four-day uptrend around $2,045 by the press time.
  • USD Index defends the post-Fed gains at 103.80, up 0.25% intraday as we write.
  • Wall Street closed in the red but the Asia-Pacific stocks drifted higher. That said, equities in the UK and Europe print minor losses during the initial hour.
  • BTCUSD and ETHUSD both posted minor losses near $42,200 and $2,280 by the press time.
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Gold buyers cheer downbeat yields…

Gold price remains on firmer footing despite the latest inaction above the key resistance confluence, now support. In doing so, the XAUUSD benefits from the downbeat Treasury bond yields while ignoring the firmer US Dollar. That said, the US Dollar Index (DXY) bounced off a one-week low and remains firmer around 103.60 of late but the benchmark US 10-year Treasury bond yields lick their wounds at the lowest level in a month.

US Federal Reserve (Fed) kept benchmark interest rates unchanged, as expected. However, the FOMC Statement removed wording on the rate cuts and was accompanied by Fed Chairman Jerome Powell’s hawkish conference to recall the US Dollar bulls. It’s worth noting, however, that the US Treasury bond yields dropped to a multi-day low and allowed the Gold Price to cheer the technical breakout around the mid-$2,000s.

It’s worth noting that a drastic fall in the market’s bets favoring the March rate cut could be witnessed after the Fed event and the same joined hawkish statement from the global rating agency Fitch to defend the US Dollar bulls. That said, Fitch expressed anticipations of no rate cuts until June or July while the CME’s FedWatch Tool showed nearly 35.0% odds favoring the Fed rate cut in March versus a 40.0% chance of witnessing such an event marked the previous week.

In addition to the Fed-induced moves and a slump in the bond yields, the Gold buyers also cheered upbeat signals from China, one of the key XAUUSD customers.

Recently, China’s Caixin Manufacturing PMI reprinted 49.8 figures for January versus 49.6 expected. The same followed the Dragon Nation’s NBS Manufacturing PMI and comments suggesting more stimulus from China President Xi Jinping and Vice Finance Minister to propel the gold price.

Meanwhile, unconfirmed news suggesting a fresh round of US strikes on Hourthi targets in Yemen joined the Red Sea tensions to challenge the gold buyers. On the same line could be the market’s recent confidence in the US economic transition and the doubts about the Fed’s rate cuts in March.

Elsewhere, dovish comments from the European Central Bank (ECB) officials join the economic pessimism about Britain to weigh on the EURUSD and GBPUSD. USDJPY, on the other hand, traces the softer yields and hawkish expectations from the Bank of Japan (BoJ), especially after the Japanese policymakers push for higher wages.

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

EU inflation, BoE and US ISM PMI in focus…

After witnessing a volatile Wednesday, the market players should aim for another active day as a slew of top-tier data/events from the Eurozone, the UK and the US are up for publishing. Among them, the first readings of the bloc’s inflation data for January will be crucial amid the ECB officials’ latest dovish remarks. Further, the BoE is likely to keep the rates unchanged but talks about the future rate cuts and the economic sturdiness will be crucial to watch. Last, the US ISM Manufacturing PMI will offer clues for the US employment and activity conditions ahead of Friday’s key Nonfarm Payrolls (NFP).

Given the likely upbeat concerns about the US, the traders may well cheer the US Dollar strength and retrace their previous bets in favor of the riskier assets. However, the Treasury bond yields need to pause the south-run to convince the Greenback bulls.

May the trading luck be with you!