Gold struggles to extend post-Fed rebound amid cautious mood, US employment clues eyed

Market sentiment remains slightly positive as the US Federal Reserve’s (Fed) hesitance in accepting rate hikes allowed optimists to keep the reins despite witnessing an increase in chatters favoring the delayed rate cuts in the US. Also underpinning the risk appetite is the progress in the Gaza peace talks and chatters about lower rates from the ex-US economies.

Against this backdrop, the US Dollar remains on the back foot while allowing the Antipodeans and other major currencies to brace for the weekly gains. However, prices of Gold and crude oil struggle amid mixed catalysts.

That said, EURUSD and GBPUSD edged higher but lacked upside momentum amid drawbacks at home whereas USDJPY consolidated the biggest daily slump in a year amid doubts about Japanese methods to defend the Yen.

Elsewhere, AUDUSD and NZDUSD extend the previous day’s recovery moves amid upbeat sentiment while ignoring mixed data/events at home, as well as holidays in China.

It should be noted that the BTCUSD and ETHUSD remain depressed at the lowest levels in nine weeks amid receding optimism on the crypto front, mainly due to the US SEC’s protective nature.

Following are the latest moves of the key assets:

• Brent oil pares the biggest daily loss in a fortnight around $84.80 but remains pressured by the press time.
• Gold fades recovery from monthly low while making rounds to $2,320 at the latest.
• The USD Index stays depressed around 105.60 after falling the most since December 2023 the previous day.
• Wall Street closed mixed while the Asia-Pacific shares edge higher. Further, UK and European shares trade mixed during the initial trading hour.
• BTCUSD and ETHUSD both post nearly 1.5% intraday losses each to around $57,600 and $2,920 at the latest.

US Dollar licks Fed-inflicted wounds ahead of US jobs report…

US Federal Reserve (Fed) held the benchmark rates unchanged and pushed back concerns about early rate cuts, as expected, during Wednesday’s Federal Open Market Committee (FOMC). However, the US central bank Chairman Jerome Powell’s resistance to entertaining the idea of rate hikes, mainly due to a pause in the disinflation process, caught the market’s eye and drowned the US Dollar.

Apart from the Fed concerns, a three-year low of US JOLTS Job Openings, softer ISM Manufacturing PMI for April and the Atlanta Fed’s GDPNow’s downbeat estimation of Q2 US growth also exerted downside pressure on the Greenback.

With this, the US Dollar Index (DXY) marked the biggest daily loss of 2024 while bracing for a second consecutive weekly loss. It should be noted, however, that the market’s bets on the Fed rate cuts suggest a hawkish approach of late and hence put a floor under the DXY so far on Thursday, which challenges the previous recoveries of commodities and Antipodeans.

The US Dollar’s weakness joined the market’s cautious optimism and a pullback in the yields to underpin the Gold price recovery. However, crude oil dropped to a seven-week low while portraying a four-day losing streak, especially backed by a higher inventory build and receding geopolitical woes in the Middle East.

EURUSD recovered from the weekly low despite holidays at home as the softer US Dollar joined hawkish comments from European Central Bank (ECB) Governing Council member Pablo Hernandez de Cos. Late Wednesday, the policymaker said, “Inflation to fluctuate for rest of 2024 then fall to 2% in 2025.” His comments challenge the market’s bias of witnessing heavy rate cuts from the ECB during 2024.

GBPUSD traces the Euro’s gains but lacks upside momentum amid doubts about the UK’s economic transition, as well as the market’s lack of belief in the Bank of England’s (BoE) hawkish signals.

Further, USDJPY gained major attention as it slumped more than 2.0% to mark the biggest daily fall since early December 2023. In doing so, the Yen pair not only cheered the US Dollar’s weakness but also justified the Japanese policymaker’s verbal intervention and backed concerns of the Asian nation’s efforts to defend the Yen (JPY). That said, Japan’s former diplomat Takatoshi Ito stated that authorities are trying to place a 160 ceiling on USDJPY. It should be observed that Japan’s Ministry of Finance (MoF) is said to have intervened in the Forex market to defend the Yen twice this week after the currency dropped to a multi-year low.

Elsewhere, AUDUSD ignored mixed housing and trade numbers from Australia as Steven Miles of Queensland announced AUD1,000 credit for each household to battle with the higher energy prices. The news joined upbeat sentiment at home and the US Dollar’s fall to propel the Aussie pair. On the same line, NZDUSD also failed to justify the downbeat housing data from home and holidays in China to recover from a weekly low. Elsewhere, the USDCAD pair snapped a three-day uptrend and dropped further so far on Thursday even as the crude oil prices slumped.

• Strong buy: USDCAD, USDJPY, US Dollar
• Strong sell: AUDUSD, NZDUSD, GBPUSD
• Buy: BTCUSD, ETHUSD, Nasdaq, Gold
• Sell: DAX, FTSE 100, BTCUSD, EURUSD

Mid-tier US data, return of full markets eyed….

Having witnessed a volatile reaction to the Fed announcements, traders should pay attention to the US Factory Orders for March and the weekly Jobless Claims. Also important will be the quarterly releases of the US Nonfarm Productivity and Unit Labor Costs. Given Fed Chair Powell’s hesitance in accepting the rate hike concerns and the rejections of early rate cuts, the US Dollar is likely to stay pressured by the unimpressive US data. However, pessimism surrounding the Fed’s rate action and fresh geopolitical concerns will allow the Greenback to pare the post-FOMC losses ahead of Friday’s monthly US employment report.

May the trading luck be with you!