Gold tests key support ahead of US inflation

Markets stay cautious ahead of US CPI

Trading sentiment is cautious early Wednesday as traders await the US October Consumer Price Index (CPI) data. Mixed economic reports from the Asia-Pacific region are also adding to the uncertainty.

That said, Tuesday's market lacked momentum ahead of key US inflation data, with mixed geopolitical news and hawkish Fed comments heightening uncertainty. Even the return of US and Canadian traders couldn't spark much volatility.

The US Dollar Index (DXY) held at a six-month high, keeping pressure on major currencies and commodities. Gold prices, though supported by a nine-month trend line, are struggling to gain traction as buyer enthusiasm remains weak.

EURUSD, GBPUSD under bearish pressure, USDJPY prints three-day uptrend

The US Dollar’s strength, combined with weak ZEW data for the Eurozone and Germany and dovish ECB comments, pressures EURUSD. Meanwhile, GBPUSD struggles under dovish remarks from BOE economist Huw Pill and a rise in UK unemployment. USDJPY extends a three-day uptrend, fueled by stronger US yields, a mixed BoJ outlook, and political uncertainty in Japan, despite disappointing local data.

AUDUSD, NZDUSD and USDCAD also reflect USD strength, downbeat commodities

Like major currencies, the Australian, New Zealand, and Canadian dollars remain under pressure from a stronger US Dollar. These currencies are also weighed down by weak domestic data, falling commodity prices—particularly crude oil—and ongoing concerns about China’s economic outlook. Earlier in the day, the Aussie wage price index remained intact for Q3 2024.

OPEC forecasts weigh on Crude Oil, Gold bounces off key support

OPEC's revised lower oil demand forecasts for 2024 and 2025, combined with a stronger US Dollar, added further downside pressure on WTI Crude prices. Meanwhile, Gold finds support at a nine-month trend line, halting its three-day downtrend as market caution grows and US Treasury yields pause their rally.

Crypto bulls take a breather

Cryptocurrency buyers take a breather after a strong week of gains, with market sentiment cooling. Bitcoin (BTC/USD) retreats from its all-time high, while Ethereum (ETH/USD) experiences a two-day pullback from its highest level since late July. Meanwhile, Dogecoin rallies following US President Trump's appointment of Elon Musk and Vivek Ramaswamy to lead the new Department of Government Efficiency (DOGE).

Latest moves of key assets

• WTI crude oil bounces off a two-week low to stall a three-day losing streak near $68.30.
• Gold recovers from a seven-week low to $2,605 at the latest, challenging a three-day downtrend.
• The USD Index stands on the front foot at the highest level since early May, close to 106.10 as we write.
• Wall Street closed with minor losses and the Asia-Pacific shares also edged lower. Further, European and British equities hold lower grounds during the initial trading hour.
• BTCUSD and ETHUSD both extend the previous day’s retreat from their recent peaks, down more than 1.0% intraday to around $86,850 and $3,150 as we write.

US CPI in the spotlight

The US Consumer Price Index (CPI) for October will be a major focus, with expectations for a 0.2% monthly rise and a slight increase in annual inflation to 2.6%. Core CPI, excluding food and energy, is also forecast to stay at 0.2% MoM and 2.4% YoY. Positive inflation data could strengthen the US Dollar, especially if it boosts expectations for slower rate cuts from the Fed. This could put pressure on commodities like gold, potentially pushing it below key support at $2,590.

Additionally, the Bank of England’s Monetary Policy Report and comments from US Federal Reserve officials will be important for market sentiment. The GBPUSD pair may face downward pressure despite strong UK jobs data, while EURUSD remains weak due to soft data and dovish ECB signals. USDJPY could continue its upward trend with mixed Bank of Japan signals and political uncertainty in Japan.

In crude oil markets, rising USD strength and easing geopolitical tensions in the Middle East may push prices lower, as growing supply concerns and weak demand fears weigh on the market.

Predictions for Key Assets

• Recovery Expected: USDCAD, USDJPY, US Dollar, Silver, BTCUSD, ETHUSD
• Further Downside Likely: AUDUSD, NZDUSD, GBPUSD
• Mostly Sideways Expectations: Nasdaq, Gold, DJI30, USDCNH
• Slow & Gradual Fall Expected: DAX, FTSE 100, EURUSD, Crude Oil

May the trading luck be with you!