Article by: ETO Markets
A study of the US industrial and service sectors performed better than expected, indicating that both segments of the US economy are expanding, and this gave the market a positive start to the day. Earnings from a number of Dow Jones components and Friday's inflation snapshot from the Personal Consumption Expenditures report will be crucial for the remainder of the week.
The US S&P Global Manufacturing Purchasing Managers Index for January reached a 15-month high of 50.3. This figure indicates a rotation toward expansion in the manufacturing sector, as it was significantly higher than the prior print of 47.9. If the reading is greater than 50, the industry is growing.
Moreover, the preliminary GDP readings for Q4 are expected to be 2% annually, down from 4.9% in Q3. On the same day, December Durable Goods Orders are expected to increase by 1.1% as opposed to the previous print of 5.4%.
In Australia, Businesses have typically expected a reduction in price increase during the previous six months, according to the Reserve Bank of Australia's Bulletin, with the assumption that prices will, on average, continue above the RBA's inflation target range of 2.0–3.0%. The Bulletin also states that slower demand growth and more competition are expected to be contributing reasons to a further slowdown in the growth of firms' prices in the future quarters.
The US GDP data could provide the USD some momentum and create possibilities for short-term trading around the price of gold ahead of US Personal Consumption Expenditures Price Index on Friday. The important inflation statistics will be critical in determining the next leg of a directional move for the XAU/USD and in shaping market expectations about the Fed's future policy actions. It will be advisable to hold off on declaring that the precious metal has made a near-term bottom unless there is significant follow-through buying.
Bearish traders are favoured by the overnight decline and the recent string of failures close to the $… supply zone. Furthermore, oscillators on the daily chart have just begun to move negatively, indicating that the price of gold is likely to follow the path of least resistance to the downside. Nevertheless, it will still be wise to hold off on making any more moves until there is some follow-through selling below the psychological $… barrier.
On the upside, above the $… zone, or the 50-DMA, immediate resistance is located, and a bounce back to the $… barrier is possible for the price of gold. Should the gold price continue to rise above this level, short-covering rallies might be sparked, pushing the metal up to $...
Red Sea geopolitical risk is already mostly included into prices. The Houthi terrorists in Yemen have been targeted by the US and the UK on multiple occasions with airstrikes, as they persist in their attacks on commercial ships in the Red Sea.
It is anticipated that China may lower the reserve requirements for regional banks and provide more stimulus to the Chinese domestic economy in an attempt to revive faltering business activity. Barrell dealers anticipate a surge in crude oil consumption in China as a result of the increased business investment.
After rising above $… and reaching an intraday high of $ … , WTI Crude Oil fell back to test the area just above the $… level. The 200-HMA around $… continues to provide technical support for US Crude Oil, and short-term technical indicators are also optimistic.
As WTI drifts into a congestion zone between the 200-DMA and a bearish 50-DMA just below $…, daily candlesticks suggest a potential technical ceiling at the 200-DMA close to the $… handle.
