Gold tumbles, BoJ holds steady & the ECB rate decision is awaited
| Gold => The commodity falls below $1700
USD/JPY => The pair holds steady around 138.25 EUR/USD => The pair rises to a 2-week high |
Gold falls to an 11-month low
Gold falls below $1700 despite the weaker USD, trading at an 11-month low.
Even after Federal Reserve interest rate hike expectations have been re-priced from 100 basis point hike in July to a 75 basis point hike in July, non-yielding Gold has still continued to fall out of favour. Not even the weaker USD has managed to boost demand for the precious metal. Usually, gold has an inverse relationship to the USD.
Recession fears are on the rise in the US as Google becomes the latest company to announce slowing or halting hiring, signaling that the jobs market resilience could s=bee ending, raising fears of a recession in the US and pulling USD lower. Due to a light US economic calendar, attention will shift to the ECB rate decision on tomorrow’s PMI figures which are expected to be weak.
Where next for Gold?
The technical picture for Gold remains bearish.
Gold trades below its 50 &20 sma. The move out of the triangle and a break below 1722 supports the case for a deeper selloff toward 1680, the August ’21 low. The oversold RSI suggests that caution should be taken before placing large bearish bets as a period of consolidation could be on the cards before another move lower.
On the flip side, buyers need to see a move over 1722 to mount any sort of recovery towards 1758 the 20 sma.
USD/JPY remains flat on BoJ rate decision
USD/JPY is holding steady after a brief spike higher as the market reacted to the BoJ’s monetary policy announcement.
The central bank, possibly the most dovish major central bank, left policy unchanged, holding interest rates at -10 bp and maintaining the 10-year JGB yield target at 0% in an 8 to 1 vote. The BoJ left guidance unchanged but in its quarterly outlook report said that risks were skewed to the upside for now, then are roughly balanced.
The Yen briefly spiked, pulling USD/JPY to 138.00 before returning to 138.25, where it has traded for the past three days. Attention will now turn to US jobless claims, which are expected to hold around the year-to-day high.
| US jobless claims | Actual: 240k (4k) | Previous: 244k |
EUR/USD rises ahead of ECB rate decision
After falling 0.4% in the previous session, EUR/USD is resuming its push higher ahead of the ECB interest rate decision.
The central bank is expected to raise rates by 25 basis points, its first hike in 11 years. However, this week expectations of a 50-basis point hike have ramped up, boosting the euro. The rate decision comes as inflation in the bloc reached a record high of 8.6%, and concerns over energy security have risen.
The cost of energy, particularly gas, has increased, lifting prices with inflation now broad-based. Any news on the anti-fragmentation tool will also be keenly awaited.
Support can be found at 1.01 (round number) and 1.00 (parity).
Resistance for the pair can be seen at 1.0230 (20 sma) and 1.0350 (May low).
