Article by: ETO Markets
Australia's central bank chooses a data-dependent approach in response to the ongoing problems brought about by inflation and the country's faltering economy. The RBA's move on Tuesday to increase the Official Cash Rate from 4.10% to a 12-year high of 4.35% served as more evidence of this strategy. The action was a direct reaction to the most recent inflation data, which showed a noteworthy 5.6% monthly increase.
The US Treasury bond yields continue to drop as there is growing recognition that the Federal Reserve is drawing closer to the end of its policy tightening campaign, which puts US Dollar bulls on the defensive. However, the recent remarks made by a number of Fed members cast doubt on the question of whether interest rates had peaked or if more hikes were required to return inflation to the 2% target. Moreover, the cautious market sentiment ought to help keep the downside of the safe-haven Greenback in check.
In October, China's Consumer Price Index fell by 0.2% yearly instead of the 0.1% that was anticipated. CPI decreased by 0.1% after growing by 0.2% earlier. A tight relationship exists between inflation rates and gold's performance, and any indications of a slowing economy may have an effect on gold's demand.
The likelihood of Middle East supply interruptions following the Israel-Hamas conflict appears to have diminished for investors. This sent the black liquid below the 200-DMA, to a nearly four-month low on Wednesday. Other factors that contributed to this were the reduction in worries about limited global supply and the deteriorating outlook for the world economy, which is predicted to hurt fuel demand.
The US dollar remains weak and the yield on US Treasury bonds continues to decrease, which gives some support to the price of gold. Aside from this, China's economic problems and the general cautious market sentiment may serve to restrict the downside for the precious metal. Though attention will still be fixed on Fed Chair Jerome Powell's speech, market investors are now looking to the US for some momentum later with the release of the weekly initial jobless claims data.
The horizontal 200-DMA around $… is currently where the immediate cushion is seen. Below that, the 50- and 100-DMAs confluence near $… will become relevant. A daily closure below the latter will start a new decline toward the $… low on October 16.
Gold buyers need to consistently recapture the 20-DMA at $… in order to try and mount a comeback. The triangle support line that converted into a resistance at $… is the location of the next significant upward barrier. Monday's high of $… will be tested farther up.
China's October crude imports were strong, according to data released earlier this week, but the country's declining economic prospects are predicted to reduce demand for gasoline. Fears returned as China's most recent inflation data showed persistent deflationary pressures following a decline in discretionary expenditure and corporate activity. This is in addition to news that Russia's oil exports reached a nearly four-month high the previous month, allaying concerns about limited supplies around the world.
Crude oil continued its bearish plunge on Wednesday, breaking through the 200-DMA at $…, forming a clear break, and moving directly into bear territory at the $… handle.
With WTI's decline from the low side of a rising uptrend from $…, bearish momentum is expected to intensify heading into the second part of the trading week. Crude Oil is down more than 20% from its swing high in late September that narrowly missed the $… handle.
