Gold Continues to Move Within a Short-Term Bearish Trend
The gold (XAU) price dropped by 0.87% on Monday as the US Treasury yields remained elevated due to decreasing expectations for a soon interest rate cut from the Federal Reserve (Fed).
XAU/USD started the year on a bearish note and has lost 1.4% since 29 December. The main reason for the decline is the decreasing expectations for the Fed's interest rate cut in March 2024. According to the CME FedWatch Tool, the market currently prices in a 57% chance of a 25-basis-point (bps) rate cut in March, while in late December, the probability was close to 90%. Better-than-expected Friday's nonfarm payroll numbers, showing more than expected jobs added in December, prompted some investors to doubt whether the rate cut will be soon.
Today, the gold prices rebounded towards 2,030 as the US dollar weakened slightly during the early European trading session. 'Spot gold may retest support of $2,016 per ounce, a break below could open the way towards $2,006,' said Reuters analyst Wang Tao.
EUR/USD Is Surprisingly Strong
EUR/USD was essentially unchanged on Monday but continued to move within a short-term bullish trend.
Traders continue to digest the latest US nonfarm payroll (NFP) report, which was much better than expected. The headline NFP figure was 29% higher than the market projected, and hourly earnings rose faster than anticipated. However, the report impacted the US Dollar Index (DXY) only slightly: the asset still trades below the level seen before the release. In fact, the recent strength in the EUR/USD is surprising, given that the market expects more rate cuts from the European Central Bank (ECB) than from the Federal Reserve (Fed). According to the latest data, traders price in 140 basis points (bps) worth of cuts from the ECB by the end of 2024 and 135 bps cuts from the Fed over the same period.
EUR/USD has been rising in the Asian and early European trading sessions. Today, the formal macroeconomic calendar is relatively uneventful, so the bullish trend might continue. Only the Eurozone unemployment rate report released at 10:00 a.m. UTC might trigger extra volatility in EUR/USD.
AUD/USD Consolidates Above 0.66800 Ahead of the CPI Report
The Australian dollar (AUD) dropped below 0.66800 yesterday but later recovered strongly and recorded a second bullish doji candle on a daily chart, signaling indecision in the market.
While the latest US nonfarm payroll (NFP) report was generally better than expected, some details within the report were not good enough, which probably supported AUD/USD. 'Friday's nonfarm payroll data was kind of a mixed bag. The headline number was definitely quite high and good, but there were a lot of subsets to that data point that showed some larger weakness in the labor market as well,' said Helen Given, the FX trader at Monex USA in Washington. Overall, the fundamental pressure on AUD/USD remains bullish as the market doesn't expect the Reserve Bank of Australia (RBA) to deliver a lot of interest rate cuts this year. Traders now price in only 44 basis points (bps) worth of cuts from the RBA by the end of 2024.
AUD/USD was declining slightly in the Asian and early European trading sessions. Today, the volatility will probably remain subdued as no major reports are scheduled. However, AUD/USD might move sharply tomorrow as the Australia Bureau of Statistics will release its latest Consumer Price Index (CPI) report at 12:30 a.m. UTC. Better-than-expected CPI numbers might push AUD/USD above 0.67500. However, if the figures are below the market expectations, the pair might drop towards a one-month low near 0.66400.