GOLD Price Analysis – March 22, 2024
Daily Price Outlook
Gold price (XAU/USD) failed to stop its downward rally and remained well offered around the 2,175 level. However, the reason for its downward trend can be attributed to the renewed strength of the US dollar, which gained traction despite the Fed’s projected three rate cuts in 2024. However, the optimistic outlook for the US economy was seen as one of the key factors that helped the US dollar to regain traction. Hence, the US dollar's strength has played a major role in underpinning the Gold prices. Another factor undermining the precious metal gold was the risk-on market sentiment, which tends to undermine safe-haven assets like gold.
Federal Reserve Policy Outlook and Economic Data Influence Gold and US Dollar Dynamics
On the US front, the Federal Reserve plans to be less strict with its policies, which might prevent the US Dollar from gaining too much strength. They might decrease interest rates by 75 basis points this year. Despite this, the Dollar bounced back strongly after hitting a low following a recent Federal Open Market Committee (FOMC) decision. The Fed is more optimistic about economic growth, predicting a 2.1% increase in real GDP by year-end, up from 1.4% in December. Furthermore, core inflation is projected to rise to 2.6%, and the unemployment rate for 2024 is forecasted to be 4%, slightly lower than previously thought. These developments support higher US Treasury bond yields, which boost the Dollar, but the Fed's less restrictive policy outlook could temper its upward momentum.
Therefore, the Federal Reserve's less restrictive policy stance undermine the Gold price as the potential for lower interest rates and a stronger Dollar could diminish the appeal of the precious metal.
On the data front, the US Department of Labor reported a drop in Initial Jobless Claims to 210K for the week ending March 16, down from the previous 212K. Additionally, US Secretary of State Antony Blinken mentioned progress in talks for a Gaza ceasefire and hostage release, which bolstered investor confidence.
Therefore, the decrease in Initial Jobless Claims and progress in Gaza ceasefire talks may strengthen the US Dollar as it indicates economic resilience. However, improved investor sentiment could reduce demand for safe-haven assets like Gold.
Moving ahead, investors will await Fed Chair Jerome Powell's speech for insights into future policy decisions, which could impact the XAU/USD. Powell's remarks are anticipated to provide fresh direction and momentum for gold trading.
Optimistic Outlook for US Economy Dampens Safe-Haven Appeal of Gold
Apart from this, the upbeat mood in the market, fueled by confidence in the US economy, is pushing investors towards riskier assets and away from safe-haven options like gold. This sentiment is often driven by optimism about economic conditions. As a result, they are less interested in buying gold, which is typically seen as a safe investment during uncertain times.
Hence, the optimistic outlook for the US economy and the ongoing risk-on sentiment reduce demand for safe-haven assets like gold, leading to downward pressure on its price.
GOLD (XAU/USD) - Technical Analysis
On March 22, gold experienced a slight decline, shedding 0.33% to settle at $2174.68. This movement occurs against a backdrop of oscillating market sentiments, with key technical levels providing insight into potential future movements. The pivot point for the day is set at $2190, with gold currently trading below this threshold, indicating short-term pressure. However, immediate resistance levels at $2186, $2199, and $2223 hint at possible upward movements should the market find sufficient momentum.
Support levels are established at $2150, $2138, and $2124, delineating critical zones where buyers might step in to curb further declines. The Relative Strength Index (RSI) hovers around 50, suggesting a market in balance between buyers and sellers. Meanwhile, the 50-Day Exponential Moving Average (EMA) at $2168 supports the notion that gold prices may find a foundation around the $2167 mark, a level closely watched by traders for potential buying opportunities.
The technical outlook suggests a cautious optimism for gold, proposing a strategic entry price for buy limit orders at $2166. This approach is complemented by a take profit level at $2190 and a stop loss at $2150, aiming to capitalize on the precious metal’s resilience and its tendency to rebound from key support levels.
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S&P500 (SPX) Price Analysis – March 22, 2024
Daily Price Outlook
The S&P 500 index maintained its upward rally and remained in the green on Friday. The index rose by 0.3%, holding its position above the key level of 5,200. While the tech-heavy Nasdaq and the broader market S&P 500 weakened slightly, the Dow Jones Industrial Average led the gains, buoyed by strong performances from blue-chip stocks like Goldman Sachs (GS).
However, the market's positive momentum was mainly driven by Federal Reserve Chairman Jerome Powell's comments hinting at three potential quarter-point rate cuts in 2024. This indication from the Fed chairman sparked optimism among investors, driving the markets higher. Furthermore, upbeat economic projections from the Federal Reserve, including an upgraded GDP forecast and expectations of lower unemployment and higher inflation, contributed to the positive sentiment.
Fed's Projected Rate Cuts and Labor Market Data Impact
On the US front, the Federal Reserve suggested they might lower interest rates three times in 2024, according to Chairman Jerome Powell. This news boosted the S&P 500 index as investors felt more confident in economic support. Lower rates mean borrowing money becomes cheaper for businesses and individuals, encouraging more spending and investment. This positive outlook lifted stock prices, signaling optimism in the market.
In addition to the Fed's monetary policy outlook, the latest data from the US Department of Labor (DOL) provided further support to the market. The report indicated a decline in Initial Jobless Claims to 210,000, signaling a strong labor market. This positive development eased concerns about the economy and contributed to the overall optimism driving the S&P 500 higher.
US S&P Global Composite PMI Impact
On the data front, the US S&P Global Composite Purchasing Managers' Index (PMI) for March came in slightly lower at 52.2, down from 52.5 in February. While the reading remained above the neutral 50-mark, indicating expansion in economic activity, the slight decline raised some concerns among investors. However, the Manufacturing PMI improved to 52.5, surpassing market expectations, which provided a counterbalance to the softer Composite PMI figure.
Hence, the mixed PMI data had a muted impact on the S&P 500 index. Investors remained focused on the broader economic outlook and monetary policy signals from the Federal Reserve, which continued to drive market sentiment.
Antony Blinken's Comments Boost Investor Confidence
On the geopolitical front, US Secretary of State Antony Blinken's remarks regarding the ongoing talks aimed at reaching a ceasefire in Gaza and the release of hostages boosted investor confidence. The news of progress in negotiations made investors feel better, so they reacted positively in the stock market, including the S&P 500 index. This reassurance helped boost confidence among market participants, leading to a favorable response in stock prices.
Investors were happy about possible peace talks in the area, as it could reduce tensions and make the world more stable. Blinken's positive remarks boosted confidence, leading to a hopeful mood in the market. This helped push the S&P 500 index upward.
S&P 500 - Technical Analysis
On March 22, the S&P 500 slightly receded, marking a 0.32% decrease to close at 5241.54. This movement reflects a nuanced interplay of market forces, as investors weigh various economic signals. The index currently rests just below its pivot point at 5252.68, suggesting a finely balanced market sentiment. Resistance levels are poised at 5272.40, 5296.35, and 5325.23, indicating potential hurdles for upward movements. Conversely, support levels at 5224.51, 5199.15, and 5178.02 delineate key zones where the index might find footing should it face further downward pressure.
The Relative Strength Index (RSI) at 66 edges towards the overbought territory, hinting at possible market retraction. Additionally, the presence of a Doji candle in the 4-hour timeframe, followed by robust upward momentum, suggests that a bearish correction may be imminent, particularly as the index has surged beyond its 50-Day Exponential Moving Average (EMA) of 5108.19, indicating a significant upward trend in recent times.
Given these observations, a cautious approach is advised for traders. A sell limit order at 5255 presents a strategic entry point, targeting a take profit at 5220 and setting a stop loss at 5270 to mitigate potential risks. This outlook underscores the current market's sensitivity to short-term fluctuations, urging investors to remain vigilant.
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EUR/USD Price Analysis – March 22, 2024
Daily Price Outlook
During early European trading session on Friday, the EUR/USD currency pair has been experiencing a downward trend and hit the intra-day low around the 1.0816 mark. However, this decline is driven by the renewed strength of the US Dollar and higher US Treasury bond yields. Furthermore, the disappointing Eurozone Manufacturing Purchasing Managers' Index (PMI) data was seen as another key factor that put bearish pressure on the EUR/USD currency pair. Investors are closely monitoring the performance of the pair as they await key economic indicators and central bank statements.
Federal Reserve Signals Potential Rate Cuts, US S&P Global Composite PMI Moderates
On the US front, Federal Reserve Chair Jerome Powell suggested three possible interest rate cuts in 2024, lifting investor confidence and boosting market activity. However, the S&P Global Composite Purchasing Managers' Index (PMI) showed a slight decrease to 52.2 in March from the previous 52.5. Despite this, the Manufacturing PMI increased to 52.5, surpassing expectations, while the Services PMI fell to 51.7, lower than predicted.
Jerome Powell's rate cut hints boosted the USD, pressuring the EUR/USD pair downward. While the US PMI showed mixed results, any signs of US economic strength tend to strengthen the dollar against the euro.
Eurozone Manufacturing PMI Slips, Impacting EUR/USD Pair
In contrast to the US data, the Eurozone's Manufacturing PMI declined to 45.7 in March from the previous reading of 46.5, marking a three-month low. This disappointing figure fell short of the consensus forecast of 47.0. However, the Services PMI improved to 51.1 in March, beating expectations and indicating resilience in the services sector. Despite this mixed performance, the Eurozone PMI Composite rose to 49.9 in March, slightly surpassing expectations and signaling overall economic expansion.
Therefore, the Eurozone's weak Manufacturing PMI weighed on the EUR/USD pair, as it highlighted economic struggles. However, the improved Services PMI and Composite PMI have provided some support, indicating a mixed impact.
Upcoming Data Releases Could Impact EUR/USD Direction
Traders are closely monitoring upcoming data releases and central bank speeches for further insights into the direction of the EUR/USD pair. Specifically, attention will be focused on the German IFO Business Climate index, which could provide clues about the health of the Eurozone's largest economy. Additionally, speeches from Fed Chair Powell and other officials will be scrutinized for any hints regarding future monetary policy decisions.
EUR/USD - Technical Analysis
On March 22, the EUR/USD pair registered a decrease, falling by 0.26% to a rate of 1.08318. This movement indicates a bearish sentiment in the market, as the pair trades below the pivotal 1.0869 mark. Resistance levels are observed at 1.0898, 1.0936, and 1.0964, suggesting potential ceilings the pair might face in its upward trajectory. Conversely, support levels are positioned at 1.0799, 1.0764, and 1.0733, marking critical zones where the price could find a floor in the event of further declines.
The Relative Strength Index (RSI) stands at 38, pointing towards a bearish momentum, while the 50-Day Exponential Moving Average (EMA) at 1.0895 currently lies just above the day's closing price, underscoring the downward pressure. A bearish engulfing candle formation on the 4-hour timeframe near the 1.0830 level reinforces the expectation of continued downtrend for the EUR/USD pair.
Considering the technical landscape, the market outlook for the EUR/USD is bearish, prompting a recommended trading strategy with a sell limit order at 1.0869. This strategy targets a take profit at 1.0799 and sets a stop loss at 1.0898 to safeguard against potential upward movements.
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USD/JPY Price Analysis – March 21, 2024
Daily Price Outlook
The USD/JPY currency pair has been experiencing mixed performance lately, struggling to find a clear direction. This could be attributed to various factors, including uncertainty in global markets, geopolitical tensions, fluctuations in interest rates, or changes in monetary policies by central banks. It's worth noting that the potential for an early rate hike by the Bank of Japan, coupled with improved confidence among Japanese companies, especially in the manufacturing and service sectors, is positive for the Japanese Yen. This contributed to the mild losses in the USD/JPY currency pair.
Furthermore, the risk-on sentiment, backed by the U.S. Federal Reserve indicating it would stick with its plans to cut interest rates, undermined the safe-haven Japanese yen. This was seen as a key factor that kept the lid on any additional losses in the USD/JPY currency pair.
BoJ's Dovish Hike and the Risk-On Mood
It's worth noting that the recent dovish stance by the Bank of Japan (BoJ), along with a prevailing risk-on mood in the market, has exerted downward pressure on the USD/JPY currency pair. The BoJ's decision to maintain accommodative monetary conditions without offering clear guidance on future rate hikes has weakened the Japanese Yen.
Besides this, the risk-on sentiment among investors, driven by positive market sentiment and an improved economic outlook, has further diminished the safe-haven appeal of the Yen. This makes it harder for the USD/JPY pair to rise as traders stay careful due to uncertain monetary policies and global market changes.
Post-FOMC USD Selling Bias and its Impact on USD/JPY Pair
Following the Federal Reserve's announcement of its intention to implement three interest rate cuts by the end of the year, the US Dollar experienced a selling bias. Despite a modest uptick in US Treasury bond yields, the US dollar remained near a one-week low. Fed Chair Jerome Powell, in a press conference after the meeting, highlighted ongoing low inflation despite recent high readings, which pushed the USD down further. This means the USD weakened because the Fed plans to lower interest rates, and Powell's comments about inflation kept the pressure on the currency.
Therefore, the USD/JPY pair likely experienced downward pressure due to the Federal Reserve's rate cut plans and concerns over inflation, leading to a weakened US dollar against the Japanese yen.
USD/JPY - Technical Analysis
In the recent trading session on March 21, the USD/JPY pair experienced a modest downturn, decreasing by 0.24% to close at 150.941. This movement places the pair below its critical pivot point at 151.73, signaling a potential shift in market sentiment. Despite this slight retreat, the currency pair faces immediate resistance levels at 151.77, followed by 152.50 and 153.30, indicating potential barriers to upward movement. On the downside, support is found at 149.63, with subsequent levels at 148.95 and 148.20, which could provide some stability in case of further declines.
Technical analysis highlights a supportive backdrop for the USD/JPY, with an upward trendline near the 150.530 level suggesting an underlying strength. A doji candle closing above this trendline could catalyze a renewed buying interest, particularly if the pair sustains above the 150.530 threshold. Both the 50-Day Exponential Moving Average (EMA) at 149.59 and the Relative Strength Index (RSI) at 62 reinforce the potential for a bullish trajectory. Traders should closely monitor these key technical markers and market dynamics, which will likely dictate the short-term direction of the USD/JPY pair in the forex market.
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AUD/USD Price Analysis – March 21, 2024
Daily Price Outlook
The AUD/USD currency pair maintained its upward rally and remained well bid around the 0.6631 level. The reason for its upward trend can be attributed to the risk-on market sentiment, which tends to underpin the Australian dollar and contribute to the gains of the AUD/USD currency pair. Apart from this, positive employment data from Australia was seen as another key factor that kept the AUD/USD pair higher, as it indicates a strong economy, boosting investor confidence in the Australian dollar (AUD), leading to increased demand and a higher value against the US dollar (USD).
Moreover, the bearish US dollar, driven by the dovish Fed outlook, has played a major role in underpinning the AUD/USD currency pair. The Federal Reserve plans to reduce interest rates by 75 basis points throughout the year, signaling a commitment to accommodative monetary policy in response to economic conditions. This weakens the US dollar and potentially strengthens the AUD/USD pair.
Australian Economic Indicators Impact Currency Markets
On the data front, Australian Employment Change for February surged to 116.5K, exceeding expectations of 40.0K and the previous figure of 15.3K. However, the Unemployment Rate increased to 3.7%, lower than the expected 4.0% and the previous 4.1%. The preliminary Judo Bank Services PMI rose to 53.5 from the previous figure of 53.1, while the Composite PMI showed a slight uptick to 52.4 compared to the previous 52.1.
Hence, the positive employment data from Australia, including a surge in employment change and a lower-than-expected unemployment rate, likely strengthened the Australian Dollar (AUD) against other currencies, potentially leading to gains in the AUD/USD currency pair.
China's Monetary Policy Stability and Positive China-Australia Relations Boost AUD Confidence
On the China front, the People’s Bank of China (PBoC) maintaining its interest rate at 3.45% suggests stability in China's monetary policy, influencing investor sentiment towards the Australian Dollar (AUD). Additionally, the positive tone from the meeting between Chinese Foreign Minister Wang Yi and Australia's Foreign Affairs Minister Penny Wong, highlighting the strong potential and positive trajectory of China-Australia relations, could bolster confidence in the AUD.
US Interest Rate Expectations and Economic Data Impact AUD/USD Exchange Rate
On the US front, the value of the US dollar didn't continue its recent rise and fell on Thhursday. This drop happened because the Federal Reserve announced a plan to cut interest rates three times this year. This could lead to a relative strength in the Australian dollar (AUD) against the US dollar (USD), causing the AUD/USD pair to remain higher.
On the data front, US Building Permits for February increased to 1.518 million, surpassing the expected 1.495 million and the prior figure of 1.489 million. Meanwhile, the housing Starts also saw a rise to 1.521 million from the previous 1.374 million, beating the anticipated 1.425 million. However, the preliminary Michigan Consumer Sentiment Index for March dipped to 76.5 from 76.9, contrary to expectations of no change.
Hence, the positive data on building permits and housing starts might influence the Fed's interest rate decision by indicating strong economic activity.
AUD/USD - Technical Analysis
The AUD/USD pair experienced a notable uptick in the March 21 trading session, marking a 0.62% rise to settle at 0.66257. This movement signifies a resurgence in bullish sentiment, yet the currency pair encounters a pivotal juncture at the 0.6631 pivot point. Resistance levels at 0.6649, 0.6666, and 0.6686 delineate the potential ceilings for further gains, while support levels established at 0.6597, 0.6573, and 0.6552 provide floors to cushion any downward pressures.
Technical indicators suggest a nuanced picture; the Relative Strength Index (RSI) at 71 indicates a market that is veering into overbought territory, hinting at potential pullbacks. Moreover, the formation of a double-top pattern near the 0.6630 level suggests that the Australian dollar may struggle to sustain its upward momentum, with a close beneath this pivotal mark potentially ushering in a bearish correction phase.
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- GOLD Price Analysis – March 21, 2024
GOLD Price Analysis – March 21, 2024
Daily Price Outlook
Gold price (XAU/USD) managed to stop its previous losing streak and hit a fresh all-time high, gaining traction around the 2,220 level. The reason for its upward rally could be attributed to the weaker US dollar, which lost its momentum on the back of the Fed's dovish outlook. The Federal Reserve indicated that it remains on track to cut interest rates by 75 basis points this year, easing market jitters that the central bank will lower its projection for the number of rate cuts to two amid sticky inflation.
Hence, the indication of a 75 basis point interest rate cut by the Federal Reserve eased market concerns, likely weakening the dollar and bolstering gold prices.
In contrast to this, the upward trend in global stocks has limited gold's gains as investors prioritize riskier assets over safe havens like gold.
Fed’s Projected Three Rate Cuts Benefit Gold Amid Weakening USD
On the US front, the Federal Reserve's plan to cut interest rates three times this year has affected gold prices. When the Fed adopts a "dovish" stance, meaning they're less concerned about inflation and more focused on boosting economic growth, it tends to lower interest rates. This makes the US dollar less attractive to investors because they can earn less return on their investments. As a result, the value of the dollar decreases supporting gold prices.
Traders are closely monitoring the Fed's policy decisions and economic projections for signals of future rate cuts, with market sentiment largely favoring a dovish outlook. As a result, gold continues to benefit from the prospect of lower interest rates and a weaker dollar, driving its upward trajectory.
Prevalent Risk-On Mood and its Impact on Gold Price
Despite the bullish performance of gold, an ongoing risk-on mood in the markets has capped some of the metal's gains in recent sessions. However, the extension of the recent bullish run across global equity markets has diverted investor attention away from safe-haven assets like gold, as risk appetite increases and confidence in riskier assets grows. This has led to some profit-taking in gold, particularly as the metal reached slightly overbought conditions on the daily chart.
Despite temporary setbacks from risk-on sentiment, the fundamental factors favoring gold's rise persist. The overall direction for gold remains upward due to ongoing supportive conditions. Although short-term fluctuations may occur, the underlying drivers of gold's bullish performance are expected to endure in the medium to long term.
GOLD (XAU/USD) - Technical Analysis
Gold's price edged higher, gaining 0.81% to settle at $2204.155 on March 21, highlighting investors' continued interest in the safe-haven asset amid economic uncertainties. With the market hovering near the pivot point at $2205, gold faces significant resistance levels at $2215, $2225, and $2235, which are crucial barriers to its upward trajectory. Conversely, support levels at $2195, $2186, and $2177 offer a foundation should the price retrace.
Technical indicators suggest a cautious outlook; the Relative Strength Index (RSI) at 77 points towards overbought conditions, indicating potential for a pullback. Moreover, with the 50-Day Exponential Moving Average (EMA) at $2160, gold's price action has notably distanced itself from recent averages, suggesting a potential reevaluation of its current valuation.
Investors should watch the $2215 resistance level closely, as a failure to breach this mark could lead to a sell-off towards the $2194 support level, with a stop-loss advised at $2225 to mitigate risk.
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GOLD Price Analysis – March 20, 2024
Daily Price Outlook
Gold prices have been facing challenges in gaining momentum recently and remained under pressure near a one-week low. However, the primary reasons for this downward trend is the strengthening of the US dollar, which has been underpinned by hawkish expectations surrounding the Federal Reserve (Fed). The Fed's indication of maintaining higher interest rates for an extended period has boosted confidence in the US currency, thereby keeping the precious metal price down.
Traders in the gold market appear hesitant to make aggressive moves, particularly ahead of the Federal Open Market Committee (FOMC) decision. Additionally, geopolitical risks, such as the ongoing conflict between Russia and Ukraine, provide some support for gold but are not sufficient to offset the broader downward pressure.
Impact of Robust US Inflation Figures on Gold Price
On the US front, the release of strong consumer and producer inflation figures in the United States last week has fueled speculation that the Federal Reserve will maintain its stance of higher interest rates for a prolonged period. This expectation has contributed to elevated US Treasury bond yields, which in turn support the US dollar and dampen demand for gold.
Historically, gold prices tend to move inversely to the US dollar, as investors often flock to the precious metal as a hedge against inflation and currency depreciation. However, the current environment of anticipated rate hikes diminishes gold's attractiveness as an alternative investment.
Investors are closely monitoring the Fed's monetary policy decisions, particularly the updated economic projections and comments from Fed Chair Jerome Powell. Any indications of a more hawkish approach to tightening monetary policy could further weigh on gold prices. Conversely, a dovish tone from the Fed could provide some relief for gold bulls, although the impact may be limited given the market sentiment.
Positive Risk Tone and Its Impact on Gold Price
Despite lingering geopolitical tensions, a generally positive risk tone in financial markets has contributed to downward pressure on gold prices. Wall Street's bullish performance, with the S&P 500 reaching record highs, reflects investor confidence and reduces the appeal of safe-haven assets like gold. The optimistic outlook is bolstered by expectations of continued economic recovery and progress in resolving global conflicts.
Traders are adopting a cautious approach, awaiting clarity on the Fed's rate-cut path before committing to significant positions in the gold market. The outcome of the FOMC meeting, including the "dot plot" indicating future interest rate expectations, will be closely scrutinized for cues on the direction of gold prices. Additionally, Jerome Powell's remarks during the post-meeting press conference could introduce volatility in financial markets and influence gold's trajectory in the short term.
GOLD (XAU/USD) - Technical Analysis
In today's technical outlook, GOLD's price shows a slight uptick, registering at $2159.165, marking a 0.07% increase. Analyzing the 4-hour chart, GOLD has approached key levels that signal potential future movements. The pivot point stands at $2153.10, acting as a reference for the session's bias.
Considering the current setup, the overall trend for GOLD seems cautiously optimistic, with a bias towards bullishness above the $2155 mark. Investors are advised to monitor these levels closely, as a decisive break could dictate the short-term direction. Entry is recommended above $2155, with a take profit target set at $2165 and a stop loss at $2150, to manage risk effectively.
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GBP/USD Price Analysis – March 20, 2024
Daily Price Outlook
The GBP/USD currency pair has been trading on a bearish note and failed to stop its previous five-day losing streak. It is currently trading near 1.2720, as the US dollar continue to gain traction in the wake of expectations that the Fed will maintain its benchmark interest rate steady at its March meeting. Fed Chairman Jerome Powell has emphasized the need for more evidence that inflation is on a sustainable path toward its 2% target before considering lowering interest rates. As a result, lower expectations for a rate cut may lift the US dollar and kept the GBP/USD pair under pressure.
Moving ahead, Investors are closely monitoring two key events that could influence the direction of the GBP/USD pair, the UK February Consumer Price Index (CPI) inflation data and the Federal Reserve (Fed) interest rate decision.
Impact of Robust US Consumer and Producer Inflation Figures on GBP/USD Pair
On the US front, the previously released strong consumer and producer inflation figures in the United States fueled speculations that the Federal Reserve would adhere to its higher-for-longer interest rates narrative. This expectation has bolstered confidence in the US dollar and contributed to the downward pressure on the GBP/USD pair. The Fed's cautious approach to monetary policy, aimed at controlling inflationary pressures, has prompted investors to favor the US dollar over the British pound.
Therefore, the Fed plans to keep interest rates high until inflation stays consistently at or above its target, while the Bank of England aims to balance inflation control with supporting economic growth. This difference in approach between the two banks is putting pressure on the GBP/USD pair.
UK CPI Inflation Report and Its Impact on GBP/USD Pair
On the UK front, the UK CPI inflation report for February is expected to provide insights into the Bank of England's (BoE) monetary policy stance. The headline CPI is projected to rise by 3.6% month-on-month, slightly lower than the 4.0% increase recorded in January. Meanwhile, the Core CPI figure is forecasted to decline to 4.6% year-on-year in February from a 5.1% rise in January.
Hence, the stronger-than-expected CPI inflation report could convince the BoE to maintain its higher interest rates for a longer period, thereby supporting the pound against the US dollar. But if inflation eases, the BoE might hint at cutting rates, which could weaken the pound against the dollar
Traders will closely monitor the UK CPI inflation report ahead of the Fed interest rate decision. Following these events, attention will turn to Chairman Jerome Powell's press conference and economic projections, as well as the BoE interest rate decision on Thursday. These developments could provide clarity and direction to the GBP/USD pair in the coming days.
GBP/USD - Technical Analysis
The GBP/USD pair showed minimal movement today, marking a slight decrease of 0.01% to settle at 1.27197. This subdued activity comes amidst a backdrop of critical technical levels that traders are keenly watching. The pivot point for today stands at 1.26677, indicating a pivotal juncture for future price movements. Resistance levels are clearly defined at 1.27600, 1.28077, and 1.28593, suggesting areas where upward momentum may face challenges. Conversely, the currency pair finds immediate support at 1.26721, with additional safety nets at 1.26416 and 1.26119, which could arrest further declines.
Technical indicators reveal a nuanced picture: the Relative Strength Index (RSI) stands at 42, pointing to a potential undervaluation that could entice buyers. Meanwhile, the 50-Day Exponential Moving Average (EMA) at 1.27432 hovers above the current price, suggesting a slight bearish sentiment in the near term.
Given these observations, the overall trend appears tilted towards bearish, with a recommended strategy to sell below 1.27394, targeting a take profit level at the pivot point of 1.26677, and setting a stop loss at 1.27752. This approach underscores a cautious yet strategic positioning amidst the pair's current technical landscape.
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EUR/USD Price Analysis – March 20, 2024
Daily Price Outlook
The EUR/USD currency pair has been experiencing a downward trend and is currently trading around 1.0865, near multi-week lows. This trend can be attributed to the bullish US dollar, which has been gaining strength in the wake of expectations that the Fed will maintain its benchmark interest rate steady at its March meeting. However, the USD Index (DXY) is consolidating its gains near three-week highs, indicating a general preference for the USD among traders.
Despite positive sentiment in the Eurozone, particularly reflected in the improved ZEW Economic Sentiment, the euro struggles to gain momentum against a resilient dollar. Traders are being careful as they wait for the Federal Open Market Committee (FOMC) meeting this Wednesday. Most expect the committee to keep interest rates steady. Analysts believe Jerome Powell, the Fed Chair, will stress the need for clear signs of inflation before thinking about lowering rates. This belief has reduced speculation about rate cuts, making the USD more attractive.
Strong US Economic Data Reinforces Expectations of Fed's Higher Interest Rates
On the US front, the recent release of robust US consumer and producer inflation figures has reinforced speculations that the Federal Reserve (Fed) will adhere to its higher-for-longer interest rates narrative. These figures highlight a strengthening US economy and heighten expectations that the Fed will maintain its current interest rate levels, thereby supporting the US dollar.
Investors see the Fed's plan for higher interest rates as a sign that they believe in the strength of the US economy, even with global uncertainties. This makes the US dollar more appealing compared to the euro. As a result, the euro loses value against the dollar.
Eurozone Economic Sentiment Improves, but EUR/USD Momentum Remains Sluggish
Despite the Eurozone ZEW Economic Sentiment improving to 33.5 in March from the previous reading of 25.0, the EUR/USD currency pair failed to gain momentum. Similarly, economic expectations for Germany also improved, rising to 31.7 versus 19.9 prior. These positive indicators suggested a more optimistic outlook for the Eurozone and Germany as the improvements in Eurozone ZEW Economic Sentiment and Germany's economic expectations suggest a positive outlook for the Eurozone and Germany, which could generally be considered positive for the EUR currency.
Traders remained cautious ahead of the FOMC interest rate decision, opting to stay on the sidelines rather than actively trading the euro. Meanwhile, the Eurozone's economic sentiment reports provided a brief boost to sentiment but were overshadowed by the anticipation surrounding the FOMC meeting and its potential impact on the US dollar.
EUR/USD - Technical Analysis
In today’s technical outlook, the EUR/USD pair exhibited a marginal upward movement, registering a 0.05% increase to settle at 1.08705. The analysis of the 4-hour chart delineates a nuanced landscape for potential trading strategies, underscored by pivotal price levels that signal the pair's short-term trajectory.
The pivot point, situated at 1.08755, delineates the threshold between bullish and bearish territories. Resistance levels at 1.08996, 1.09297, and 1.09658 consecutively mark potential barriers where the pair's ascent might be contested. Conversely, support points at 1.08421, 1.07996, and 1.07622 represent zones where buyers could potentially reassert control, should the pair retreat.
Technical indicators further color the trading outlook; the Relative Strength Index (RSI) stands at 41, hinting at a bearish sentiment underpinning the current price action. Meanwhile, the 50-day Exponential Moving Average (EMA) at 1.08878 slightly overshadows the current price, suggesting a delicate balance between buyers and sellers, yet leaning towards a bearish bias.
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GOLD Price Analysis – March 19, 2024
Daily Price Outlook
Gold price has been facing downward pressure and maintaining a bearish trajectory near the 2,150 level over the past four days. This decline is attributed to the hawkish feds outlook mainly because investors believe the Federal Reserve will keep interest rates high, making the US dollar stronger. However, the recent release of robust inflation data has reinforced this expectation, strengthening the conviction that the Fed will maintain its current monetary policy stance.
Moreover, the geopolitical tensions such as the ongoing Russia-Ukraine conflict and disturbances in the Middle East have emerged as potential catalysts for supporting gold prices. Investors often turn to gold as a safe-haven asset during periods of heightened uncertainty.
Impact of US Economic Indicators on Gold and the Dollar
On the US front, the recent rise in inflation in the US suggests that the Federal Reserve might keep interest rates high for longer. This makes the US dollar stronger but lowers the price of gold. Investors are expecting fewer interest rate cuts from the Federal Reserve this year, with a 51% chance of a rate cut in June. Thereby, the lower interest rates usually make a currency less appealing to investors, which could limit gains for the US dollar. On the flip side, this could help gold prices because they often rise when the dollar weakens.
Geopolitical Conflicts and Their Impact on Gold Prices
On the geopolitical front, the ongoing conflicts like the Russia-Ukraine war and Middle East disputes make investors worried, so they invest in safe options like gold, increasing its demand and price. This uncertainty can also cause shifts in other financial markets, further boosting gold prices. Ukraine increased drone attacks on Russian oil refineries, and Israeli Prime Minister Benjamin Netanyahu announced intentions to enter Gaza's Rafah area. These actions add to global uncertainty, affecting oil markets and regional stability.
GOLD (XAU/USD) - Technical Analysis
Gold's price experienced a marginal decrease, trading at $2158.57, down by 0.01%. The precious metal is hovering around pivotal levels as traders and investors gauge market directions amidst fluctuating global economic cues. With a current pivot point at $2163, gold faces immediate resistance at $2169, followed by higher resistance levels at $2176 and $2184. On the downside, support is found at $2153, with further cushions at $2147 and $2139, indicating potential floors for price retracements.
The RSI indicator stands at 47, suggesting a neutral to slightly bearish sentiment among market participants. The 50-day Exponential Moving Average (EMA), positioned at $2153, is closely aligned with the current price, offering a potential support zone that could influence short-term price movements.
A downward trendline extending resistance near the $2160 level hints at a bearish bias below this mark. Investors might consider this a cue for potential sell trades, should the price fail to breach the $2162 resistance. Given the current technical setup, a cautious approach is advised, with a recommended entry price for selling below $2162, targeting a take profit at $2152, and setting a stop loss at $2168. This cautious stance reflects the market's ongoing evaluation of gold's value as it navigates through various economic indicators and geopolitical developments.
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