Traders Look to Fed Chair Powell for Direction

Gold            => Rises above $1800

AUD/USD   => The pair looks towards 0.7200

Oil               => Oil moves towards $79.00 

Gold rises ahead of Jerome Powell’s testimony

Gold is rising, adding to yesterday’s gains, whilst recouping some of last week’s 2% losses. Gold sold off last week on the prospect of a sooner move by the Federal Reserve to hike interest rates. The Fed is still expected to adopt a more hawkish approach to monetary policy which is bad news for non-yielding Gold. However, Gold, which is known as a hedge against inflation, is still managing to rise today, finding support from high inflation expectations. Attention will now turn to Federal Reserve chair Jerome Powell who is due to testify before Congress today. A more hawkish tone from Powell could hurt demand for Gold. Meanwhile strong CPI inflation data from China & the US could lift Gold prices. Expect volatility in the precious metal.

China Inflation Dec. Expected: 1.8% (-0.2%) Previous: 2%
U.S. Inflation Dec. Expected: 7% (0.2%) Previous: 6.8%

USDAUD trading chart
Where next for Gold?

Gold is attempting to move above the 50 sma, after re-taking the 100 sma at $1793 and breaking firmly above $1800 the psychological level. The RSI is pushing into bullish territory above 50 hinting at further upside. A break above resistance at $1814 the December 17 high could open the door to a move towards $1830 the year to date high. On the downside, failure to move cleanly above the 50 sma could see Gold fall back towards the 100 sma at $1793. Further support can be seen at $1781 the 2022 low.

AUD/USD rallies as Australian retail sales smash forecasts

AUD/USD rising following strong Australian retail sales data. Figures released by the Australian Bureau of Statistics showed that retail sales jumped 7.9% in November compared to the previous month, adding to a 4.9% jump in October and marking two straight months of strong sales. The data shows that Australians are comfortable spending as they emerge from lockdown restrictions, which bodes well for economic growth in the final quarter of last year. Looking ahead attention will now turn to Fed Powell’s testimony which could drive movement in the US Dollar and Chinese inflation data, given that the Australian dollar is often considered a proxy for China.

Aus. Retail sales MoM Nov. Actual: 7.9% (3%) Previous: 4.9%

Oil rises ahead of API stockpile data

Oil prices are rising, helped by a weaker US dollar. Oil is priced in US dollars so a fall in the value of the US dollar means oil becomes cheaper for buyers with other currencies. Last week’s concerns over the oil demand outlook, as COVID cases rose, pulled oil prices lower. However, despite rising infections, major economies have not tightened lockdown restrictions, supporting oil prices. 

Separately OPEC+ has been struggling to hit its increased production quota, meaning that oil producers are failing to keep up with rising demand. This, along with production disruptions in Libya and Kazakhstan are also supportive of oil prices.

Attention will now turn to crude oil stockpile data released by the American Petroleum Institute (API). Stockpiles are expected to fall by 2 million barrels, which would mark the seventh straight week of falling inventories. A larger fall in stockpiles could lift oil prices further.

Support for WTI crude oil can be found at 78.00 (round number) and 75.10 (50 &100 sma).           

Resistance can be seen at 80.25 (January) and 84.00 (November high).


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