Fed to hike rates, oil steadies, peace talks continue
Gold => The commodity falls to 3.3% this week
Oil => The commodity rises after 11% losses
EUR/USD => The euro rises towards 1.10
Gold needs a cautious Fed
Gold prices fell 1.7% yesterday, marking the third straight day of losses, amid cautious optimism towards Russia, Ukraine peace talks, and as the Federal Reserve interest rate decision moves into focus.
The Fed is expected to raise interest rates by 25 basis points, a move that was as good as confirmed by Federal Reserve Chair Powell in his testimony before Congress at the start of the month. This is likely to be the first-rate hike in a cycle of hikes, all of which is bad news for non-yielding US dollar-denominated, gold.
Any cautious remarks from Powell over the economic outlook or ability to hike rates could lift Gold., meanwhile plans to press ahead with rate hikes aggressively could boost the USD and drag on Gold. Before the Fed US retail sales data will be released.
|US retail sales||Expected: 0.4% (3.4%)||Previous: 3.8%|
Where next for Gold?
Gold is extending the rebound lower from 2070, taking it several key supports and breaking below the rising trendline support.
This combined with the bearish crossover on the MACD suggests that there is more downside to come. A break below support at 1915 could open the door to 1901 the March low and 1880 the November high.
On the flip side, buyers would need a break above 19556 the rising trendline and yesterday’s high.
Oil edges higher with peace talks in focus
Oil prices plunged 6% yesterday, after dropping 5% last week.
Oil sold off rapidly after rising to $130, a 14-year high last week. Since then, hopes of a diplomatic solution to the Russia, Ukraine invasion have cooled supply fears, meanwhile, the rapidly spreading Omicron outbreak in China and strict lockdown restrictions are hurting the demand outlook.
There has also been progress towards reviving the Iran nuclear deal, which would see Iranian oil flood back to the market.
Today oil prices are once again edging higher with the focus on peace talks, which are reportedly sounding more realistic but moving slowly. Looking ahead EIA stockpile data is due.
EUR/USD rises for a third day
EUR/USD rose 0.1% yesterday, rebounding from session lows of 1.0926 to close at 1.0950.
The euro initially fell following data that highlighted the impact the Russian invasion was having on economic confidence in Germany, the largest economy in the eurozone. German economic sentiment experienced its largest drop on record in March.
Russia, Ukraine peace talks continue, and reports of cautious progress are helping to keep the euro buoyed.
Meanwhile, the US dollar came under pressure yesterday, on safe-haven outflows and despite US wholesale inflation jumping to a record high.
There is no high impacting Eurozone data, Russia, Ukraine headlines will remain the focus for the euro, whilst the Fed rate decision will be the key driver for the USD.
|GER. ZEW economic sentiment||Actual: -39.3 (93.6)||Previous: 54.3|
Support can be found at 1.0895 (March 9 low) and 1.08 (2022 low).
Resistance for the pair can be seen at 1.10 (psychological level) and 1.1040 (Friday’s high).
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