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2022-11-15T20:18:00.001+08:00

EURJPY Price Analysis: Next on the upside emerges 147.00

EURJPY adds to Monday’s uptick and surpasses 145.00.
The recovery faces the next hurdle at the 147.00 zone.

EURJPY extends the auspicious start of the week and reclaims the area above the 145.00 barrier on Tuesday.

If the corrective bounce gathers extra steam, then the cross should face initial resistance at the so far November high at 147.11 (November 9). The surpass of this level could open the door to a more meaningful move to the 2022 peak at 148.40 (October 21).

In the longer run, while above the key 200-day SMA at 138.21, the constructive outlook is expected to remain unchanged.

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2022-11-14T16:58:00.004+08:00

Silver Price Analysis: XAGUSD holds steady above mid-$21.00s, around 200 DMA pivotal point

Silver reverses an intraday dip to the $21.30 area, though lacks follow-through buying.
Repeated failures to capitalize on the move beyond 200 DMA warrants caution for bulls.
A convincing break below the $21.00 mark will shift the bias in favour of bearish traders.

Silver attracts some dip-buying near the $21.30 region on Monday and hits a fresh daily peak during the first half of the European session. The white metal is currently placed around the $21.65-$21.70 area, though remains below a five-month high touched on Friday.

Looking at the broader picture, the XAGUSD, so far, has been struggling to capitalize on its positive move beyond the very important 200-day SMA. This makes it prudent to wait for some follow-through buying before positioning for any further near-term appreciating move.

From current levels, the multi-month high, around the $22.05 region, could act as an immediate hurdle. The next relevant resistance is pegged near the $22.45-$22.50 supply zone, which if cleared will be seen as a fresh trigger for bulls and pave the way for additional gains.

The XAGUSD might then accelerate the momentum towards the $23.00 mark and eventually climb to the May swing high, around the $23.25-$23.30 area. Given that RSI on the daily chart is on the verge of breaking into the overbought zone, the latter should act as a tough nut to crack for bulls.

On the flip side, the daily low, around the $21.35 region, now seems to protect the immediate downside. Any further pullback could be seen as a buying opportunity and remain limited near the $21.00 mark, which should now act as a pivotal point for short-term traders.

A convincing break below could trigger some technical selling and drag the XAGUSD to the $20.40 support zone. Failure to defend the said support levels might negate the near-term positive outlook and shift the bias in favour of bearish traders.

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2022-11-11T20:57:00.003+08:00

GBPUSD set to test the August 26 high near 1.19 – BBH

GBPUSD edges higher and is currently trading around the mid-1.1700s. Economists at BBH expect Cable to test the August 26 high near 1.19.

Monthly UK data dump began

“Cable broke above its September 13 high near 1.1740 and sets up a test of the August 26 high near 1.19.”

“Q3 growth came in at -0.2% QoQ vs. -0.5% expected and 0.2% in Q2, which translated into a YoY rate of 2.4% vs. 2.1% expected and 4.4% in Q2. This is just the beginning, as the BoE has warned that the recession had already started and would likely last two years. Of note, strong government spending, GFCF, and net exports all boosted the overall number and those components are likely to be large drags in Q4 and beyond.”

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2022-11-10T20:26:00.003+08:00

EURUSD looks somewhat fragile again

EURUSD slides below parity. The Euro looks vulnerable again, in the view of economists at Scotiabank.

Euro stocks may support

“Ironically, the recent gains in spot have perhaps been getting some support from relatively better equity market returns in Europe versus North America which has seen better relative investor interest in FX unhedged European equity ETFs, data suggests. Investors want exposure to European stocks and the (cheap looking) EUR, in other words.”

“Intraday patterns – very tentatively – suggest some better EUR demand is emerging in the mid-0.99s but the failure to press higher after a strong advance from last week's low leaves the EUR looking somewhat fragile again.”

“Support is 0.9890/00. Resistance is 1.0040/50.”

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2022-11-09T20:39:00.002+08:00

USD Index Price Analysis: Losses expected to accelerate below 109.00

DXY regains some poised following three daily pullbacks.
The 9-month support line appears around 109.00.

DXY picks up some buying interest and briefly tests the area just beyond 110.00 the figure on Wednesday.

Further weakness in the dollar should not be ruled out despite the current bullish attempt. That said, the loss of the 9-month support near 109.00 carries the potential to magnify the decline and open the taps to extra retracement in the near term.

In the longer run, DXY is expected to maintain its constructive stance while above the 200-day SMA at 104.66.

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2022-11-08T20:27:00.003+08:00

GBPUSD eases from multi-day high, still well bid below mid-1.1400s amid softer USD

GBPUSD gains traction for the second successive day amid sustained USD selling.
Hopes for less aggressive Fed rate hikes, the risk-on impulse weighs on the buck.
The BoE's gloomy outlook might act as a headwind for the Sterling and cap gains.

The GBPUSD pair attracts some buying following an early dip to the 1.1290 area on Monday and is building on the previous session's goodish rebound from a two-week low. This marks the second successive day of a positive move and lifts spot prices to the 1.1475 region, or a three-day high during the mid-European session.

The US Dollar adds to the post-NFP heavy losses and drops to over a one-week low, which, in turn, is seen as a key factor pushing the GBPUSD pair higher. The mixed results from Friday's release of the US jobs report fueled speculations that the Federal Reserve might slow the pace of its policy tightening. This, along with a generally positive tone around the equity markets, continues to weigh on the safe-haven greenback.

That said, worries about the headwinds stemming from China's commitment to maintaining its economically disruptive zero-COVID policy might keep a lid on the optimism. Moreover, the markets are still pricing in the possibility of at least a 50 bps Fed rate hike move in December. This remains supportive of elevated US Treasury bond yields, which should act as a tailwind for the buck and cap the upside for the GBPUSD pair.

Apart from this, the Bank of England's dovish rate hike last week warrants some caution for aggressive bullish traders. It is worth recalling that the UK central bank raised interest rates by 75 bps - its most forceful act to tame inflation since 1989 - but indicated a lower terminal peak than is currently priced into markets. Moreover, the BoE said that it expects a recession to last for all of 2023 and the first half of 2024.

This, in turn, suggests that any subsequent move up might still be seen as a selling opportunity and runs the risk of fizzling out rather quickly. There isn't any major market-moving economic data due for release on Monday. Hence, the US bond yields, along with the broader market risk sentiment, will play a key role in influencing the USD price dynamics and produce short-term trading opportunities around the GBPUSD pair.

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2022-11-04T20:38:00.002+08:00

Gold Price Forecast: XAUUSD unlikely to move much further from the lows

Gold climbed toward $1,650 despite the hawkish Fed tone. However, the recovery is set to stall, strategists at Commerzbank report.

Gold under pressure following the hawkish remarks made by the Fed chair

“Fed Chair Jay Powell stressed that the speed of rate hikes was not so important anymore and that the key question was the level at which interest rates would finally peak. And this, Fed members now believe, looks set to be higher than they had assumed in September.”

“The Fed’s goal is to bring real interest rates into positive territory. This means that the key rate will remain at a high level until such time as the rate of inflation has fallen below it.”

“Generally speaking, the FOMC meeting turned out to be more hawkish than expected, which was then reflected in higher interest rate expectations and a firmer dollar and ultimately caused the Gold price to fall. Shortly before hitting its yearly low, Gold did a U-turn and began climbing again, though today’s US labour market report could put the brakes on its recovery again.”

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2022-11-03T20:41:00.007+08:00

Stronger USD heading into year-end amid higher terminal rate expectations – MUFG

The US Dollar has continued to trade at stronger levels after the Fed dashed hopes again for a dovish policy pivot. Higher terminal rate expectations for Fed's hiking cycle are set to continue strengthening the greenback into year-end, economists at MUFG Bank report.

The Fed is shifting to plans for a slower but more extended hiking cycle

“The US rate market is now pricing in 62 bps of hikes at the December FOMC meeting as it weighs up whether the Fed will deliver one final 75 bps hike or step down to a 50 bps hike.”

“The updated policy statement added as well that the Fed would take into account ‘the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments’.”

“The comments signal that the Fed is shifting to plans for a slower but more extended hiking cycle. The increase in market expectations for the Fed’s terminal policy rate support our outlook for an even stronger US dollar heading into year-end.”

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Bailey speech: Bank rate may have to go up further

2022-11-03T20:41:00.005+08:00

Bank of England (BoE) Governor Andrew Bailey is delivering his remarks on the policy outlook and responding to questions from the press following the bank's decision to hike the policy rate by 75 basis points to 3%.

Key takeaways

"If we do not act forcefully now, it will be tougher later."

"Bank rate may have to go up further."

"We think bank rate will have to up by less than priced in markets."

"We are increasing bank rate because inflation is too high."

"Low and stable inflation is the bedrock of a stable economy."

About Andrew Bailey (via bankofengland.co.uk)

"Andrew Bailey previously held the role of Deputy Governor, Prudential Regulation and CEO of the PRA from 1 April 2013. While retaining his role as Executive Director of the Bank, Andrew joined the Financial Services Authority in April 2011 as Deputy Head of the Prudential Business Unit and Director of UK Banks and Building Societies. In July 2012, Andrew became Managing Director of the Prudential Business Unit, with responsibility for the prudential supervision of banks, investment banks and insurance companies. Andrew was appointed as a voting member of the interim Financial Policy Committee at its June 2012 meeting."

2022-11-02T21:02:00.001+08:00

GBP/USD could test 1.1300 on a dovish BoE – ING

GBP/USD continues to fluctuate at around 1.15. But a USD-positive FOMC and a dovish surprise by the Bank of England (BoE) could drag cable down to 1.13, economists at ING report.

EUR/GBP may climb back into the 0.8650-0.8700 area

“We continue to highlight the risk of a dovish surprise (50 bps hike) by the BoE tomorrow. The combination of a USD-positive FOMC and a GBP-negative BoE means cable could test 1.1300 by the end of the week.”

“EUR/GBP may climb back into the 0.8650-0.8700 area in the coming days.”

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US: ADP Employment Change rises 239K in October vs. 193K expected

2022-11-02T20:26:00.004+08:00

The data published by Automatic Data Processing (ADP) showed on Wednesday that private sector employment in the US rose by 239,000 in October. This reading came in better than the market expectation of 193,000. September print of 208,000 got revised down to 192,000.

Developing story...

Market reaction

The US Dollar Index showed no immediate reaction to this data and was last seen losing 0.22% on the day at 111.30.

2022-11-01T21:15:00.002+08:00

USD Index Price Analysis: Upside target remains at 114.00

DXY comes under pressure soon after hitting daily highs near 111.60.
Next on the upside still emerges the 114.00 region.

DXY reverses three consecutive daily advances and slips back below the 110.00 mark on turnaround Tuesday.

Despite the ongoing corrective downside, the near-term bullish stance in the dollar remains unchanged and with the immediate target at the 114.00 area ahead of the 2022 high at 114.78 (September 28).

The near-term upside bias is expected to hold while above the 8-month support line near 108.60. The proximity of the 100-day SMA also reinforces this area of contention.

In the longer run, DXY is expected to maintain its constructive stance while above the 200-day SMA at 104.22.

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2022-11-01T20:40:00.005+08:00

Silver Price Analysis: XAG/USD sees vulnerable, sustained weakness below $19.00 awaited

Silver shows some resilience below the $19.00 mark and reverses the early dip to a multi-day low.
The technical set-up still favours bearish traders and supports prospects for further near-term fall.
A sustained strength beyond the $20.00 psychological mark is needed to negate the negative bias.

Silver reverses an intraday dip to sub-$19.00 levels, or a multi-day low and climbs to the top end of its daily trading range heading into the North American session. The XAG/USD pair is currently hovering around the $19.15-$19.20 region, still down over 0.20% for the day.

From a technical perspective, any subsequent move-up is likely to face resistance near the $19.30-$19.40 confluence support breakpoint. The said area comprises the 38.2% Fibonacci retracement level of the sharp downfall from the monthly peak and the 100-hour SMA, which should now act as a pivotal point for intraday traders.

A sustained strength beyond might trigger a short-covering move and allow the XAG/USD to reclaim the $20.00 psychological mark. The positive momentum could get extended towards an intermediate hurdle near the $20.50 area, above which bulls could target the $21.00 mark en route to the monthly peak, around the $21.25 region.

On the flip side, the $18.95-$18.90 zone coincides with the 23.6% Fibo. level. A convincing break below will be seen as a fresh trigger for bearish traders and expose the $18.00 mark, with some intermediate support near the $18.30-$18.25 region. The XAG/USD could eventually drop further to challenge the YTD low, around the $17.55 area.

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Malaysia: BNM could pause its hiking cycle in November – UOB

2022-11-01T20:24:00.000+08:00

Bank Negara Malaysia (BNM) could make an impasse in its tightening cycle at the November 3 event, suggests Lee Sue Ann, an Economist at UOB Group.

Key Quotes

“Given that inflation expectations are anchored to official targets and risks to the domestic growth outlook are tilting to the downside, we believe BNM will tread more cautiously”.

“We expect BNM to take an intermittent pause to assess the effect of its cumulative 75bps rate hikes to date, domestic policy outcomes, as well as higher external risks and weaker global outlook. As such, we expect the OPR to be left unchanged at 2.50% at the coming Nov meeting”.

2022-10-29T20:27:00.001+08:00

EURUSD recovered ground towards the end of the NY session, despite hot US Core PCE

The US Dollar got bolstered by US core PCE but weakened towards the close of Wall Street.
GDP in France and Spain weakened, while inflation in Germany continued its uptrend, above 10%.
EURUSD is neutral-to-downward biased, though slightly tilted to the upside, facing strong resistance at the 100-DMA.

The EURUSD finished Friday’s session almost flat at around 0.9960s with minuscule gains of 0.02%. US economic data bolstered the US Dollar due to further action warranted by the Fed; as its preferred gauge of inflation, the core Personal Consumption Expenditure (PCE) jumped above August’s figures, a headwind for the EUR. Nevertheless, the Shared currency recovered some ground against the USD at the New York close. At the time of writing, the EURUSD is trading at 0.9966, slightly above its opening price.

The Federal Reserve’s gauge of inflation jumps the 5% threshold

Wall Street finished the day with solid gains. Even though the narrative of a possible Federal Reserve pivot circulates in the financial markets, US economic data, particularly inflation, could prove it wrong.

The US Department of Commerce revealed that the US core PCE expenditure for September expanded by 0.5% MoM, in line with estimates, while the year-over-year reading increased by 5.1%, below expectations but above the previous month’s 4.9%, on Friday. Another report revealed by the US Labor Department reported that the Employment Cost Index (ECI) for Q3 increased by 1.2%, in line with Bloomberg’s estimates, and lower than the second quarter by 1.4%.

Data did not surprise traders, which turned to risk-perceived assets, speculating that a Fed pivot is imminent. Nevertheless, Friday’s data further justified the case for the Fed’s 75 bps interest-rate hike at the November meeting, while odds for another significant increase at the December meeting jumped from yesterday’s 34.1% to 44.9%.

The markets’ reaction to the headlines witnessed the EURUSD sliding from the daily high of 0.9989 to the daily low of around 0.9920s. However, as the North American session progressed, the EURUSD bounced off the lows and finished the session around the 0.9960s.

Consumer sentiment is unchanged, while US inflation expectations ease

Aside from US inflation data, the University of Michigan Consumer Sentiment October’s final reading came at 59.9, while inflation expectations barely moved. According to the survey, expectations for inflation in a one-year horizon rose to 5% from 5.1%, while for five years is estimated at 2.9%.

Of late, the Dallas Fed Trimmed Mean PCE for September edged lower from 6% to 4.3%. At the same time, the Atlanta Fed GDPNow Forecast for Q4 is 3.1%.

Growth in France and Spain decelerated, and Germany’s inflation spiked

In the meantime, the European economic calendar reported Gross Domestic Product (GDP), inflation, and the EU’s Economic Sentiment, for France, Spain, Germany, and the Euro area, respectively. Growth in France and Spain for the Q3 came in line with estimations, though they flashed recession signs as both countries trail the second quarter readings.

At the same time, Germany reported inflation for October on its preliminary reading, increasing by 10.4% YoY, vs. estimates of 10.1%, and exceeding the previous month’s reading.

Therefore, estimations for further tightening by the European Central Bank (ECB) are warranted, as some ECB speakers, namely Muller, Vasle, and Villeroy, commented that interest rates are still low, not at a restrictive level. It’s worth pointing out that Vasle said he expects further rate increases, while Villeroy added that the ECB will decide on interest rate increases, meeting by meeting.

Given the abovementioned backdrop, the ECB and the Federal Reserve will continue to tighten monetary conditions, which is positive for both the Euro and the US Dollar. Nevertheless, interest rate differentials and peak objectives amid the current high inflationary outlook would favor the US Dollar, so the EURUSD would likely be under selling pressure, keeping the exchange rates below parity.

EURUSD Price Forecast: Technical outlook

Despite closing in an upbeat tone on Friday, the EURUSD remains neutral-to-downward biased, as depicted by the daily chart. Traders should note that the EUR had risen in four of the last five trading days and stayed above the 50-day Exponential Moving Average (EMA). Nevertheless, on the only day that the EURUSD climbed toward the 100-day EMA, it was rejected, and the pair tumbled toward the October 27 daily low at 0.9957.

The Relative Strength Index (RSI) oscillates in bullish territory, which suggests that buyers are gathering momentum. However, to shift the bias to neutral, EURUSD buyers must conquer the 100-day EMA and 1.0100. And if the Euro clears 1.0200, a move towards the 200-EMA is on the cards.

On the flip side, key support levels lie at the 50-day EMA at 0.9887. Once cleared, the following support would be the 20-day EMA at 0.9838, ahead of 0.9800, followed by October’s monthly low of 0.9631.

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BoE: Looking for a 75 bps rate hike next week – Rabobank

2022-10-29T16:58:00.003+08:00

Next week, the Bank of England will have its monetary policy committee meeting. Analysts at Rabobank look for a 75 basis points rate hike to 3.00% from 2.25%. They explain that it would still be the largest rate hike of this cycle. They expect to see rates peaking at 4.75%.

Key Quotes:

“After the mini-Budget disaster of late-September, we shifted our call for the November MPC from +50 to +100 bps. We have dialled back our forecast to +75 bps, as most of the political and financial market upheaval has subsided. This is also the consensus among economists.”

“The central bank needs to show markets that it is cognizant that confidence in the UK’s institutional framework has been damaged, but there is no need for crisis management anymore. Still, a 75 bps hike would still be Britain’s largest of this cycle. We think it will also be a one-off, allowing the central bank to move back to a more gradual pace of 50 bps and then 25 bps rate increases this winter.”

“While inflation should remain around 10% in upcoming months, the outlook for growth has weakened markedly. Even as the August Monetary Policy Report was already sombre, forecasting a fifteen-month recession, we expect more of this gloominess rather than less.”

2022-10-28T20:38:00.004+08:00

Crude Oil Futures: Rising odds for further consolidation

CME Group’s flash data for crude oil futures markets noted traders extended the uptrend in open interest for the 4^th session in a row on Thursday, this time by around 12.4K contracts. Volume followed suit and rose for the thirds straight session, now by around 63.1K contracts.

WTI remains focused on $90.00 and above

Prices of the WTI extended the weekly recovery on Thursday. The small uptick was in tandem with increasing open interest and volume and opens the door to some consolidation in the very near term and with the immediate target at the $90.00 mark per barrel and beyond.

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2022-10-27T20:25:00.002+08:00

Gold Price Forecast: XAU/USD consolidates above $1,660 level amid modest USD strength

A combination of factors prompts some selling around gold on Thursday.
Rising US bond yields revive the USD demand and exert some pressure.
Bets for a less hawkish Fed offer support ahead of the US Q3 GDP report.

Gold struggles to gain any meaningful traction on Thursday and seesaws between tepid gains/minor losses through the first half of the European session. The XAU/USD remains below a nearly two-week high set the previous day and is currently trading around the $1,663-$1,662 area, nearly unchanged for the day.

The US dollar regains some positive traction and stages a goodish rebound from its lowest level since September 20, which, in turn, acts as a headwind for the dollar-denominated gold. Apart from this, a positive tone around the US equity futures further contributes to capping the upside for the safe-haven precious metal.

That said, expectations that the Fed may slow the pace of its policy tightening helps limit the downside for the non-yielding gold. The incoming US macro data pointed to signs of a slowdown in the world's largest economy and forced investors to trim their bets for more aggressive rate hikes by the US central bank.

Traders also prefer to move to the sidelines ahead of Thursday's key event/data risks. The European Central Bank is scheduled to announce its policy decision and is widely expected to hike interest rates by 75 bps. Apart from this, the Advance US Q3 GDP report should infuse some volatility and provide a fresh impetus to gold.

From a technical perspective, the recent recovery from the vicinity of the YTD low stalls near the $1,675 intermediate hurdle. This is followed by the $1,682 supply zone, which if cleared decisively will set the stage for an extension of the recent positive move witnessed over the past week or so, from the vicinity of the YTD low.

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2022-10-26T21:03:00.000+08:00

EUR/USD Price Analysis: The next hurdle comes at 1.0050

EUR/USD surpasses the parity in a sustainable fashion.
There is scope for a visit to the 1.0050 level in the near term.

The weekly upside in EUR/USD remains healthy and manages to leave behind the key parity zone on Wednesday.

The surpass of this key region could spark a more serious recovery in the short-term horizon. Against that, the immediate barrier is expected at the weekly top at 1.0050 (September 20).

In the longer run, the pair’s bearish view should remain unaltered while below the 200-day SMA at 1.0516.

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2022-10-21T19:56:00.002+08:00

GBP will likely continue to be under pressure in the time to come – Nordea

In the UK, rates have continued their fall on a policy U-turn. Still, economists at Nordea see more pain ahead for the British pound.

The policy U-turn will lessen the GBP blow, but it is not enough

“The proposal of the UK government – lower taxes and higher spending financed by more debt – broke havoc in the gilt markets while sending the pound in a free fall. Since then UK markets have stabilised. But it takes a long time to build up trust which can be easily lost in a moment.”

“Investors are unlikely to have strong renewed confidence in UK’s governance no matter who take over the helm – trust takes years to build, seconds to break and forever to repair.”

“The poor economic fundamentals in the UK, sky-high inflation, financial imbalances and pension funds under strain will continue to weigh upon the pound.”

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UK PM Truss Spokesman: Working in preparation for a medium-term fiscal plan on October 31

2022-10-21T19:11:00.006+08:00

UK PM Liz Truss's spokesman said in a statement on Friday, “we are working in preparation for a medium-term fiscal plan on October 31.”

He added that “the new PM will decide whether it will be delivered then.”

Market reaction

GBP/USD found some support on the above headlines, as it moved away from weekly lows at 1.1100, currently trading at 1.1130, still down 0.91% so far.

2022-10-20T21:12:00.002+08:00

EUR/USD regains some ground lost and re-targets 0.9800

EUR/USD bounces off lows near the 0.9750 region.
German 10-year bund yields surpass the 2.45% level.
Weekly Claims, Philly Fed index, Fedspeak come next in the NA session.

The European currency regains a small smile and motivates EUR/USD to rebound from earlier lows in the mid-0.9700s on Thursday.

EUR/USD supported near 0.9750 so far

EUR/USD manages to regain some buying interest and recoup part of the ground lost following Wednesday’s strong decline, retargeting the 0.9800 region amidst the so far tepid downside momentum in the dollar.

Also underpinning the daily uptick in spot, the German 10-year benchmark bund yields rise past the 2.45% level for the first time since August 2011, in line with the uptrend observed in their US pees across the curve.

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USD/IDR to grind higher toward next resistance at 15,832 – TDS

2022-10-20T20:05:00.001+08:00

Bank Indonesia (BI) hiked rates by 50 bps as expected. Nonetheless, economists at TD Securities expect the USD/IDR to advance nicely toward the 15,832 resistance.

Another 50 bps hike cannot be discounted if IDR weakens aggressively

“BI hiked by another 50 bps, bringing the 7-day reverse repo rate to 4.75%. BI Governor Warjiyo noted that the hike was a ‘front-loaded, pre-emptive and forward-looking step to lower inflation expectations that are too high or overshooting’. However, we think the policy path ahead leans more on the pace of IDR depreciation given BI's historical focus on FX. Further, Warjiyo commented that the Bank wants to control the IDR to prevent imported inflation.”

“We see a gradual move for USD/IDR higher towards its next technical resistance level at 15,832 (76.4% Fib level over 5 yr-window).”

“BI likely won't tolerate any sharp one-sided moves in IDR and another 50 bps hike cannot be discounted if IDR weakens aggressively against the USD and compared to its regional peers.”

2022-10-19T21:26:00.002+08:00

Gold Price Forecast: XAU/USD hits three-week low amid surging bond yields, stronger USD

A combination of factors drags gold to a fresh three-week low on Wednesday.
Hawkish Fed expectations, rising US bond yields, stronger USD exert pressure.
The risk-off impulse could lend some support and help limit any further losses.

Gold continues losing ground through the early North American session and hits a fresh three-week low, around the $1,630 area in the last hour. The downtick is exclusively sponsored by a strong pickup in demand for the US dollar, which tends to weigh on the dollar-denominated commodity.

In fact, the USD Index, which measures the greenback's performance against a basket of currencies, has now recovered a major part of its weekly losses amid rising bets for aggressive rate hikes by the Fed. The US central bank remains committed to bringing inflation under control and is expected to deliver another supersized 75 bps rate increase at the next policy meeting in November.

Hawkish Fed expectations trigger a fresh leg up in the US Treasury bond yields and continue to act as a tailwind for the buck. In fact, the yield on the rate-sensitive 2-year US government bond rallies to a new 15-year peak and the benchmark 10-year Treasury note hit its highest level since 2008. This is seen as another factor driving flows away from the non-yielding gold.

The USD maintains its strong bid tone and seems rather unaffected by mixed US housing market data. This, along with rising bets for a jumbo rate hike by the European Central Bank and the Bank of England, suggests that the path of least resistance for the XAU/USD is to the downside. Hence, a slide back towards the YTD low, around the $1,615 area, remains a distinct possibility.

That said, a turnaround in the global risk sentiment - as depicted by a generally weaker tone around the equity markets, could lend support to the safe-haven gold. That said, any attempted recovery might still be seen as a selling opportunity and runs the risk of fizzling out rather quickly.

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Canada: Annual CPI eases to 6.9% in September vs. 6.8% expected

2022-10-19T20:47:00.002+08:00

Inflation in Canada falls at a slightly slower-than-expected pace.
USD/CAD trims a part of its intraday gains in reaction to the data.

Inflation in Canada, as measured by the Consumer Price Index (CPI), fell to 6.9% in September from 7.0% in August, data published by Statistics Canada showed this Wednesday. This reading is slightly better than the market expectation of 6.8%.

The Bank of Canada's (BOC) Core CPI, which excludes volatile food and energy prices, unexpectedly climbed to 6.0% on a yearly basis from 5.8% in August, again beating estimates for a reading of 5.6%.

The initial market reaction, however, is limited amid a goodish pickup in the US dollar demand, which continues to act as a tailwind for the USD/CAD pair.