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MTrading Team • 2023-09-13

Gold sellers remain hopeful as US Dollar rises ahead of inflation data

Gold sellers remain hopeful as US Dollar rises ahead of inflation data

Financial markets portray the typical pre-data anxiety as traders await the key US inflation numbers for August. Adding to the risk-off mood could be the fears of fresh US-China tension, as well as the Bank of Japan’s (BoJ) exit from its ultra-easy monetary policy. Furthermore, the concerns about Russia-North Korea ties also add strength to the risk aversion.

Together with the sour sentiment, firmer yields and the growing expectations of the US soft-landing propel the US Dollar after reversing from a one-week low the previous day.

The US Dollar’s strength weighs more on the GBPUSD after the UK data dump follows the previous day’s downbeat British employment signals. On the same line is the AUDUSD pair due to its close links with China and risk-barometer status.

It’s worth noting that EURUSD remains depressed as the broad US Dollar strength joins the market’s pre-ECB positioning while the JPY fails to cheer hawkish concerns about the BoJ.

Elsewhere, the Gold Price prods the 200-EMA support but prices of Brent Oil and WTI crude oil remain firmer at the yearly highs marked the previous day.

That said, Wall Street closed in the red while the Asia-Pacific shares edged lower. It should be noted that the cryptocurrencies trade mixed as market players seek more clarification amid fears of harsh regulations and a delay in the spot ETF approvals, not to forget the industry versus government tension.

Following are the latest moves of the key assets:

  • Brent oil remains firmer at the highest level since November 2022, up half a percent to $92.60 by the press time.
  • Gold price prints mild losses near $1,910, poking the 200-EMA support at the latest.
  • USD Index defends the previous day’s recovery to around 104.70 as we write.
  • Wall Street closed with minor losses and so did the Asia-Pacific stocks. That said, equities in Europe and the UK trade mixed by the press time.
  • BTCUSD prints mild gains around $29,580 but ETHUSD drops to $1,590 as we write.
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Cautious markets underpin US Dollar strength

Given the latest talks about the US soft-landing, as well as the recently increasing odds of witnessing the Fed’s final rate hike in November 2023, today’s US Inflation numbers become more important and escalate the anxiety ahead of the CPI data for August.

The US-China tension also adds to the market’s risk aversion as US Senate Majority Leader Chuck Schumer, a politician who has majorly favored hard policies for China, will travel to Beijing, Japan and South Korea soon as a part of improving the US-China ties.

Furthermore, fears of witnessing a liquidity crunch in China, after the BoJ exits its ultra-easy monetary policy, joined the pessimism among the business houses to also roil the mood. That said, Japan’s PPI improves on MoM but eases on YoY for August, which in turn joins the hawkish outlook about the Bank of Japan (BoJ) shared by various reports from media outlets including Bloomberg and Nikkei, shared by Reuters, to challenge the USDJPY buyers. The macros suggest increasing odds of the BoJ’s exit from the negative rate policy in early 2024.

It’s worth noting that a Reuters-Tankan survey for September found that the optimism among Japanese manufacturers has dropped the most in eight months, while morale in the services sector has also fallen. The poll cited China's economic woes and global hardships as the main catalysts for the renewed pessimism among the Japanese businesses.

Elsewhere, the chatters about the European Central Bank’s (ECB) lifting of inflation forecasts and defending the hawkish monetary policy, as well as recession woes in the UK, China and Eurozone, continue helping the pessimists.

With this, the US Dollar Index traces the firmer yields and weighs on the Commodities and Antipodeans. Additionally, GBPUSD bears the burden of downbeat activity numbers whereas AUDUSD performs its role of the risk-barometer, as well as justifies its close trade ties with China.

Moving on, Gold Price prods the key EMA support (mentioned in our technical analysis) whereas Oil buyers also take a breather at the Year-To-Date (YTD) high. That said, stocks in the Asia-Pacific region grind lower, with China drowning the sentiment, after the Wall Street benchmarks closed in the red.

Talking about the cryptos, fears that the SEC Chairman Gary Gensler won’t allow cryptocurrencies to have softer terms weighed on the prices of BTCUSD and ETHUSD. However, comparatively more optimism surrounding Bitcoin helped the BTCUSD to print mild gains.

  • Strong buy: USDCAD
  • Strong sell: ETHUSD, GBPUSD, Gold
  • Buy: USD Index, Nasdaq, USDJPY

Eurozone Industrial Production, US inflation in focus

Moving on, the markets are likely to witness increasing volatility as the Eurozone Industrial Production for July will precede the US Consumer Price Index (CPI) for August. With the mixed expectations from both the scheduled data, the US Dollar buyers have an upper hand considering the likely pre-ECB positioning, unless the US CPI drops heavily. The same could weigh on the riskier assets moving forward.

May the trading luck be with you!