Inflation Alchemy: Decoding the USD CPI's Dance with Gold Prices

Forex

Traders' Opinions

Summary:

As Gold prices persistently seek a stabilizing demand point, the unexplored territory at $2000 emerges as the bears' potential target. However, a strategic move from the robust supply zone at $2040-$2050 is crucial for sustaining the downward momentum. The looming question: Will the bears leverage the CPI momentum to propel the market even lower?

SELL XAUUSD

Close Time

CLOSED

2045.00

Entry Price

2000.00

2058.00

2626.65 -6.83 -0.26%

17.2

Pips

Loss

2000.00

2046.72

Exit Price

2045.00

Entry Price

2058.00

The upcoming release of the USD CPI has investors and analysts eagerly anticipating its potential impact on gold prices. The CPI serves as a key indicator of inflation in the U.S., directly influencing the value of gold as an investment asset. As inflation erodes currency value, gold is often seen as a hedge, making it attractive in times of economic uncertainty.

Investors closely watch the CPI for signs of inflationary pressure. A higher-than-expected CPI can lead to a surge in gold prices as investors seek a safe-haven asset. Conversely, a lower-than-expected CPI may result in a sell-off in gold as inflation concerns wane.

Recent years have shown a strong correlation between the USD CPI and gold prices, especially amid rising inflationary pressures. The impending release is expected to significantly impact gold prices, given the Federal Reserve's commitment to low-interest rates, fueling concerns about inflation.

In the lead-up to the CPI release, gold prices are likely to be volatile as investors assess its potential impact on inflation expectations. Beyond the CPI, factors like geopolitical tensions and central bank policies could also influence gold prices. Inflation Alchemy: Decoding the USD CPI's Dance with Gold Prices_1

Inflation Alchemy: Decoding the USD CPI's Dance with Gold Prices_1

XAUUSD 4 HOUR CHART

In conclusion, the USD CPI's imminent release is poised to shape gold market dynamics, with investors bracing for potential volatility. The interplay of economic indicators, geopolitical factors, and policy shifts underscores the need for informed vigilance in navigating the gold market amid the upcoming USD CPI release.

TRADE RECOMMENDATION

SELL XAUUSD

ENTRY: 2045

STOPLOSS: 2058

TAKE PROFIT: 2000

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

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Warren Takunda

Traders' Opinions

Summary:

Despite Canada's economy adding a mere 100 jobs in December—falling significantly short of estimates—the USD/CAD exchange rate has edged higher, currently trading at 1.3387 in Europe, reflecting a 0.19% increase.

SELL USDCAD

EXP

EXPIRED

1.33300

Entry Price

1.31000

1.34300

1.44020 -0.00040 -0.03%

Pips

EXPIRED

1.31000

1.34760

Exit Price

1.33300

Entry Price

1.34300

The Canadian Labor Market

Canada experienced a meager job creation of 100 positions in December, a stark decline from the 24,900 added in November and below the estimated 13,500. The unemployment rate held steady at 5.8%, with the most notable development being a substantial 5.4% year-on-year wage growth in December, up from 4.8% the previous month. This surge in wage growth poses a challenge for the Bank of Canada, whose inflation target of 2% is at odds with a 5% wage growth. The rapid pace of wage growth, the fastest in over a year, signals a potential continuation of the central bank's rate pause, putting rate-cutting plans on hold.

Robust US Labor Market

Contrastingly, the US job market finished 2023 on a strong note, exceeding expectations with the addition of 216,000 jobs in December. This figure, an improvement from November's revised 173,000, surpassed the estimated 170,000 jobs. The unemployment rate remained low at 3.7%, below the anticipated 3.8%. Furthermore, wage growth in December, at 0.4% month-on-month and 4.1% year-on-year, exceeded estimates of 0.3% and 3.9%, respectively. Despite the Federal Reserve's aggressive rate tightening, the US economy's resilience, coupled with persistent wage growth, suggests that inflation in the labor market remains a concern.

Federal Reserve's Dilemma

The Federal Reserve's commitment to rate tightening has tempered the US economy, yet job growth continues to defy expectations. The robust wage growth data indicates that inflation in the labor market is not in alignment with the Fed's preferences. Although there is speculation about a potential rate cut, especially in March, Fed Chair Jerome Powell seems cautious, indicating that markets may be premature in pricing in an initial rate cut. The Fed's rate-cutting decisions hinge on inflation trends and unforeseen economic weaknesses.

Technical Analysis - USD/CAD

From a technical standpoint, the USD/CAD pair exhibits a bearish outlook, with resistance at 1.3411 and further resistance at 1.3460. The rejection of key level support and the formation of lower highs suggest a continuation of the bearish trend. Additionally, the pair is putting pressure on resistance at 1.3411, indicating potential downward momentum.

On the downside, crucial support levels are identified at 1.3349 and 1.3300. The rejection of key support levels suggests a strong bearish sentiment, with the potential for further declines into higher timeframe support below.

TRADE RECOMMENDATION

SELL USDCAD

ENTRY PRICE : 1.33300

STOP LOSS : 1.34300

TAKE PROFIT : 1.31000

Risk Warnings and Disclaimers

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Peterson

Commodity

Summary:

Today's oscillation will start from 69.8 to 72.5, and it is better to buy low and sell high.

BUY WTI

EXP

EXPIRED

69.800

Entry Price

72.500

69.300

70.014 +0.504 +0.73%

Pips

EXPIRED

69.300

72.562

Exit Price

69.800

Entry Price

72.500

Fundamentals

During Tuesday's (January 9th) Asian session, WTI crude oil oscillated slightly, and it is currently trading at 71.1 dollars/bbl.

WTI descended unilaterally in yesterday's Asian session. After once touching the highest point at 74, WTI dropped all the way down, and it is now in an extremely weak state. In addition, the long side is completely crushed by the short side, and there is no resistance. Meanwhile, yesterday's bad news was that Saudi Aramco will cut down the light oil prices for February sales in Asia, as well as that the OPEC+ production rose in December, which triggered investors' concern about further deterioration of supply and demand. Besides, as we emphasized a long time ago, the Red Sea crisis will gradually pass. However, Houthi armed forces and shipping companies reached a passage agreement yesterday, which also indicates that the geopolitical crisis has temporarily come to an end. By the combined impact of these factors, the oil price plummeted 5% with its lowest price reaching 70.1, the same price before the production cuts announcement.

For future oil prices, there will be huger oscillations. The news yesterday should not have had such a big impact, and the result was that the market is currently dominated by pessimism. Nonetheless, currently, the OPEC+ production cuts have started and it made a commitment last week, while the market expected a better future. Moreover, in addition to the Middle East situation, although there is no Red Sea crisis, there are still frequent geopolitical issues, which is also a supportive factor for WTI. Investors are not recommended to be overly bearish, but instead, WTI is preparing to grow.

WTI plunged after the news unexpectedly. There is no doubt that our strategy to go long at lows resulted in a loss of 0.5 dollars. It is normal to lose during the trade, especially for experienced traders. For them, losing is as normal as breathing. However, it is not acceptable for new traders, and many new traders start to question the system after several times of loss. Eventually, they give up an effective system because of the absence of belief! The system has both sides and if you fail to withstand the loss, you won't make profits.

News: OPEC+ increased the December output by 70,000 bpd to 27.88 million bpd. Saudi Aramco slashed the official selling price of Arabian light crude sold to Asia in February by 2 dollars/bbl. Furthermore, a group of shipping companies sailing in the Red Sea has now reached an agreement with the Houthis to allow unimpeded passage through this vital body of water, according to Danish media outlet ShippingWatch.

Today's focus: API inventory data.

Technical Analysis

WTI depreciated in the Asian session last Friday. After opening at the high of 74, WTI was suppressed under a resistance area from 74 to 74.5, and then declined rapidly, once reaching 70.2 in the U.S. session, closing the daily chart higher. Moreover, a Bearish Piercing candle appeared, showing that WTI returns to a weak trend to test the support at 70. Now, there is insufficient momentum to cross through this level unless demand deteriorates.

Regarding the 1H chart, MACD forms a golden cross at low with the opening expanding. As WTI stays in a strong support area, there will be rebounds later. For the 4H chart, after two doji stars at highs, WTI plummets continuously, and it is now moving horizontally. In addition, MACD keeps a death cross, indicating a weak rebound in the near term. For the daily chart, a big bearish candle covers last week's growth, showing an extremely weak pattern. At the same time, MACD maintains its golden cross with a trend to turn to a death cross, showing that WTI may close lower today. Therefore, investors should buy low and sell high in the range of 69.8 to 72.5. Oil Prices Plunge Worries about Demand _1

Oil Prices Plunge Worries about Demand _1

Trading Recommendations

Trading direction: Long

Entry price: 69.800

Target price: 72.500

Stop loss: 69.300

Support: 70.200/69.400

Resistance: 71.500/72.500

Risk Warnings and Disclaimers

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Peterson

Commodity

Summary:

Today's oscillation will start from $2015 to $2048, and it is better to buy low and sell high.

BUY XAUUSD

EXP

EXPIRED

2015.00

Entry Price

2048.00

2010.00

2626.65 -6.83 -0.26%

Pips

EXPIRED

2010.00

2031.48

Exit Price

2015.00

Entry Price

2048.00

Fundamentals

During Tuesday's (January 9th) Asian session, spot gold ascended slightly, and it is now trading at $2032.

Yesterday, gold slid in a unilateral downward trend under the impact of last week's data. There was no decent rebound throughout the day, and the daily high was in the opening near $2046.5. It once plunged to $2017.5, which may be caused by the short side as it was worried about the recent complex situation. Besides, data has been repeating in the past few days without much inertia. Although the short-term optimistic expectations were corrected, geopolitical disturbances still exist to support the gold price. In addition, another heavy data, the CPI data, will be announced on Thursday, which can also be expected to provide new guidance for the interest rate cut! Therefore, yesterday's market did not fall again, but stayed and rebounded in the support area ($2015 to $2020) we have emphasized. Before the data is published, the market will stay alert, and bulls and bears will not move smoothly. For aggressive investors, try to buy low and sell high around significant support and resistance.

We made decent profits during the last trading session. For recommendation, we demonstrated that investors should go long at $2020 and go short at $2050. Then, gold reached its highest level at $2046.5, when its lowest price touched $2017.5. As the highest level did not match, we did not go short in the Asian session. However, as we went long at $2020 in the early U.S. session, and set the take-profits target at $2035, a margin of $15 was made. Nevertheless, we failed to meet our second target at $2050, and the profit/loss ratio ended with 3:1. Trading works in this way, at first you would be annoyed to be restricted by the rules and regulations. Then, the more you go on, you will eventually be afraid of trading without restrictions. It also explains that you have been trapped several times, while a well-tested trading system and the implementation become essential for a stable trading situation, which may seem to be easy, but it is the most difficult stage.

Today's focus: U.S. trade account for November. Most importantly, the CPI data is to be released Thursday.

Technical Analysis

Gold depreciated unilaterally yesterday in the Asian session. After surging to $2046.5, gold declined with oscillations without any rebound, and once touched $2017.5 before getting support. Later on, gold rebounded to $2037 by 20 dollars. There wasn't enough news to support it, and gold moved according to technical analysis. After reaching support in the range of $2015 to $2020, gold rebounded but also stopped in the range of $2035 to $2040. Now, the pattern center is declining, but the retracement is sufficient. If no more bad news appears, gold will get stable, and we should focus on the CPI data this Thursday.

After two consecutive doji stars last Friday, gold failed to rebound but plummeted further, showing that gold tried to reach the bottom. However, according to the daily chart, gold is at the lower area of an oscillating-ascended channel, suggesting strong technical support in the near term. There will be short-term deviation, but it will not last longer unless a reversal emerges. Furthermore, we should consider the range from $2015 to $2020 below, with further attention to the support at $2000. About the situation above, we must take a look at the situation between the 5-day SMA ($2040) and the 10-day SMA ($2050). Today, our trading range should be from $2015 to $2048, where aggressive investors can buy low and sell high. Gold Trend Is Weak as Affected by Data _1

Gold Trend Is Weak as Affected by Data _1

Trading Recommendations

Trading direction: Long

Entry price: 2015

Entry price: 2048

Stop loss: 2010

Support: 2020.000/2010.000

Resistance: 2038.000/2050.000

Risk Warnings and Disclaimers

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Jason

Summary:

Expectations of interest rate cuts remain the main driver of the dollar's downside for now, and it is foreseeable that the dollar will be affected by it in the next few trading days. Until Thursday, the US December CPI will be released, and then the market will reprice.

SELL USDX

Close Time

CLOSED

102.500

Entry Price

102.000

102.850

107.760 -0.090 -0.08%

9.6

Pips

Loss

102.000

102.596

Exit Price

102.500

Entry Price

102.850

Fundamentals

The US dollar index continued to be affected by the non-farm payrolls overnight, weakening slightly, hitting a low of 102. Although last Friday's non-farm payrolls performance was impressive, it was not as “rosy” as it looked, and some of the sub-data pointed to potential weakness. As a result, Friday's non-farm payrolls only slightly weighed on the market's expectations of a rate cut, cooling expectations for the Fed's first rate cut in March, and not enough to delay the market's expectations of a rate cut. Therefore, the US dollar remains in a disadvantageous position in the short term. In addition, Fed officials are still suppressing market expectations, but their rhetoric is not as harsh as last week. In his speech, Atlanta Fed President Bostic reiterated his expectation of two rate cuts this year, while giving his expectation of a first rate cut --- the third quarter of this year.

Michelle Bowman, the Fed Governor, said the Fed's monetary policy appears to be “restrictive enough”. If the policy rate remains at its current level for some time, inflation could fall further. If inflation continues to fall, interest rate cuts will eventually be needed to prevent policy from becoming too restrictive. By contrast, if inflation stalls or reverses, interest rates will still be raised.

Although Bowman's speech still did not rule out the possibility of another rate hike, it did mention a rate cut. And her previous view was that “another rate hike is likely needed to curb inflation”. This speech marks a change in her long-held views.

Overall, interest rate cut expectations remain the main driver of the dollar's downside for now, and it is foreseeable that the dollar will be affected by it in the next few trading days. Until Thursday, the US December CPI will be released, and then the market will reprice.

Technical Analysis

Looking at the 4-hour chart, the dollar is still hovering at a high of 102.07-102.80. Strong short-term support at 102.07 is unlikely to see further declines before a breakout. The short-term strong resistance is 102.5, which has blocked the dollar's rally many times in the historical trend.

In terms of indicators, in the Ichimoku chart, the baseline and the turning line are running horizontally, and the US index has signs of hitting the turning line. In the DMI, there are signs of crossover in ±DI, and +DI shows a significant upward trend, while the ADX line shows a decrease in downward momentum. Overall, technical indicators all point to a short-term rise in the US dollar. Considering that the US dollar is still affected by the expectation of interest rate cuts, the overall bias is weak, and investors can wait for the US dollar to rebound and then go short at high. The US Dollar Rebounded in the Short Term, and the Overall Situation Is Still Bearish_1

The US Dollar Rebounded in the Short Term, and the Overall Situation Is Still Bearish_1

Trading Recommendations

Trading Direction: Short

Entry Price: 102.500

Target Price: 102.000

Stop Loss: 102.850

Support: 102.000/101.900

Resistance: 102.500/102.800

Risk Warnings and Disclaimers

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Zi Cheng

Forex

Traders' Opinions

Summary:

GBP/JPY faces key resistance of 184.000 and signs of bearishness have shown.

SELL GBPJPY

Close Time

CLOSED

183.182

Entry Price

178.775

186.485

197.867 -0.019 -0.01%

204.1

Pips

Loss

178.775

185.223

Exit Price

183.182

Entry Price

186.485

Fundamental Analysis

Follow-through buying is observed in the Japanese Yen during Tuesday's Asian session, although caution is advised for aggressive bullish traders due to the underlying fundamental conditions.

As anticipated, inflation in the capital of Japan decreased, with the Tokyo core Consumer Price Index (CPI) registering a 2.1% year-on-year increase in December, excluding the influence of volatile fresh food prices. The core reading, which excludes both fresh food and fuel prices and serves as a key gauge of underlying inflation monitored by the Bank of Japan, showed a slight easing from 3.6% to 3.5%.

Furthermore, the headline Tokyo CPI inflation declined from 2.6% in the previous month to an annualized 2.4% in December, now closely approaching the Bank of Japan's annual target. This situation is compounded by a recent destructive earthquake in Japan, diminishing prospects for a swift shift in the Bank of Japan's dovish stance at the upcoming January 22-23 monetary policy meeting.

GBP/JPY Faces Key Resistance 184.000, Could It Break Resistance Or Reject?_1

Technical Analysis

GBP/JPY has been forming bearish market structure of lower lows and lower highs since last year November. However, when price came close to the 200 Day Moving Average, it formed its own sideway channel and started to consolidate in a big range.

As you can see from the chart that I have attached below, GBP/JPY is at a key resistance level and signs of bearishness have shown. This is a good opportunity for some short term shorts towards the lower side of the sideway channel.

TRADE RECOMMENDATION

SELL GBP/JPY

ENTRY PRICE : 183.175

STOP LOSS : 186.485

TAKE PROFIT : 178.775

Risk Warnings and Disclaimers

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Eva Chen

Stocks

Economic

Summary:

After experiencing declines in the past few trading days, the US stock market saw significant volatility during last Friday's trading session. Major indices fluctuated around the opening price, eventually closing slightly higher.

SELL US30

Close Time

CLOSED

37704.50

Entry Price

36308.00

38240.00

43279.42 -108.03 -0.25%

2621.0

Pips

Profit

36308.00

37442.40

Exit Price

37704.50

Entry Price

38240.00

Fundamentals

The US stock market saw a modest rise in last Friday's trading session. The tech-heavy Nasdaq index edged up by 13.77 points, or 0.1%, to 14524, ending a five-day losing streak. The Dow Jones Industrial Average (DJIA) also rose by 25.77 points, or 0.1%, to 37466; the S&P 500 index, after four consecutive trading days of declines, increased by 8.56 points, or 0.2%, to 4697.

Despite the minor gains on that day, major indices experienced declines throughout the first week of the new year. The Nasdaq index dropped by 3.3%, the S&P 500 index declined by 1.5%, and the DJIA fell by 0.6%. As the market retreated, major indices recorded their first weekly decline in ten weeks.

The day's volatility was a response to traders reacting to US economic data releases, including the highly anticipated report from the Department of Labor, which showed stronger-than-expected job growth in December.

Although this data initially raised concerns about the outlook for interest rates, as investors digested the details of the report, positive sentiment prevailed, driving an upward move in the stock market. The report also revealed significant downward revisions to job growth in October and November.

The Labor Department reported a substantial increase of 216,000 jobs in December, well above the market's expected 170,000. Meanwhile, job growth in October and November was downwardly revised to 105,000 and 173,000, respectively, reflecting a net reduction of 71,000 jobs.

Despite two consecutive months of downward revisions to non-farm employment data, this report indicates a robust economic backdrop with the unemployment rate holding steady at 3.7% and hourly wages continuing an unexpected rise, providing strong cushioning for sustained consumer spending. The report does not indicate any imminent threat of an economic downturn, nor does it give the Fed reason to worry about an overheating economy.

However, subsequently, the Institute for Supply Management (ISM) released a report showing a greater-than-expected slowdown in the growth of the US service sector, leading to market volatility.

ISM reported that the December Services PMI declined from November's 52.7 to 50.6. Although a reading above 50 still indicates growth, the market had previously expected the index to dip slightly to 52.6.

This data also caused significant fluctuations in the bond market, with the benchmark 10-year Treasury yield bouncing back and forth near the unchanged line, ultimately closing above 4.0% for the first time in four weeks.

After concluding 2023 with a nine-week winning streak in the weekly chart, the US stock market faced a challenging start in the new year. Notably, the Nasdaq, which performed exceptionally well last year, set a record for its longest losing streak since 2022. Concerns about the escalating tensions in the Middle East, overbought conditions in stocks and bonds, and fears that the Fed may not be able to cut interest rates as quickly as expected are considered reasons behind the selling.

After a period of rebound, the market witnessed some profit-taking, which is not uncommon, and investors are beginning to seriously consider the unfavorable factors they may face. The current investor sentiment is leaning towards the market's normal fluctuations, with a slight inclination towards caution.

Upward Structure Still Intact, but Opportunities Significantly Narrowing_1

Technical Analysis

The Dow Jones Industrial Average (DJIA) recently exhibited a potential structural weakness, with momentum indicators shifting toward the bearish side. The Average Directional Index (ADX) is rapidly approaching the 25 midpoint, indicating the potential end of the recent bullish trend.

Similarly, the Relative Strength Index (RSI) is poised to drop below the 50 midpoint for the first time in two months. More significantly, the stochastic oscillator has finally dropped below the moving average and the overbought zone. This move is often considered a strong bearish signal.

The first support level at 36955 has been identified as a retracement support level, indicating previous buying interest. The second support level at 36043 is considered a retracement support level, increasing its potential as a support level.

On the resistance side, the first resistance level at 37839 is a volatile high resistance level, coinciding with the 161.80% Fibonacci extension level. It will impede further upward movement for the bulls.

Overall, after a significant rally from the October low last year, the DJIA has experienced a correction. With the support of bearish momentum indicators, this correction may gain further traction. In terms of trading strategy, it is recommended to go short at highs.

Trading Recommendations

Trading Direction: Short

Entry Price: 37650

Target Price: 36308

Stop Loss: 38240

Valid Until: 2024-01-22 23:55:00

Support: 36955, 37280, 36043

Resistance: 37630, 37737, 37839

Risk Warnings and Disclaimers

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Inflation Alchemy: Decoding the USD CPI's Dance with Gold Prices

XAUUSD 4 HOUR CHART

TRADE RECOMMENDATION

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Oil Prices Plunge Worries about Demand

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Trading Recommendations

Gold Trend Is Weak as Affected by Data

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Trading Recommendations

The US Dollar Rebounded in the Short Term, and the Overall Situation Is Still Bearish

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Technical Analysis

Trading Recommendations

GBP/JPY Faces Key Resistance 184.000, Could It Break Resistance Or Reject?

Fundamental Analysis

Technical Analysis

TRADE RECOMMENDATION

Upward Structure Still Intact, but Opportunities Significantly Narrowing

Fundamentals

Technical Analysis

Trading Recommendations

Risk Disclosure