Article by: ETO Markets
The US inflation report was greater than anticipated, which supported the Federal Reserve's cautious strategy of reducing interest rates in 2024. The Federal Open Market Committee is still optimistic that US inflation will reach the central bank's 2% objective. However, before Fed supports rate reduction, they want to see more consistent positive evidence.
Before loosening monetary policy, the Fed, according to Fed Chair Jerome Powell and other Fed officials, needs to see more positive data and validate the direction of inflation. The markets are now pricing in a roughly 80% chance that the Fed will lower rates in June, reversing earlier wagers that the central bank would start doing so in May. It's important to remember that a high interest rate makes higher-yielding assets more competitive and less appealing to investors seeking higher yields on their investments.
On Wednesday Israel responded to a fatal rocket attack on northern Israel with widespread and deadly airstrikes in southern Lebanon. Israeli officials have issued a warning, stating that should the cross-border violence persist, they will respond with far more force on the ground in Lebanon. The price of gold, a classic safe-haven asset, may rise due to the continued geopolitical turmoil in the Middle East.
Traders will be concentrating on US retail sales, which are predicted to decline by 0.1% in January. Thursday also marks the deadline for the weekly Initial Jobless Claims, Industrial Production, and US Philly Fed Manufacturing Index. Additionally, traders will be more aware of the Bostic and Waller speeches made by the FOMC. These occurrences might provide the gold price with a definite direction.
As investors evaluate the contradictory signals from US Federal Reserve policymakers and their implications for pricing the dovish policy turn this year, the market sentiment is still mixed as of Thursday's trade. In light of the robust US Nonfarm Payrolls and Consumer Price Index data for January, as well as the uncertainty around the timing of Fed interest rate decreases, the US dollar and US Treasury bond yields remain in a corrective mode.
Traders who are bearish should hold off on taking any more losses until they see acceptance below the 100-SMA. The price of gold might possibly accelerate its decline towards the crucial 200-DMA support, which is currently anchored around the $… region, given that oscillators on the daily chart are holding firmly in the negative sector. In order to reach the November 2023 low, which is located near $…, a strong break below the latter should open the door for additional depreciation towards an intermediate support around ….
Alternatively, it appears that any effort at a rebound above $… will face strong opposition near $… region. However, some further purchasing that pushes the price of gold above $… and prompts a short-covering rebound might push the metal to the 50-DMA, which is presently around $….
Israel retaliated to a rocket fired into Northern Israel with airstrikes in Lebanon. This comes after Israeli Prime Minister Benjamin Netanyahu called for a strong operation in Rafa, defying international demands for a truce and increasing the possibility of a further escalation of military action in the area. On the other hand, the probability of more losses for oil prices is supported by the lack of buying interest.
WTI witnessed a significant retreat on Wednesday, despite testing into its highest bids in almost three weeks. This means that XTI/USD will experience its first down day following seven straight closings in the green. WTI/USD hit an intraday high of $… before testing $… and then slipping down below the $… barrier.
With Wednesday's decline, XTI/USD formed a bearish rejection from the 200-DMA at $…. WTI could continue to move in a choppy manner within a consolidation zone between the 200-DMA and the 50-DMA at $….
