Article by: ETO Markets
The price of gold is trading above $2,300 during the Asian session on Thursday, setting a new record. The US ISM Services PMI data for March came in below expectations, and dovish Fed language raised hopes of a rate cut and gold prices. Next up, some more Fedspeak and US statistics.
According to a survey released by the Institute for Supply Management, the US service sector's growth stalled in March. This increases speculation that the Federal Reserve would begin reducing interest rates in June, which would cause the yields on US Treasury bonds to drop sharply and negatively impact the value of the greenback.
The Japanese Yen gains a little bit versus the US dollar in an attempt to consolidate the small gain it made the day before from the neighbourhood of a multi-decade low. The Japanese government's growing threat of intervention keeps the home currency somewhat supported. In addition, the overnight decline in the US dollar to a level close to a one-week low helped to contain the USD/JPY pair around the 152.00 round-figure barrier.
Following better Judo Bank Purchasing Managers Index data reported on Thursday, the Australian dollar is rising for the third straight session. Better Building Permits data that were made public by the Australian Bureau of Statistics further supported the AUD's gain.
The expectations of a dovish policy shift by the US Federal Reserve this year gained traction following sharp declines in the US Treasury bond yields throughout the curve in March, as evidenced by the US ISM Services PMI and the Price Paid sub-index, which fell to 51.4 and 53.4 in March, respectively. The US dollar's decline was aided by markets' celebration of the revived optimism and the declining yields on US Treasury bonds.
Buyers of gold should continue to exercise care due to the severely overbought Relative Strength Index conditions on the daily chart. The next objective at the psychological $… level would be revealed if acceptance over the $… round level is seen on a daily closing basis, which would support positive interest in the price of gold. However, any downward correction could find initial support near the high of April 2, $…, below which the psychological $… barrier would be tested.
An unexpected increase in US crude stockpiles was revealed in the official data released by the Energy Information Administration on Wednesday. This is considered to be a major factor acting as a headwind for the black liquid. Despite evidence of improved demand, constrained global supply, and worries about supply disruptions in the Middle East, the downside for crude oil prices is still somewhat mitigated.
After the price broke over the important Fibonacci 61.8% retracement barrier at $…, a new bullish signal is emerging on the daily chart. A closing above this level would confirm the signal and add to the support from bullish daily technical research. The iimmsidate resistance awaits at $...
