Author: FXStreet Team

Breaking: Binance CEO Changpeng Zhao discredits rumors of Interpol Red Notice, citing photoshop

https://www.fxstreet.com/cryptocurrencies/news/breaking-binance-ceo-changpeng-zhao-discredits-rumors-of-interpol-red-notice-citing-photoshop-202304032252

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  • Binance CEO has quelled rumors of a Red Notice filed against him by Interpol.
  • Cobie, a well-followed account in the crypto Twitter community, pedaled the rumor.
  • The speculation triggered a slump of over 3% in BNB price and around 1% for BTC price.

Binance CEO Changpeng Zhao (CZ) has come forward to dismiss rumors about a Red Notice issued against him by Interpol.

An encrypted message from Twitter user Cobie read, “Interpol Red Notice for CZ.” Cobie is a renowned Twitter user with a massive following, which explains the loud chatter around the post. The message was tweeted in a sequence of letters and numbers encrypted using the SHA-256 hash function, the same cryptography that secures many cryptocurrencies, including Bitcoin.

An excerpt from the Interpol website describes a Red Notice as “A request to law enforcement worldwide to locate and provisionally arrest a person pending extradition, surrender, or similar legal action.” The site also specifies, “The individuals are wanted by the requesting member country or international tribunal.”

Read: Four issues Binance CEO notes in his open address to the CFTC complaint

The rumor comes days after the Commodity Futures Trading Commission (CFTC) sued Binance and its CEO over alleged federal law violations. The lawsuit provoked fears of an impending US Department of Justice (DOJ) lawsuit among other criminal charges.

CZ had made efforts to calm the community, penning an official letter to clear his name and that of the largest crypto exchange by trading volume. In the letter, the Binance executive addressed technology for compliance and US blocks, cooperation, and transparency with law enforcement, trading, and registrations and licenses, before closing with a no-bias assertion that “I strictly observe these policies.”

Binance Coin (BNB) suffers rumor-infused FUD

The news of the alleged Red Notice affected Binance Coin price (BNB), causing a 3% decline in market value. At the time of writing, the altcoin is down almost 2% in the last 24 hours with a 55% increase in 24-hour trading volume as chatter around the digital asset continues.

Bitcoin price (BTC) was also affected by the FUD around the Red Notice, causing a 1% drop to $27,770. Notably, CZ addressed the rumors at around 21:51 UTC on April 3 and passed an investor tip to community members shortly after, warning them against panic selling on every whim of FUD.

CZ has asked community members to unfollow and block Cobie. 

A comparison of the one-hour and the 24-hour timeframes showed that both BNB and BTC had reacted to CZ’s reply. 

BNB/USDT 1-hour chart, BNB/USDT 1-day chart, BTC/USDT 1-hour chart, BTC/USDT 1-day chart

Breaking: Terraform Labs founder Do Kwon arrested in Montenegro: Interior minister

https://www.fxstreet.com/cryptocurrencies/news/breaking-terraform-labs-founder-do-kwon-arrested-in-montenegro-interior-minister-202303231345

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Terraform Labs’ founder Do Kwon is arrested, according to Minister of Interior of Montenegro Filip Adzic.

Adzic tweeted that “one of the world’s most wanted fugitives was arrested in Podgorica. He added,

Montenegrin police have detained a person suspected of being one of the most wanted fugitives, South Korean citizen Do Kwon, co-founder and CEO of Singapore-based Terraform Labs

This is a developing story and will be updated accordingly.

Jerome Powell speech: Chairman’s tough balancing act after rate decision

https://www.fxstreet.com/news/powell-speech-preview-fed-chairman-faces-tough-questions-202303221555

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  • Jerome Powell will explain Fed interest rate decision, economic projections in press conference.
  • Fed chair will face tough Q&A session trying to balance inflation and financial stress risks.

Jerome Powell, Chairman of the Federal Reserve System (Fed), will speak in a press conference on Wednesday at 18:30 GMT, 30 minutes after the Fed Interest Rate decision is announced. The speech of Powell will reflect the current views of the Federal Open Market Committee (FOMC) on monetary policy and will also update the Summary of Economic Projections, also known as the dot plot.

Powell will face tough questions from the press on whether the US central bank can keep going with its interest rate hikes considering the financial stress that the banking system has suffered recently. Jerome Powell’s words will carry enormous importance for the market, with the US Dollar, and the US Treasury bonds leading the way and affecting the valuation of most asset classes. 

According to Yohay Elam, Senior Analyst at FXStreet, Powell should persevere in the interest rate hikes and “convey a message of confidence” to the markets. Elam expects Powell’s press conference to alleviate any market over-reaction to the likely interest rate hike: 

“The sweetener for markets could come in the accompanying statement. Powell and his colleagues will have to comment on the banking crisis, probably by saying they are working closely to resolve the issues and are ready to act if the situation deteriorates.

Such remarks would ease and balance the pain coming from raising rates and defying expectations for rate cuts later this year.”

 

Fed Interest Rate decision and dot plot have huge market implications

https://www.fxstreet.com/news/federal-reserve-interest-rate-decision-preview-dot-plot-has-market-attention-202303221200

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  • Federal Reserve expected to hike interest rates by 25 basis points.
  • Summary of Economic Projections, known as the dot plot, will shape how the markets react.
  • FOMC will need to find a balance between addressing inflation pressures and banking troubles.

The Federal Reserve (Fed) is expected to raise its policy rate by 25 basis points (bps) to the range of 4.75%-5% on Wednesday, March 22 at 18.00 GMT. 

The market positioning suggests that such a decision is already largely priced in, opening the door for a significant reaction to the Fed’s communication, the revised Summary of Economic Projections (SEP) and Chairman Jerome Powell’s press conference regarding future policy actions. 

According to the CME Group’s FedWatch Tool, the probability of a 25 bps hike this week stands at around 84%, an almost certain chance. For the March 22nd meeting, the market is currently pricing in only a 16% chance of the Fed leaving its policy rate, the federal funds rate, unchanged at the range of 4.5%-4.75%.

Federal Reserve interest rate decision: What to know in markets on Wednesday, March 22

  • The US Dollar (USD) suffered heavy losses last week, pressured by falling US Treasury bond yields and the re-pricing of the Fed’s rate outlook following the collapse of the Silicon Valley Bank and Signature Bank. 
  • As investors move to the sidelines ahead of the Fed’s policy announcements, the US Dollar Index consolidates its losses.
  • US stock index futures trade mixed following Tuesday’s risk rally and the 10-year US Treasury bond yield continues to fluctuate above 3.5%. 
  • The European economic docket will not feature any high-impact data releases on Wednesday, allowing the USD’s reaction to the Fed to drive EUR/USD’s action.

When is the Fed meeting and how could it affect EUR/USD?

The Federal Reserve is scheduled to announce its interest rate decision and publish the revised Summary of Economic Projections (SEP), the so-called dot plot, this Wednesday, March 22, at 18:00 GMT. This will be followed by the post-meeting FOMC press conference at 18:30 GMT. Investors had begun to re-price the Fed’s policy outlook following last week’s collapse of two mid-size US banks – Silicon Valley Bank and Signature Bank. 

That said, investors are still forecasting a 25 bps rate increase amid easing fears over a deepening liquidity crisis following the quick measures taken by the Fed. This, along with a positive development surrounding the Credit Suisse saga, suggests that the Fed could stay focused on battling inflation. Nevertheless, the terminal rate projection in the dot plot and Fed President Jerome Powell’s comments on the policy outlook and the market turmoil will provide fresh clues regarding potential future policy steps.

In December, the Fed’s SEP revealed that the median view of the policy rate at end-2023, the terminal rate, stood at 5.1%, up from 4.6% in September’s SEP. At this point, an upward revision to the terminal rate projection shouldn’t be surprising. Having said that, where the terminal rate lands will reveal whether policymakers have turned reluctant to continue with rate hikes. Moreover, market participants will want to know if policymakers forecast a rate cut before the end of the year, given the negative impact of high interest rates on financing conditions. 

According to Yohay Elam, Analyst at FXStreet, “after the initial reaction, the focus will shift to interest rate projections. I expect no significant change for 2023 – the Fed will likely stick to its guns about refusing to slash borrowing costs this year. By signaling rates will near 5.50%, the Fed would continue conveying a message of confidence. It could offer a token reduction of its projections for 2024 and 2025 – but markets do not look that far.”

FOMC Chairman Jerome Powell will have to respond to tough questions on the state of the banking sector. His communication on how the Fed plans to continue to tame inflation while reassuring that SVB turmoil will remain contained will impact the action in US Treasury bond yields and the US Dollar’s performance against its major rivals.

Previewing Powell’s presser, “if fighting inflation is an overriding priority, even if it results in a recession, shares would tumble, and the Greenback would surge. Such a clear-cut message also has low chances,” Elam noted. “I expect Powell to dedicate significant emphasis and time to the labor market – the Fed’s second official mandate, alongside price stability., He could tie the bank’s next moves to jobs data rather than solely banks vs. inflation.” 

Eren Sengezer, European Session Lead Analyst at FXStreet, shares his outlook for EUR/USD: “Heading into the key central bank event risk, the EUR/USD pair trades with a positive bias comfortably above 1.0700. The Relative Strength Index (RSI) indicator on the daily chart stays near 60, suggesting that the pair has more room on the upside before turning technically overbought.”

“Nevertheless, a hawkish dot plot combined with Powell’s assurance that they will focus on taming inflation should help the US Dollar gather strength and cause the pair to turn south. In that scenario, the 50-day Simple Moving Average (SMA) is likely to act as dynamic support at around 1.0700. A daily close below that level could open the door for an extended slide toward 1.0600 (100-day SMA) and 1.0540 (static level).”

“On the upside, EUR/USD could face interim resistance at 1.0850 (static level) before targeting 1.0900 (psychological level, static level) and 1.1000 (psychological level),” Eren adds further.

Federal Reserve Related content

About Federal Reserve

The Federal Reserve System (Fed) is the central banking system of the United States and it has two main targets or reasons to be: one is to keep unemployment rate to their lowest possible levels and the other one, to keep inflation around 2%. The Federal Reserve System’s structure is composed of the presidentially appointed Board of Governors, partially presidentially appointed Federal Open Market Committee (FOMC). The FOMC organizes 8 meetings in a year and reviews economic and financial conditions. Also determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. FOMC Minutes are released by the Board of Governors of the Federal Reserve and are a clear guide to the future US interest rate policy.

ECB Press Conference Preview: Christine Lagarde speech is a crucial one

https://www.fxstreet.com/news/lagarde-speech-preview-all-about-ecb-press-conference-202303160844

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  •  Christine Lagarde to hold key press conference on Thursday.
  •  European Central Bank expected to raise interest rates by 50 basis points.
  •  Q&A section of ECB President speech will be highly scrutinized.

Christine Lagarde, President of the European Central Bank (ECB), will hold a press conference on Thursday, March 16 at 13:45 GMT, 30 minutes after the publication of the ECB monetary policy decision statement. The Q&A session by Lagarde will be a highly anticipated one, as the current ECB tightening monetary policy seems to be questioned on the aftermath of the banking crisis triggered by the Silicon Valley Bank (SVB) collapse.

You can follow the ECB press conference, with Christine Lagarde’s speech, in the following video:

The European Central Bank has been raising interest rates in the past months, since the summer of 2022, lifting the main operations rate from 0% to the current 3.5%. Another 50 basis point interest rate hike is expected this time around, but the banking crisis that started in the United States with the default of SVB seems to have spread quickly to the European banking sector. It will be very important to see if Christine Lagarde addresses these issues – and whether they have impacted the ECB decision-making – in her prepared statement or in the following Q&A session, where she will surely be asked about it.

About Christine Lagarde

Christine Lagarde was born in 1956 in Paris, France. Graduated from Paris West University Nanterre La Défense and became President of the European Central Bank on November 1st 2019. Prior to that, she served as Chairman and Managing Director of the International Monetary Fund between 2011 and 2019. Lagarde previously held various senior ministerial posts in the Government of France: she was Minister of the Economy, Finance and Industry (2007–2011), Minister of Agriculture and Fishing (2007) and Minister of Commerce (2005–2007). 

About ECB press conference

Following the ECB´s economic policy decision, the ECB President gives a press conference regarding monetary policy. Her comments may influence the volatility of EUR and determine a short-term positive or negative trend. Her hawkish view is considered as positive – or bullish for the EUR – whereas her dovish view is considered as negative, or bearish.

Dogecoin price goes nowhere as bulls are unable to seize bullish sentiment when its offered to them [Video]

https://www.fxstreet.com/cryptocurrencies/news/dogecoin-price-goes-nowhere-as-bulls-are-unable-to-seize-bullish-sentiment-when-its-offered-to-them-video-202303160517

A brief technical and on-chain analysis on Dogecoin price. Here, FXStreet’s analysts evaluate where DOGE could be heading next. Please, subscribe to o

How will US Consumer Price Index impact Federal Reserve monetary policy?

https://www.fxstreet.com/news/cpi-data-expectations-analyzing-february-us-inflation-202303140600

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  • Annualized Consumer Price Index in the US is expected to decline to 6.0% in February.
  • Core CPI is forecast to edge lower to 5.5% YoY in February from January’s 5.6%.
  • Hot US CPI is critical to initiating a turnaround in the US Dollar against its major rivals.

The Consumer Price Index (CPI) data release for February, published by the US Bureau of Labor Statistics (BLS), is scheduled for March 14 at 12:30 GMT. The US Dollar (USD) has entered into a downward spiral following the latest mixed US labor market report and the US banking stress, which have revived the dovish US Federal Reserve (Fed) expectations. 

The United States (US) inflation report will be the last high-impact economic data that will be published ahead of the March 22 Federal Reserve policy meeting.

What to expect in the next CPI data report?

On an annualized basis, the Consumer Price Index data is forecast to decline to 6.0% and the Core CPI, which excludes volatile food and energy prices, is also expected to edge a tad lower to 5.5% from 5.6% registered in January.

Meanwhile, the headline CPI data is seen easing to 0.4% MoM in February, compared with a 0.5% increase reported in January. The Core CPI is likely to hold steady at 0.4% MoM in the reported month. 

The US CPI data will hold the utmost relevance, as the Federal Reserve remains committed to bringing down inflation back to its 2.0% target. Further, it’s a ‘blackout period’ for the Fed policymakers ahead of the March 22 meeting, and therefore, the inflation data will have a strong market impact, as it helps the Fed determine the future policy path.  

Economists from Wells Fargo agree with the consensus and expect headline inflation numbers to remain high this time around: “We look for another monthly increase of 0.4% in the overall CPI in February, which would put the YoY rate at 6.0%. We still see inflation set to grind lower, but the process is likely to be bumpy and take time. Despite some directional improvement over the past couple of quarters, prices are still growing well above the Fed’s 2% target, and the tight labor market suggests that there are still inflationary pressures that could forestall a full return to 2% inflation.”

When will be the Consumer Price Index report and how could it affect EUR/USD?

The Consumer Price Index data report is scheduled for release at 12:30 GMT, on March 14. A softer-than-expected reading could strengthen the renewed dovish Fed rate hike expectations. 

Federal Reserve Chief Jerome Powell, during his testimony in the US Congress last week, endorsed a case for bigger rate hikes should the incoming data warrant faster tightening. However, the US banking rout combined with mixed employment data old cold water on a bigger Fed rate hike outlook.

Goldman Sachs revised down its Fed rate hike outlook, now stating that the Federal Reserve will not deliver any rate hike at its March 22 meeting. Meanwhile, JP Morgan called on for a 25 bps March Fed rate increase. 

The Silicon Valley Bank (SVB) collapse saga prompted traders to reassess their bets for the US interest rate trajectory, with rate cuts by end-2023 now priced in.

In case of a disappointing CPI print, the US Dollar will see a fresh leg lower, allowing the EUR/USD pair to extend its uptrend toward the 1.0800 level. Conversely, a surprisingly hotter US CPI print could save the day for the Greenback bulls. 

The US CPI data is likely to stir the market and ramp up volatility, irrespective of divergence from the expected readings, prompting traders to grab short-term opportunities around the EUR/USD pair.

Dhwani Mehta offers a brief technical outlook for the major and explains: “EUR/USD has turned south after failing to find acceptance above the flattish 50-Daily Moving Average (DMA) at 1.0726 on the daily sticks. The Relative Strength Index (RSI) is pointing lower while defending the midline, suggesting that the retracement could be shortlived.”

Dhwani also outlines important technical levels to trade the EUR/USD pair: “On the upside, recapturing the 50 DMA barrier is critical to resuming the uptrend. The next stops for Euro bulls are seen at the monthly top of 1.0749 and the 1.0800 round figure. Alternatively, further retreat in the EUR/USD pair could expose the horizontal 21 DMA support at 1.0637, below which the road toward the 1.0600 mark could be a smooth one for EUR/USD sellers.”

CPI data related content

About the Consumer Price Index

The Consumer Price Index released by the US Bureau of Labor Statistics is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The purchasing power of USD is dragged down by inflation. The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally speaking, a high reading is seen as positive (or bullish) for the USD, while a low reading is seen as negative (or Bearish).

Can XRP price trigger a 9% recovery rally after US Treasury Department called for SVB depositor reimbursement?

https://www.fxstreet.com/cryptocurrencies/news/can-xrp-price-trigger-a-9-recovery-rally-after-us-treasury-department-called-for-svb-depositor-reimbursement-202303130737

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  • XRP price suggests a 9% recovery to $0.393 on the promise of restored SVB depositor wholeness.
  • Ripple could break past the 50- and 100-day EMAs at $0.381 and $0.386, respectively, before completing the V-shaped boomerang.
  • The bullish thesis would be invalidated if the altcoin slips below the $0.364 support level.

XRP price is on course to regain all the ground lost since the topple of Silicon Valley Bank (SVB) on March 10, after identifying a decisive pivot from which to scale a recovery. The boomerang effect is attributed to reassurances by Ripple Labs CEO, Brad Garlinghouse, that despite some of its cash being held at SVB, the firm “remains in a strong financial position.” 

Other positive influences include the USDC stablecon regaining its peg, according to a recent statement. 

XRP price targets 9% upswing to $0.393

XRP price is trading with a bullish bias after a tumultuous weekend that sent a negative wave across the crypto market. The collapse of Silicon Valley Bank and the subsequent depegging of the USDC stablecoin from the dollar were both catastrophic incidents that worsened the already negative market sentiment. However, following recent developments, investors now have renewed hope.

At the time of writing, XRP price is auctioning for $0.367 with a 26.22% increase in 24-hour trading volume to $1.405 billion. The token’s market value is up 1% in the last day as bullish momentum increases. If buyers increase their presence in the market, Ripple price could ascend to tag the 50-day Exponential Moving Average (EMA) at $0.381, or the 100-day EMA at $$0.386 resistance levels.

A decisive flip of these roadblocks into support levels could set the tone for XRP price to tag the $0.393 resistance level last visited on March 9 before the two crises hit. Such a move would denote a 9.57% climb from current levels as shown in the twelve-hour chart below. 

XRP/USDT 12-hour chart

On the downside, failure to break past the overhead barriers could suppress XRP price further, causing its market value to plummet below the immediate support level at $0.364. A daily candlestick close below this level could invalidate the bullish premise.

In such a case, XRP price could drop to retest the Saturday low of $0.357 or in dire situations, move below the $0.350 level and revisit the $0.341 support level. 

Dogecoin Price Prediction: DOGE hemorrhage to continue after Powell’s hawkish testimony

https://www.fxstreet.com/cryptocurrencies/news/dogecoin-price-prediction-doge-hemorrhage-to-continue-after-powells-hawkish-testimony-202303080405

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  • Dogecoin price has been on a downtrend since late February, a stance partially invigorated by Elon Musk’s comment about his interest in AI.
  • If DOGE repels the EMAs further, the price could lose the immediate support at $0.0736 and plummet lower.
  • A daily candlestick close that flips the resistance level confluence at $0.0823 into a support floor would invalidaet the bearish thesis.

Dogecoin (DOGE) price was trading with a bearish bias since February 19, undergoing a massive down move. Twitter CEO and famed doge father Elon Musk reinvigorated the fire with his tweet about a newly found interest in artificial intelligence (AI).

Further inspiring the negative sentiment for the meme coin, Morgan Creek Capital Management chief investment officer Mark Yusko scaled another painful attack on Dogecoin, saying, “meme coins don’t have any value.”

Dogecoin price feels the brunt of tighter interest rates hikes

Dogecoin price is down 11% over the last week and currently trades above the  $0.0736 support level. Given Jerome Powell’s testimony hinted at speeding up rate hikes, investors should expect the downtrend to continue.

In such a case, the Dogecoin price could plunge lower to tag the $0.0701 support level before a potential upswing. If the buyers fail to make a comeback, DOGE could plummet to the next support structure at $0.0682. This move, in total, would roughly constitute an 8% selloff. 

The undesirable position of the Relative Strength Index (RSI) heading downwards with a price strength of 32 also adds credence to the bearish sentiment.

DOGE/USDT 1-day chart

On the flip side, Dogecoin price noted a bullish cross on the daily chart between the 50-day and 100-day Exponential Moving Averages (EMAs). This technical formation breathes hope for DOGE holders, suggesting a potential for an uptrend.

If sidelined buyers heed the call come to the meme coin’s rescue, Dogecoin price could attempt a recovery rally to tag the $0.0823 resistance level. While this move will attract more investors, only a daily candlestick close above $0.0827 would invalidate the bearish thesis. Such a move would create a higher high and skew the odds in the bulls’ favor and potentially trigger a run-up to the 200-day EMA at $0.0845.

Jerome Powell Speech Preview: Fed Chair testifies in US Congress

https://www.fxstreet.com/news/jerome-powell-speech-preview-fed-chair-testifies-in-us-congress-202303071300

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  • Jerome Powell testimony in the US Congress will be a top-tier market moving event.
  • New clues on the Federal Reserve interest rate hike path are awaited.
  • US Dollar, stock markets and other asset classes could see big swings on Fed Chair words.

Jerome Powell, Chairman of the Federal Reserve System, will testify on March 7 in the US Congress, in front of the Senate Committe on Banking, Housing and Urban Affairs. The hearing, entitled as “The Semi-Annual Monetary Policy Report to the Congress”, will start at 15:00 GMT (10:00 US Eastern Standard Time), and it will have the full attention of all financial market players. 

Jerome Powell, Federal Reserve Chaiman, will deliver a key speech today in front of the US Senate

Jerome Powell is expected to address the main takeaways of the semi-annual Federal Reserve Monetary Policy Report, published last Friday. In that report, the Fed mentioned that “ongoing increased in the fed funds rate target are necessary” and that “bringing inflation back to 2% likely requires a period of below-trend growth, and some softening of labor market conditions.” 

Expect US representatives in the Senate to inquire Powell in a long Q&A session about the future path of interest rates and how will the Fed assess how much more monetary policy tightening is needed. Markets could see strong moves to the US Dollar, US Treasury bond yields, stock markets and all asset classes, including Gold price and all major currency pairs, during Powell’s testimony. 

About Jerome Powell (via Federalreserve.gov)

“Jerome H. Powell first took office as Chair of the Board of Governors of the Federal Reserve System on February 5, 2018, for a four-year term. He was reappointed to the office and sworn in for a second four-year term on May 23, 2022. Mr. Powell also serves as Chairman of the Federal Open Market Committee, the System’s principal monetary policymaking body. Mr. Powell has served as a member of the Board of Governors since taking office on May 25, 2012, to fill an unexpired term. He was reappointed to the Board and sworn in on June 16, 2014, for a term ending January 31, 2028.”

Gold Price Forecast: Bulls keep pushing after strong Chinese Services PMI

https://www.fxstreet.com/news/gold-price-forecast-bulls-keep-pushing-after-strong-chinese-services-pmi-202303030849

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  • Gold price bulls come alive in a bullish reversal week.
  • US Dollar retraced a bit despite surging US Treasury 10-year bond yields.
  • ISM Services PMI release is still awaited for fresh impulse on XAU/USD.

Gold price bulls have returned to action this week, helping the bright metal break out of a bearish trend that had dominated XAU/USD price action during February. What has been more impressive is that Gold has been able to rally despite US Treasury bond yields gathering strength, which usually supports the US Dollar and weighs on yield-less commodities. 

Gold news: Chinese PMI boost

Strong PMI data from China, both in Manufacturing and Services sectors, has really helped Gold price to pick up demand, as the Asian giant is a huge yellow-metal market. Gold traders now await more Federal Reserve clues, which could come from Fed officials’ speeches and Friday’s ISM Services PMI.

In the meantime, investors keep watching the US 10-year Treasury bond yield market, which rallied past the round 4% resistance on Wednesday and remains above this crucial level. The usual inverse correlation of Gold price with the US Treasury yields could provide downward pressures on XAU/USD if yields stay high, but a retracement in that bond market could propel the bright metal on a notable surge.

United States Services PMIs on the way, watch for inflation clues

The Institute of Supply Management (ISM) will publish the Services PMI on Friday at 15 GMT. If this report reaffirms that rising wage costs are feeding into accelerating price pressures in the sector, the US Dollar is likely to hold its ground against Gold. Hence, the Prices Paid Index component will be watched closely by market participants.

It’s worth noting, however, that the CME Group FedWatch Tool shows that markets are fully pricing in at least two more 25 basis points Federal Reserve rate hikes in March and May. Additionally, the probability of the Fed holding the policy rate unchanged in June stands at 25%.

The market turnaround has confirmed that the US Dollar does not have a lot of room on the upside, at least until the February jobs report and inflation data confirm or refute one more 25-bps hike in June.

Gold price targets key resistance

Dhwani Mehta, Senior Analyst at FXStreet, points at a key moving average as the main resistance to beat by Gold price bulls:

At that level, the bearish 21-Daily Moving Average (DMA) coincides, making it a powerful resistance. Gold bulls yearn for a daily candlestick closing above the latter to add extra legs to the ongoing recovery in the bright metal.

Fresh buying opportunities will be created above the 21 DMA hurdle, fuelling a rally toward the mildly bullish 50 DMA at $1,858.

Gold price in 2023: Up-and-down action

Financial markets have been a two-tale story for the early part of 2023, in which Gold price has reflected in its price action like no other asset. XAU/USD rode an uptrend during all of January with the market optimism about inflation slowing down and constant Federal Reserve dovish talk, only to see a drastic turnaround back to the old dynamics in February after a hot US Nonfarm Payrolls (NFP) report. The US economy adding more than 500K jobs in the month of January shifted the market expectations for the Fed easing its monetary policy, and the US Dollar has come back to the market King throne.

Gold price opened the year at $1,823.76 and reached a year-to-date high of $1,960 on February 2, right in between the first Federal Reserve meeting of the year and the surprising release of the US jobs report for January. Gold price went on a big downtrend from there, reaching year-to-date lows just above $1,800, where it found support.

Gold price daily chart

Gold Price Forecast: Bullish reversal triggered by US Dollar sell-off

https://www.fxstreet.com/news/gold-price-forecast-bullish-reversal-triggered-by-us-dollar-sell-off-202303010900

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  • Gold price breaks out of descending parallel channel as market mood improves.
  • US Dollar was sold off on a mix of soft US data and improving Chinese PMI numbrs.
  • ISM Manufacturing and Services PMI releases still awaited for fresh impulse on XAU/USD.

Gold price has rallied in the first half of the trading week, breaking out of a bearish trend that had dominated XAU/USD price action for most of February, following a surprisingly hot US Nonfarm Payrolls report. 

US 10-year Treasury bond yields faced once again a super-thick resistance at 4%, which is putting a hard cap on further US Dollar upside in the past trading days. While US 10-year T-bond yields are unable to break above this level, Gold price bulls should have the edge.

Gold news: Softer US inflation expectations, improving Chinese PMIs support XAU/USD

Soft data from the United States, led by decreasing inflation expectations in the CB Consumer Confidence report released on Tuesday, triggered some profit-taking on the US Dollar longs, as the reading might somewhat ease the pressure on the Federal Reserve to increase its interest rate hike path again. 

This was followed on early Wednesday by higher-than-expected Purchasing Managers Index (PMI) readings in China, which improved the market mood in Asia. The first trading day in the month implies that a whole bunch of PMI surveys will be out around the world, which should bring fresh impulse to Gold price action.

United States Manufacturing and Services PMIs on the way

The Institute of Supply Management (ISM) will publish the Manufacturing PMI and the Services PMI on Wednesday and Friday, respectively, both at 15 GMT. 

If the ISM Services PMI report reaffirms that rising wage costs are feeding into accelerating price pressures in the sector, the US Dollar is likely to hold its ground against Gold. Hence, the Prices Paid Index component will be watched closely by market participants.

It’s worth noting, however, that the CME Group FedWatch Tool shows that markets are fully pricing in at least two more 25 basis points Federal Reserve rate hikes in March and May. Additionally, the probability of the Fed holding the policy rate unchanged in June stands at 25%.

The market turnaround has confirmed that the US Dollar does not have a lot of room on the upside, at least until the February jobs report and inflation data confirm or refute one more 25-bps hike in June.

In the meantime, investors are watching the US Treasury bond yields. 4% aligns as key resistance for the 10-year US T-bond yield and there could be a technical correction if that level stays intact. In that scenario, Gold price could turn north due to the inverse correlation with the US Treasury yields.

Gold price confirms Falling Wedge reversal pattern

Dhwani Mehta, Senior Analyst at FXStreet, reports the confirmation of the previously advised Falling Wedge pattern, which correctly hinted at a bullish reversal, and points at potential target levels for Gold price bulls:

Gold price confirmed falling wedge formation on the daily chart after yielding a daily close above the falling trendline resistance at $1,813 on Tuesday.”

“Should the upside break find its footing, the Gold price could advance further toward the previous week’s high at $1,848, above which the $1,850 psychological level will come into play.”

“Further up, the downward-sloping 21-Daily Moving Average (DMA) at $1,853 could challenge the bearish commitments.

Gold price in 2023: Up-and-down action

Financial markets have been a two-tale story for the early part of 2023, in which Gold price has reflected in its price action like no other asset. XAU/USD rode an uptrend during all of January with the market optimism about inflation slowing down and constant Federal Reserve dovish talk, only to see a drastic turnaround back to the old dynamics in February after a hot US Nonfarm Payrolls (NFP) report. The US economy adding more than 500K jobs in the month of January shifted the market expectations for the Fed easing its monetary policy, and the US Dollar has come back to the market King throne.

Gold price opened the year at $1,823.76 and reached a year-to-date high of $1,960 on February 2, right in between the first Federal Reserve meeting of the year and the surprising release of the US jobs report for January. Gold price went on a big downtrend from there, reaching year-to-date lows just above $1,800, where it found support. 

Gold price daily chart

How could the most important manufacturing PMI affect the market?

https://www.fxstreet.com/news/ism-manufacturing-pmi-february-preview-gloom-persists-despite-us-expanding-economy-202303010700

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  • The Manufacturing PMI set to improve to 48.0 from 47.4, New Orders expected to rise to 43.7.
  • The ISM Prices Paid Index is seen a tad higher at 45.0 from 44.5 in the previous month.
  • Purchasing Managers’ Index will be released by the ISM on Wednesday at 15:00 GMT.

The main Manufacturing Purchasing Managers’ Index (PMI) in the United States will be released by the Institute of Supply Management (ISM) in its Report on Business, where the latest manufacturing business survey result is displayed, at 13:30 GMT this Wednesday.

What to expect from the ISM manufacturing PMI report?

The most important manufacturing PMI in the United States is anticipated to have edged up slightly to 48.0 in February from the 47.4 contraction registered in January.

Among the sub-components of the report, the focus will be on Prices Paid as it reflects business sentiment around future inflation. The Manufacturing Prices Paid sub-index is expected to improve from 44.5 in January to 45.0 during the reported month.

The Employment Index is also seen a tad higher at 51.0 in the second month of the year while the New Orders Index for February is expected to rise to 43.7 vs. January’s 42.5.

It’s worth noting that the US manufacturing contraction deepened in January, as the main index contracted for the third straight month and hit its lowest since May 2020.

The data will provide a fresh update on the manufacturing sector activity amid rising borrowing costs and growing doubts about a potential ‘soft-landing’, especially after Monday’s US Durable Goods Orders declined by 4.50% in January, compared to the -4.0% expectations and December’s increase of 5.10%.

Apart from the US economic data, the focus will also remain on the speeches from Federal Reserve policymakers, in the wake of heightened expectations of higher rates for longer amidst hot US inflation.

Wells Fargo’s research team forecasts a below-expectations report: 

“We expect to see that ISM manufacturing spent another month in contractionary territory, with only an improvement of one-tenth of a point to 47.5. Last month, new manufacturing orders fell to 42.5, the lowest reading since mid-2020. Orders are expected to continue to dry up and production is expected to slowly contract. At least prices paid fell and employment remains steady in the face of these issues. We will look for more disinflationary pressures and challenges to the labor market in this upcoming report.”

When will the ISM manufacturing Purchasing Managers’ Index report be released and how could it affect EUR/USD?

The ISM Manufacturing PMI report is scheduled for release at 15:00 GMT, on March 1. Ahead of the key release, the US Dollar holds near multi-week highs, keeping the EUR/USD depressed near the 1.0600 mark.

A stronger headline print will be enough to bolster bets for a 50 basis points (bps) Fed rate hike move in March. This, in turn, should help provide a fresh lift to the US Treasury bond yields and boost the US Dollar.

NatWest said on Monday that it now expects the Federal Reserve to raise interest rates by 50 bps at its March meeting following Friday’s hot Personal Consumption Expenditures (PCE) data for January. The bank also expects 25 bps increments at the May and June meetings, which would take the terminal rate to 5.75%, up from their earlier estimate of 5.25%.

However, a softer report could act as a headwind to the ongoing bullish momentum in the US Dollar. A US Dollar correction is likely to ensue, initiating a meaningful recovery in the EUR/USD pair. Traders will also pay close attention to the ISM survey’s forward-looking New Orders sub-index, the Prices Paid component and the measure of factory employment for a significant market impact.

Dhwani Mehta, Editor at FXStreet, offers a brief technical overview of the EUR/USD and writes: “The Relative Strength Index (RSI) indicator on the four-hour chart is looking to pierce the midline for the upside on Wednesday. Additionally, the EUR/USD pair has managed to find reclaim ground above the flattish 21-Simple Moving Average (SMA), now at 1.0580.”

Dhwani also notes important technical levels to trade the EUR/USD: “On the upside, downward-sloping 50 SMA at 1.0621 could lure buyers should the latest uptick gain traction. Further up, the multi-day high near 1.0650 could be challenged. 

“If the 21 SMA support fails, EUR/USD could resume its decline toward the 1.0550 psychological mark. The last line of defense for Euro bulls is foreseen at the 2023 low of 1.0533,” Dhwani adds further.

ISM manufacturing PMI-related content

About the US ISM manufacturing PMI

The Institute for Supply Management (ISM) Manufacturing Index shows business conditions in the US manufacturing sector. It is a significant indicator of the overall economic condition in the US. A result above 50 is seen as positive (or bullish) for the USD, whereas a result below 50 is seen as negative (or bearish).

Gold Price Forecast: Strong US data weighs down XAU/USD

https://www.fxstreet.com/news/gold-price-forecast-us-dollar-dominance-keeps-weighing-on-xau-usd-202302271025

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  • Gold price stays in bearish mode, approaching $1,800 psychological support.
  • US Dollar stays dominant across the board as US macroeconomic data keeps beating expectations.
  • ISM Manufacturing and Services PMI releases headline a mid-tier economic data week.

Gold price has opened the week quietly, treading waters above the round $1,800 figure, which is providing immediate support. The bright metal lost value to the US Dollar on all five trading days last week, seeing its biggest sell-off on Friday after the US Personal Consumption Expenditures (PCE) inflation release, the Fed’s preferred indicator, clearly beating expectations.

This week, a bunch of mid-tier United States macroeconomic releases could help shape how much more room Gold price can have to the downside ahead of the crucial March 22 Federal Reserve (Fed) meeting. The US central bank probably will take all the data into account before delivering its next monetary policy plan – the now famously known as dot plot – although next two weeks with Nonfarm Payrolls and Consumer Price Index should be more impactful.

Gold news: Consumer Confidence more relevant than Durable Goods Orders

The US Census Bureau will release the Durable Goods Orders data for January at 13:30 GMT. Since the beginning of February, upbeat macroeconomic data releases from the United States have been supporting the US Dollar, and a similar market reaction could be expected this time. Nevertheless, this data by itself is unlikely to impact the Federal Reserve’s policy outlook in a significant way.

On Tuesday, the Conference Board’s Consumer Confidence Survey for February (scheduled for 15 GMT) will be scrutinized for more direction. Rather than the headline Consumer Confidence Index, the one-year consumer inflation expectations could trigger a reaction. In January, this component of the survey climbed to 6.8% from 6.6% in December. In case there is a pullback in this figure, the US Dollar could lose interest and help Gold price stage a short-term recovery and vice versa.

United States Manufacturing and Services PMIs on the way

The ISM will publish the Manufacturing PMI and the Services PMI on Wednesday and Friday, respectively, both at 15 GMT. 

If the ISM Services PMI report reaffirms that rising wage costs are feeding into accelerating price pressures in the sector, the US Dollar is likely to hold its ground against Gold. Hence, the Prices Paid Index component will be watched closely by market participants.

It’s worth noting, however, that the CME Group FedWatch Tool shows that markets are fully pricing in at least two more 25 basis points Federal Reserve rate hikes in March and May. Additionally, the probability of the Fed holding the policy rate unchanged in June stands at 25%.

The market positioning suggests that the US Dollar doesn’t have a lot of room on the upside, at least until the February jobs report and inflation data confirm or refute one more 25-bps hike in June.

In the meantime, investors will be watching the US Treasury bond yields. 4% aligns as key resistance for the 10-year US T-bond yield and there could be a technical correction if that level stays intact. In that scenario, Gold price could turn north due to the inverse correlation with the US Treasury yields.

Gold price developing more bearish patterns

Dhwani Mehta, Senior Analyst at FXStreet, analyzes Gold price current bearish trend:

Gold price is maintaining its downtrend while within a falling wedge formation since peaking at $1,960 on February 2.”

“XAU/USD is likely to test the falling trendline support at $1,794 after it breached several crucial demand area last week. At that level, the bullish 100-Daily Moving Average (DMA) coincides. Ahead of that level, the $1,800 level will likely offer stiff resistance to Gold sellers.

Gold price in 2023: Up-and-down action

Financial markets have been a two-tale story for the early part of 2023, in which Gold price has reflected in its price action like no other asset. XAU/USD rode an uptrend during all of January with the market optimism about inflation slowing down and constant Federal Reserve dovish talk, only to see a drastic turnaround back to the old dynamics in February after a hot US Nonfarm Payrolls (NFP) report. The US economy adding more than 500K jobs in the month of January shifted the market expectations for the Fed easing its monetary policy, and the US Dollar has come back to the market King throne.

Gold price daily chart in 2023, downtrend after peaking at $1,950

Gold price daily chart

Gold price opened the year at $1,823.76 and reached a year-to-date high of $1,960 on February 2, right in between the first Federal Reserve meeting of the year and the surprising release of the US jobs report for January. Since then, the ongoing downtrend has been relentless, reaching levels below the yearly open, around $1,800.

Core PCE Inflation Report Preview: US inflation and possible Federal Reserve steps

https://www.fxstreet.com/news/core-pce-inflation-report-preview-us-inflation-and-possible-federal-reserve-steps-202302240700

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  • Core Personal Consumption Expenditures Price Index is expected to rise by 0.4% MoM in January.
  • Markets have largely priced in two more Federal Reserve 25 basis points rate hikes.
  • US Dollar is likely to face renewed selling pressure if PCE figures match expectations.

The Core Personal Consumption Expenditures (PCE) Price Index data from the United States, the Federal Reserve’s (Fed) preferred inflation measure, will be published by the Bureau of Economic Analysis (BEA) on Friday, February 24 at 13:30 GMT.

What to expect of the Federal Reserve in the next PCE inflation report?

The Personal Consumption Expenditures Price Index, excluding food and energy, is set to have increased by 0.4% on a monthly basis in January, a bit higher than the previous growth of 0.3% reported for December 2022.

The annualized Core PCE Price Index for January is foreseen at 4.3%, a tad lower from the 4.4% one reported in December’22. That was the slowest annual rate of increase since October 2021.

Meanwhile, the headline Personal Consumption Expenditures Price Index is expected to jump by 0.5% MoM in January while annually, the gauge is foreseen by market consensus slightly lower at 4.9%, a tad lower than the 5.0% registered in December.

The increase in the monthly figures is mainly expected on the back of potentially robust Personal Income and Personal Spending data. The report is set to affirm that the United States consumer remains alive and kicking, having indicated previously that the economy slowed at the end of 2022.

The US Federal Reserve (Fed) watches the headline number. But officials have said repeatedly that core PCE usually provides a better long-term indicator of where inflation is headed because it strips out prices that can be volatile over shorter time periods.

Besides, investors will closely scrutinize the comments from Fed Governor Philip Jefferson and Cleveland Fed President Loretta Mester, especially after Mester said last week: ‘I saw a compelling economic case’ for a half-point rate rise at the last meeting.

Analysts at Credit Suisse analyze how the data release might shift Fed policy expectations: 

“We anticipate an above-consensus acceleration in both headline and core PCE, from 0.1% MoM and 0.3% MoM in Dec to 0.6% MoM and 0.5% MoM respectively. If realized, these readings would be seen as reinforcing hawkish Fed policy risks, and on the margin might bring further weight to the scenario of a 50 bps hike in March. At the same time, weaker than expected reading would represent a more substantial surprise relative to now more hawkish consensus, and as such needs to be considered as a tactical tail risk. This said we suspect that the bar for a downside PCE surprise to trigger an actual challenge of the recent shift in Fed policy expectations is very high. A particularly weak data surprise would also likely lead to speculation about possible ‘technical’ reasons behind it, which might undermine its credibility and ultimately its market impact.”

When will be the Personal Consumption Expenditures Price Index report and how could it affect EUR/USD?

The PCE Inflation report is scheduled for release at 13:30 GMT, on February 24. Against the backdrop of strong US Nonfarm Payrolls and hot Consumer Price Index (CPI) data, a higher-than-expected increase in the monthly Core PCE could fan expectations of three more Fed rate hikes this year. It’s worth noting that economists at Goldman Sachs said earlier this month that they are now forecasting the Fed to hike rates by 25 basis points (bps) each at the March, May and June meetings. The US banking giant previously had previously projected just two rate hikes ahead.  

As a result, the US Dollar could witness a fresh leg higher and deepen the pain in the  EUR/USD pair. The main currency pair touched the lowest level in almost a week at 1.0612 on Tuesday.

Conversely, downbeat PCE inflation data could pour cold water on the heightened hawkish Federal Reserve interest rate hike expectations. This could snap the ongoing recovery momentum in the Greenback. The market reaction, however, is likely to remain limited as investors will look forward to the February labor market report and the CPI data for fresh hints on the Fed’s tightening outlook.

Dhwani Mehta offers a brief technical outlook for the major and explains: “EUR/USD is defending the critical daily support line at 1.0578 heading into the US PCE inflation showdown. The 21-Daily Moving Average (DMA) is on the verge of cutting the flattish 50 DMA from above, which if materialized could confirm a bear cross. The 14-day Relative Strength Index (RSI) is keeping its range below the midline.”

In face of these unfavorable technical indicators, the pair remains exposed to downside risks, with a test of the 1.0550 psychological mark inevitable on a sustained break below the abovementioned falling trendline support,” Dhwani explains. 

Dhwani adds, “EUR/USD buyers need to take out the previous day’s high at 1.0627 to initiate a meaningful recovery toward the static resistance at around 1.0700. The confluence zone of the 21 and 50 DMAs near the 1.0735 region will be next on their radars.”

PCE inflation-related content

About the Core Personal Consumption Expenditures Price Index

The Core Personal Consumption Expenditures released by the US Bureau of Economic Analysis is an average amount of money that consumers spend in a month. “Core” excludes seasonally volatile products such as food and energy in order to capture an accurate calculation of the expenditure. It is a significant indicator of inflation. A high reading is bullish for the USD, while a low reading is bearish

Gold Price Forecast: Close to year-to-date lows after hawkish FOMC Minutes

https://www.fxstreet.com/news/gold-price-forecast-close-to-year-to-date-lows-after-hawkish-fomc-minutes-202302230853

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  • Gold price triggered another bearish run after FOMC Minutes showed a somewhat hawkish stance.
  • US Dollar stays dominant across the board ahead of US Gross Domestic Product second estimate for Q4.
  • PCE disinflation should continue, but any surprise could have a notable impact on Gold.

Gold price keeps trending lower after a bearish Wednesday, where the bright metal was weighed down by the release of somewhat hawkish Federal Open Market Committee (FOMC) Minutes. US Dollar made gains across the board, and XAU/USD closed below what had been thick support at $1,830 for the first time since January 3. 

Market eyes will turn now to Friday’s US Personal Consumption Expenditures (PCE) Price Index release, the Fed’s preferred measure of inflation.

Gold news: FOMC Minutes hawkish, US Gross Domestic Product second estimate next

The FOMC Minutes showed that all Federal Reserve policymakers agreed more rate hikes would be needed to achieve inflation objectives and even that “a few participants” trend towards raising interest rates by 50 basis points, which would speed up the tightening monetary policy again. 

This hawkish tone helped US Treasury bond yields rally, supporting the USD and weighing on the Gold price.

Thursday’s economic docket has the publication of the second reading of the US Gross Domestic Product (GDP) numbers for the last quarter of 2022, but the market does not expect any changes to the 2.9% growth printed in the preliminary estimate. The weekly Jobless Claims release and some Fed speakers could bring some action to Gold price. 

US PCE disinflation to continue, but how fast?

More important is the economic data to come out on Friday. The US Bureau of Economic Analysis (BEA) will publish the PCE Price Index, the Fed’s preferred gauge of inflation, at 13:30 GMT on Friday. Gold traders and investors will watch the data release closely, as Core PCE inflation is forecast to rise by 0.4% on a monthly basis but the annual figure is expected to decline to 4.1% in January from 4.4% in December. The market reaction should be straightforward, with a softer-than-expected monthly PCE inflation weighing on the US Dollar and vice versa, with Gold price reacting the opposite way. 

Considering that the CPI report already revealed that inflation remained sticky in January, it would be surprising to see this data have a long-lasting impact on markets.

Gold price risks skewed to the downside

Dhwani Mehta, Senior Analyst at FXStreet, analyzes Gold price current bearish trend:

“Gold price has finally yielded a downside break, on a daily closing basis, from the critical horizontal trendline support from the January 5 low at $1,825. The breakdown has re-opened floors toward the $1,800 threshold. However, Gold bears will need to take out the seven-week low of $1,819 and the falling trendline support at $1,804 beforehand.”

Gold price in 2023: Up-and-down action

Financial markets have been a two-tale story for the early part of 2023, in which Gold price has reflected in its price action like no other asset. XAU/USD rode an uptrend during all of January with the market optimism about inflation slowing down and constant Federal Reserve dovish talk, only to see a drastic turnaround back to the old dynamics in February after a hot US Nonfarm Payrolls (NFP) report. The US economy adding more than 500K jobs in the month of January shifted the market expectations for the Fed easing its monetary policy, and the US Dollar has come back to the market King throne.

Gold price opened the year at $1,823.76 and reached a year-to-date high of $1,960 on February 2, right in between the first Federal Reserve meeting of the year and the surprising release of the US jobs report for January. Since then, the ongoing downtrend has been relentless, reaching levels close to the yearly open, around $1,830.

Gold price daily chart shows bearish trend

Gold price daily chart

Gold Price Forecast: Can FOMC Minutes provide a spark?

https://www.fxstreet.com/news/gold-price-forecast-russian-ukraine-tensions-keep-us-dollar-bid-on-pmi-day-202302210907

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  • Gold price trades around key $1,835 support, awaiting next catalyst.
  • Market will scrutinize last Federal Reserve meeting minutes looking for more monetary policy clues.
  • PCE disinflation should continue, but any surprise could have a notable impact on Gold.

Gold price keeps trading around the key $1,830-$1,835 support area on Wednesday as chippy market action continues while market players wait for the next price action catalyst. American stock markets closed Tuesday in the red, ignoring upbeat US S&P Global PMIs as surging geopolitical tensions over the first anniversary of the Russian-Ukrainian war dominated the sentiment. Rising US Treasury bond yields supported the US Dollar and dented Gold price. Wednesday’s economic docket in the United States will be focused on the release of the Federal Open Market Committee (FOMC) Minutes at 19:00 GMT, where traders will look for clues on whether the Fed voting members are considering a return to the tightening monetary policy. This release could have a limited impact on the markets, though, as the Fed meeting took place before the ground-changing January Nonfarm Payrolls report, and it might be considered somewhat outdated. 

Gold news: Small details in the FOMC Minutes can be market-moving

The Federal Reserve (Fed) will publish the minutes of its last policy meeting late in the American Session, with the whole FOMC assessing the monetary policy. It will be key to see whether some policymakers saw the need for the Fed to reconsider 50 bps rate hikes in case they saw enough evidence to suggest that the slowdown in inflation was temporary. Such a development could revive bets for a 50 bps hike at the next meeting and weigh heavily on Gold price. 

Eren Sengezer, Senior Analyst at FXStreet, mentions that some FOMC members might have considered a return to higher interest rate hikes:

Cleveland Fed President Loretta Mester said last week that she saw a ‘compelling case’ for a 50 bps rate hike at the last policy meeting. On the same note, ‘I was an advocate for a 50 bps hike and I argued that we should get to the level of rates the committee viewed as sufficiently restrictive as soon as we could,’ St. Louis Federal Reserve’s James Bullard said. 

If not, markets are unlikely to read too much into the FOMC Minutes ahead of the Fed March meeting, where the revised Summary of Projections will be unveiled.

 

US PCE disinflation trend to continue

The US Bureau of Economic Analysis (BEA) will publish on Friday at 13:30 GMT the Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred gauge of inflation. Gold traders and investors will watch the data release closely, as Core PCE inflation is forecast to rise by 0.4% on a monthly basis. Still, the annual figure is expected to decline to 4.1% in January from 4.4% in December. The market reaction should be straightforward, with a softer-than-expected monthly PCE inflation weighing on the US Dollar and vice versa, with Gold price reacting the opposite way. 

Considering that the CPI report already revealed that inflation remained sticky in January, it would be surprising to see this data have a long-lasting impact on markets.

Time to buy Gold, says Standard Chartered

Strategists at Standard Chartered foresee a buying opportunity in Gold after the recent slide:

Gold broke below a strong support level at $1,840; the next support is at $1,810, followed by $1,780.

“We would gradually add exposure to Gold (especially those who are underinvested), given that XAU/USD is starting to look oversold. Moreover, central bank demand remains strong and we expect that to continue supporting Gold prices.

Gold price: Chinese economy re-opening and risk sentiment dynamics

China’s zero-covid policy ended at the end of 2022, and the second-largest economy re-opening effects should spill over throughout 2023. One of the biggest takeaways is that this should bump Gold demand, as China (and India) are two of the biggest world Gold consumers and purchasers. Of course, the performance of the US Dollar will be vital in assessing how big this rise in demand can be, as both the Chinese Yuan (CNY) and the Indian Rupee (INR) have been underperforming badly against the USD – the INR, in particular, hit an all-time low in October 2022.

All in all, the fact that Gold price might react positively to positive economic developments in China reinforces the idea that the yellow metal might have conceded the status of being the ultimate safety net for traders and asset managers to the mighty US Dollar. Market sentiment is not always a straightforward dynamic, and that might change over the course of the year, but Gold might be, these days, more of a risk-on asset than a safe-haven one.

Gold price in 2023: Up-and-down action

Financial markets have been a two-tale story for the early part of 2023, in which Gold price has reflected in its price action like no other asset. XAU/USD rode an uptrend during all of January with the market optimism about inflation slowing down and constant Federal Reserve dovish talk, only to see a drastic turnaround back to the old dynamics in February after a hot US Nonfarm Payrolls (NFP) report. The US economy adding more than 500K jobs in the month of January shifted the market expectations for the Fed easing its monetary policy, and the US Dollar has come back to the market King throne.

Gold price opened the year at $1,823.76 and reached a year-to-date high of $1,960 on February 2, right in between the first Federal Reserve meeting of the year and the surprising release of the US jobs report for January. Since then, the ongoing downtrend has been relentless, reaching levels close to the yearly open, around $1,830.

Gold price forecast daily chart

Gold price daily chart