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Summary Not only is the services sector still expanding, it picked up steam in November with the ISM coming in at 52.7. With prices still firmly in expansion and employment rising slightly, it suggests that recent expectations for rate cuts might have been pulled too far forward. Two years before the mast It’s been quite a journey the past two years. In November 2021, the ISM services index reached its zenith, not just for this cycle, but in records dating back to the 1990s. The fed funds rate two years ago was still at the zero lower bound and inflation was still ascendant. In the ensuing 24 months, the Fed embarked on a rate-tightening campaign for the ages, yet despite a fed funds rate now higher than any point in more than 20 years, the Fed’s job is not quite finished. Yes, inflation is coming down, but is still above the Fed’s 2.0% target and the ISM services index is still in expansion territory, even if unconvincingly so at 52.7 (chart). The trouble is that while the service economy may be able to withstand higher capital costs, big-ticket durable goods spending is more vulnerable to higher rates. But as long… Read More »Hot service sector might be cold water on swift rate cut hopes

US markets traded in a mixed-bag fashion, but the tone of the S&P 500 was rather moody, with losers outpacing winners by a wide margin — all as markets digest a stronger-than-expected November ISM Non-manufacturing survey offset by an unexpected significant decline in October job openings — and all resulting in yet another decline in 10-year Treasury yields. Throughout November, markets increasingly factored in the possibility of the Federal Reserve implementing rate cuts next year. Despite a brief upward movement in yields on 10-year US Treasuries overnight, they have decreased by approximately 11 basis points by today’s Asia open, indicating a renewed expectation of less restrictive monetary policy in the coming year.  Interestingly, the latest US data conveyed a somewhat Goldilocks message: economic growth appears satisfactory (as evidenced by the Services ISM), and there are indications that inflation may be poised to moderate further, given the ongoing rebalancing in the job market. Nevertheless, given the breadth of decline in broader indexes amid lower bond yields, some stock market operators seem to interpret the recent run of US economic data as not growth-friendly enough. From our seat, the current US macroeconomic data indicates a scenario where, against expectations, inflation might return… Read More »US markets traded in a mixed-bag fashion

XAU/USD Current price: $2,018 XAU/USD continues to decline from record highs despite declining US yields. The US Dollar extends its gains and adds pressure to XAU/USD. Economic data from the US shows mixed results; ADP data is scheduled for release on Wednesday. The recovery in Gold spot during the Asian session proved short-lived as it resumed its decline, despite mixed US economic data and a decrease in US Treasury yields. This indicates that bearish pressure on the yellow metal remains intact. Data from the US revealed that the number of job openings on the last business day of October was 8.7 million, down from 9.35 million in September, falling below the market expectation of 9.3 million. The ISM Services PMI surpassed expectations, rising to 52.7 in November compared to the expected 52. These data points suggest a more balanced labor market. Initially, this triggered a retreat in the Greenback, but it resumed its upward movement even as Treasury yields turned downwards. The 10-year US bond yields dropped to 4.16%, reaching the lowest level since early September. Simultaneously, the US Dollar index reached multi-day highs above 104.00. The short-term bullish momentum remains in place for the Greenback, implying a negative outlook… Read More »Gold Price Forecast: XAU/USD extends slide, more pressure seen under $2,010

EUR/USD staged a modest rebound after testing 1.0800 earlier in the day. 1.0820 aligns as a key pivot level for the pair. Eyes on US ISM Services PMI and JOLTS Job Openings data. After falling toward 1.0800 in the early European session on Tuesday, EUR/USD regained its traction and rose above 1.0820, erasing its daily losses in the process. The near-term technical outlook is yet to point to a build-up of bullish momentum as markets await key data releases from the US. Following Monday’s sharp decline, EUR/USD started the day on the back foot. With the Euro Stoxx 50 Index turning positive on the day, however, the pair managed to find a foothold. Meanwhile, the benchmark 10-year US Treasury bond yield went into a consolidation phase above 4.2% after rising sharply on Monday, making it difficult for the US Dollar (USD) to preserve its strength. The US Bureau of Labor Statistics will release the JOLTS Job Openings data on Tuesday, which is expected to edge lower to 9.3 million in October from 9.55 million in September. If the number of job openings fall below 9 million and point to loosening conditions in the labor market, the USD could come under… Read More »EUR/USD Forecast: Euro holds above 1.0800 ahead of key US data

EUR/USD came under renewed bearish pressure following a quiet Asian session. The pair needs to reclaim 1.0820 to shake off the bearish pressure. US economic docket will feature JOLTS Job Openings and ISM Services PMI data. After closing in negative territory on Monday, EUR/USD extended its slide and touched its lowest level in three weeks near 1.0800 early Tuesday. Unless the pair manages to stabilize above 1.0820, technical sellers could remain interested. The steady recovery seen in the US Treasury bond yields and the risk-averse market atmosphere helped the US Dollar (USD) outperform its rivals on the first trading day of the week. As investors remain concerned over the Israel-Hamas conflict turning into a widespread conflict in the Middle East, safe haven flows continue to dominate the action in financial markets early Tuesday. At the time of press, US stock index futures were down between 0.3% and 0.4%. In the second half of the day, JOLTS Job Openings data for October and the ISM Services PMI for November will be featured in the US economic docket. In case there is a significant decrease in the number of job openings, the USD could have a difficult time preserving its strength. Investors… Read More »EUR/USD Forecast: Downward correction could extend toward 1.0760

Dollar Index needs to hold below 104 to fall towards 102 while Euro needs sustain above 1.08, else would be vulnerable to see 1.07-1.06. EURJPY has risen from 158.72 and could rise towards 160 before again declining back towards 158. Dollar Yen has sustained well above 146 can rise towards 148-150 in the near term. USDCNY continues to trade between 7.12-7.15/16. Aussie could fall towards 0.65 or lower while the resistance at 0.67 holds. Pound can be ranged below 1.27 for a while. USDRUB is rising as expected and is likely to test 92-94 on the upside. EURINR is falling sharply but could face some support at 90. USDINR could be ranged within 83.25-83.40. The US Treasury yields have bounced slightly. A break below their crucial supports if seen can extend bearish bias. The German yields continue to move down in line with our expectation. They have room to fall more in the coming sessions. The 10Yr and 5Yr GoI have dipped yesterday and could trade within a narrow range for sometime before breaking higher eventually. Dow Jones lacks strength but outlook remains bullish while above the support at 36000-35800. DAX is heading up towards the key resistance as expected.… Read More »Morning briefing: Euro needs sustain above 1.08, else would be vulnerable to see 1.07-1.06

U.S. stocks are experiencing a decline, influenced by indications that interest rates may have reached a bottom, at least temporarily, triggering a subtle reversal of the positive momentum seen in November when both equities and bonds made significant gains. Last month’s bond rally and the tidal wave of dovish rates wagers may be indicative of a momentous shift in the market’s thinking; the move higher in 10-year US Treasury yields we are seeing today might just be marking a local bottom (at least for now) as investors assess positioning into December. But frankly, market positioning can’t get any more dovish without concrete evidence to suggest that the US economy is on the verge of an equally epochal downdraft. In an ideal world, rates would decline, inflation would return to target levels, corporate profitability would double, and prior interest rate hikes would have no adverse effects on demand or balance sheets. And as incredulous as that sounds, since Chris Waller’s game-changing remarks late last month, the market’s collective faith in a best-case 2024 conjuncture may have gotten too far over its skis on rate cuts mania. While the growth outlook has moderated in recent weeks from the 5%+ pace we saw… Read More »Is rate cut mania justified?

Gold price is making another to recapture the $2,050 psychological barrier. Fed rate cut bets keep weighing on the US Dollar and US Treasury bond yields ahead of jobs data. Gold price’s daily technical setup continues to favor buyers, with eyes again on $2,100 Gold price is attempting a bounce toward $2,050 early Tuesday, following a massive $120 pullback from fresh record highs of $2,144 set in Monday’s Asian trading. Gold price is finding support from a renewed weakness in the US Dollar alongside the US Treasury bond yields, as the focus shifts toward the high-impact US JOLTS Job Openings data and ISM Services PMI due later on Tuesday.    Gold price retains the bullish potential Monday’s sharp retracement in Gold price came as no surprise after the relentless upsurge. Investors resorted to recaliberating the US Federal Reserve (Fed) rate cut expectations, as well as, some profit-taking heading into a slew of critical US employment data, starting from Tuesday. US Job Openings data, due at 1530 GMT, is forecast to show 9.35M, having shown signs of a slowdown in the job market in September. Further slack in the US employment sector is likely to affirm the March Fed rate cut expectations,… Read More »Gold Price Forecast: XAU/USD looks to reclaim $2,050 of key top-tier US data

AUD/USD Current Price: 0.6606 The Reserve Bank of Australia is expected to leave interest rates unchanged. The sharp reversal of the US Dollar leaves AUD/USD vulnerable in the short term. Price is testing an upward trendline near 0.6600. The AUD/USD reached its highest level in four months at 0.6689 and then sharply reversed, falling towards 0.6600. The decline occurred without a clear catalyst and followed a reversal in Gold and Silver and a stronger US Dollar. The focus is now on the Reserve Bank of Australia (RBA) meeting, followed by key US data. The RBA is expected to leave its key interest rate unchanged at 4.35% after the November rate hike. Data since the last meeting has been mixed, with a strong labor market and slower inflation. The latest report warrants some caution from the RBA, that is unlikely to bring a dovish surprise, particularly after Governor Michele Bullock’s comments last week regarding stronger-than-anticipated inflation pressures. The outcome of the RBA meeting is not expected to significantly impact the Australian Dollar, as there are not many changes anticipated in the statement compared to the previous meeting. The central bank will likely need more data, such as Q4 inflation, to reassess… Read More »AUD/USD Forecast: Reversal indicates potential for further losses below 0.6595

XAU/USD Current price: $2,025 The sharp retreat from record highs warns about the sustainability of one-directional moves. Volatility will likely remain elevated ahead of US data and next week’s events. The short-term bias favors the downside while below $2,040. Gold spot recorded a new all-time high near $2,150 at the weekly opening and then experienced a sharp corrective pullback, extending below $2,040. Wild moves could continue throughout this week’s key labor market data from the US, as well as market preparations for next week’s central bank meetings and the US Consumer Price Index data. On Friday, despite a hawkish tone from Federal Reserve Chair Jerome Powell, Gold advanced sharply, and the momentum exploded from the weekly opening. Gold remains supported by hopes, not only that the tightening cycle from the Fed and other central banks is over but also for expectations of interest rate cuts. However, today’s pullback could reflect that the odds went too far regarding rate cuts. The Gold market at the moment appears to be on its own, more reflective of a shift in sentiment rather than specific fundamentals. No particular catalyst led to the rally to $2,150, and no specific event pushed the price sharply back… Read More »Gold Price Forecast: XAU/USD to remain volatile, with risks of extending pullback