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EUR/USD faces a sharp sell-off as Middle East crisis deepen. ECB policymakers pushed back market expectations of early rate cuts due to high inflation. The major will be guided by the US Retail Sales data, which will be published on Wednesday. Persistent Middle East tensions have improved the appeal for safe-haven assets while risk-perceived currencies have been hit hard in the Asian session on Tuesday. The EUR/USD pair has declined to near weekly low around 1.0900 amid dull risk-appetite as Iran-backed-Houthi rebels threatened to retaliate for airstrikes launched by the United States and the United Kingdom in Yemen. The Euro fails to gain strength despite European Central Bank (ECB) policymaker Joachim Nagel pushed back against market expectations of early rate cuts. Nagel said it is too early to discuss rate cuts as inflation is too high. ECB policymaker Robert Holzmann opposed rate cuts for the entire year, citing upside risks to energy prices due to deepening conflicts over commercial shipments from the Red Sea. Meanwhile, faltered economic development in the German economy in 2023, weighed down by inflation and global headwinds are expected to keep the Euro under stress. The German economy shrank by 0.3% in 2023 as higher interest… Read More »EUR/USD Forecast: At make or a break around 1.0900 as Middle East crisis undermine risk-appetite

Its hardly surprising risk is a bit unstable this morning. Following a slew of airstrikes on Houthi sites and installations in Yemen, the group has made it clear to both Number 10 Downing Street and The White House that they will continue to assault ships in and around the Red Sea. The fact that the attacks have continued makes it more likely that US airstrikes on Yemen will continue. The Houthis fired an anti-ship ballistic missile at the US-owned Gibraltar Eagle in the most recent incident. After seven years of unwinnable war with the Saudi-led coalition (supplied by the US), it appears that the Houthis have a high threshold for casualties, both civilian and combatant and that their basic tenet appears to be an ongoing state of armed confrontation. The current regime in Tehran claims that the Houthis operate independently from the Quds and are operating autonomously from Iraq oversight. However, everyone knows this rebuke is bordering on the theatre of the absurd. It appears that any hope to resolve this issue means the US pushes Israel into an unlikely ceasefire or, in the worst case, the ultimatum request will get delivered to Tehran.

Gold price recovery falters once again near $2,060 ahead of Fed Waller’s speech. Middle East geopolitical escalation, higher US Treasury bond yields bump up the US Dollar. Gold price confirmed a symmetrical triangle breakout on Monday, upside potential stays intact.   Gold price is challenging the $2,050 barrier early Tuesday, feeling the heat from resurgent US Dollar (USD) demand amid a further escalation in the Middle East geopolitical tensions. Gold price looks to geopolitics and Fed Waller’s speech Gold price has turned red for the first time in four trading days, stalling its recovery momentum from three-week lows of $2,013. Gold price is undermined by renewed US Dollar demand across the board, as investors scurry for safety in the Greenback amid intensifying geopolitical tensions in the Middle East. Risk sentiment took a hit following reports that Iran’s Islamic Revolutionary Guard Corps (IRGC) fired missiles at targets near the US Consulate in Erbil, Iraq. Iranians retaliated against the terrorist attacks this month that killed almost 100 people near the burial site of General Qassem Soleimani. Meanwhile, Gold price also bears the brunt of rising US Treasury bond yields, as they play catch up after the holiday weekend. The uptick in the US… Read More »Gold Price Forecast: ‘Buy-the-dips’ as XAU/USD charts a triangle breakout

At its December meeting, the Federal Reserve effectively declared victory over inflation. They didn’t didn’t use those words, but that was the signal given by the policy trajectory laid out by the FOMC. Is this victory dance premature? Financial analyst Jim Grant thinks so. In an interview on Bloomberg Markets: The Close with Romaine Bostick, Grant said it’s way too early for the Fed to say “mission accomplished.” According to the Fed’s “dot plot” showing the expected trajectory of interest rates. The central bank has penciled in three rate cuts for 2024 with another four cuts in 2025. That would lower rates to between 2 and 2.5 percent. Federal Reserve Chairman Jerome Powell tried to temper this projection, emphasizing that inflation remains too high. Inflation has eased from its highs, and this has come without a significant increase in unemployment. That’s very good news. But inflation is still too high. Ongoing progress in bringing it down is not assured and the path forward is uncertain. Powell was talking, but the markets weren’t listening. As Bostick put it, they were all in on “mission accomplished.” Grant disagreed with the notion that inflation is beat saying it is “endemic.” In other words,… Read More »It’s too early for the Fed to declare “mission accomplished”

The dollar drifts up and down. Gold moves higher on Friday. Good Day… And a Marvelous Monday to you… In my past life, I would be taking today off, as it is a national holiday… But, given my status as non-working, I thought what the heck! Well, the NFL didn’t make any friends, and received a lot of criticism, even from a senator, about putting a playoff game on a streaming channel… As well they should! The game in Buffalo had to be moved to today, as is the norm for Buffalo, they were getting a winter storm on Saturday… Went to dinner last night with my good friend, Gus, who’s down here for the winter like me! Seals and Crofts greet me this morning with their great song: We May Never Pass This Way Again…  Well, last Tub Thumpin’ Thursday saw the STUPID CPI print… And even with all the hedonic adjustments that the BLS adds to the inflation calculation, the report showed that it was too soon to sound the “All Clear” siren on inflation… This from the headlines: “Last month, overall prices rose 3.4% from a year earlier, up from 3.1% in November, according to the Labor Department’s consumer price… Read More »Inflation isn’t going away

XAU/USD Current price: 2,051.10 A holiday in the US maintains markets ranging, although the sentiment is sour. The US calendar has little to offer this week, investors keep an eye on inflation and Davos. XAU/USD is marginally bullish in the near term, needs to clear the $2,062.35 resistance area. Gold Price holds on to gains, trading near an intraday high of $2,058.55. XAU/USD hovers above $2,050 a troy ounce in a quiet American afternoon, as United States (US) markets are closed amid the Martin Luther Day Holiday. The week started with optimism, as reflected by the positive tone of Asian shares, but the positive sentiment faded during European trading hours, as tepid local data weighed EU indexes lower. Across the FX board, the US Dollar trades mixed, particularly stronger against commodity-linked currencies, usually more sensitive to risk-off. Beyond the holiday, the US macroeconomic calendar has little to offer this week. The country will release  December Retail Sales next Thursday and the preliminary estimate of the January Michigan Consumer Sentiment Index on Friday. The focus will remain on inflation, as Canada, the United Kingdom, Germany, and the Eurozone will post updates. Investors will also keep an eye on the World Economic… Read More »Gold Price Forecast: XAU/USD holds on to gains above the $2,050 mark

EUR/USD Current price: 1.0948 United States markets will remain closed amid the Martin Luther King Day holiday. European data disappointed, limiting the bullish potential of the Euro. EUR/USD is neutral-to-bearish in the near term, likely to continue ranging. The EUR/USD pair trades uneventfully around its daily opening on Monday, with a scarce macroeconomic calendar and a holiday in the United States (US) exacerbating range trading. Investors take clues out of stocks’ behavior, with European indexes currently trading in the red. Equities started the day with a positive tone amid persistent bets the US Federal Reserve (Fed) will go on with rate cuts this year, potentially triggering the first one in March. However, stock markets lost momentum and European indexes post modest losses at the time. Meanwhile, the US celebrates Martin Luther King Day. That means there will be no activity on Wall Street or in Treasuries. Data-wise, Germany published the December Wholesale Price Index, which slid 0.6% MoM. The Eurozone Trade Balance posted a surplus of €14.8 billion in November, while Industrial Production in the same month declined 6.8% YoY, much worse than anticipated. EUR/USD short-term technical outlook The  EUR/USD pair hovers around the 1.0950 level without clear directional strength.… Read More »EUR/USD Forecast: US Dollar buyers keep fighting to retain control

EUR/USD consolidates slightly above 1.0950 amid a holiday-truncated week. Investors’ bets for rate cut by the Fed in March remain persistent. The ECB is done with hiking interest rates for now. EUR/USD remained inside Thursday’s trading range of 1.0930-1.1000 in the Friday’s trading session. The upside remained caped as the European Central Bank (ECB) announced an end to the elongated rate-tightening regime while stubbornly higher consumer price inflation in the United States provided cushion at the downside. The pair continues to trade listless inside Friday’s trading range on Monday due to an extended weekend in the US economy amid Martin Luther King Birthday. The major is struggling to catch action despite the surprisingly softer US Producer Price Index (PPI) report for December. Producers at factory gates rose annual prices of goods and services at a slower pace of 1.0% against 1.3% as anticipated by investors. The core PPI that excludes volatile food and oil prices decelerated sharply to 1.8% vs. consensus of 1.9%. Bets supporting a rate cut by the Federal Reserve (Fed) in the March monetary policy meeting are persistently upbeat despite policymakers are endorsing them atleast after the first-half of this year. Fed policymakers need more evidence to… Read More »EUR/USD Forecast: Remains listless around 1.0950 due to extended weekend in US markets

It’s another week marked by US holidays, with Wall Street observing Martin Luther King Day today, so markets are getting off to a rather sluggish start in Asia. That said, there is a lot of geopolitical and macro noise in the market, so it’s probably not the time to get over complacent, especially with consumer sentiment apt to get held hostage to the gnarly geopolitical scrim as policymakers, companies and investors struggle to operate in today’s highly politically charged environment. Given the market has moved all in on March’s rate cuts after evident pipeline disinflation in the PPI data, traders will be intently focused on Federal Reserve discussions and significant data releases from the world’s largest economy this week. However, no major narrative shake-up is expected. Of course, a more robust retail sales number could slightly push back the odds of a March rate cut by the Fed, but unless the print is of the home run variety and one that knocks it right out of the park, it is unlikely to be a decisive game-changer. Geopolitically, tension rises following more US airstrikes on Yemen over the weekend, and domestically, President Biden faces challenges in foreign policy on two fronts:… Read More »A sluggish start to yet another US holiday session

Gold price builds on last week’s recovery early Monday on cautious optimism. The Dollar drifts lower amid sluggish US Treasury bond yields and US holiday. Gold price closed the week above 21-day SMA at $2,045, where next? Gold price is sitting near the highest level in five days above $2,050 in Asian trading on Monday, helped by a cautiously optimistic market mood, increased US Federal Reserve (Fed) bets for a March rate cut and a US holiday-led thin trading conditions.   Gold price stays supported amid wobbly US Dollar Gold price is capitalizing on persisting uncertainty in the market, as investors digest a bunch of the latest fundamental developments at the start of the week on Monday. The US Dollar is fluctuating between gains and losses, as the US Treasury bond yields trade listlessly amid light trading on account of the Martin Luther King Jr. Day holiday in the United States. On Friday, the US Dollar slipped from higher levels after the US Producer Price Index (PPI) unexpectedly fell in December, ramping up Fed March rate cut bets while dragging US Treasury bond yields lower. Market pricing now points to a 78% chance that the US central bank will begin… Read More »Gold Price Forecast: Further upside for XAU/USD appears elusive amid a US holiday