This article was submitted by Michael Stark, market analyst at Exness.
The performance of equity markets at the start of the week was mixed, with participants still somewhat nervous about inflation and a degree of uncertainty over monetary policy. The main focus of regular data this week is inflation from the USA on Wednesday. Today’s preview of weekly data looks at XAUUSD and USDJPY.
There wasn’t any activity among major central banks last week, with the same expected this week. Markets are increasingly pricing in the higher likelihood of the Fed hiking its funds rate in March, with about 70% of participants expecting a hike on 16 March according to CME’s FedWatch.
Wednesday’s inflation data from the USA, core and non-core, are critical for determining the direction of American monetary policy in the further future and how instruments like gold might move over the next few weeks. Other nations such as China, Russia and France will also report on inflation this week. Australian, British and Chinese balances of trade are regionally important releases over the next few days.
Gold, daily
Gold started the week below $1,800 and close to a three-week low amid rising yields from American bonds and the possibility of this week’s data supporting monetary tightening in the USA within the next few months. Conversely, nervousness in stock markets, a rising VIX and the still low chance of real rates beating inflation until next year are positive factors for the yellow metal.
$1,800 remains the main technical reference; the price is currently testing this zone. Based on TA, at least a temporary breakout is likely this week with ATR at about $15. Continuation upward is uncertain and probably looks unlikely for now given the presence of price within the value area between the fairly tightly bunched moving averages. If successive resistances immediately above can be broken, though, the stochastic close to oversold might suggest the potential for a retest of the 23.6% weekly Fibonacci retracement area.
American annual non-core inflation on Wednesday afternoon GMT is expected to come in at around 7%, which would be a fresh 39-year high. If accurate, this would probably be positive for gold: although it would confirm the Fed’s hawkish stance, there would still be some time before monetary policy could bring inflation down significantly.
Key data this week
Bold indicates the most important releases for this symbol.
Two disappointing NFPs in a row for November and December haven’t done much to dent sentiment on the dollar, with traders concentrating on monetary policy and expectations for at least three rate hikes in the USA this year. Last week’s minutes of the Fed’s meeting in December reinforced the pivot to hawkness, showing general support for action against sharply rising inflation. Monetary policy in Japan is almost certain to be very loose for the foreseeable future as inflation remains stubbornly low.
The dollar has retreated slightly from last week’s five-year high around ¥116.20 but this appears to be a technical consolidation. The 161.8% weekly Fibonacci extension area is an important resistance and there was also strong buying saturation last week based on Bands and the slow stochastic. For new buyers, waiting for more relatively small losses to the area of the 50 SMA from Bands followed by a common buy single from candlesticks such as an engulfing candle would be a traditionally favoured approach.
Most of the same data are in view for the dollar this week as gold, especially inflation on Wednesday, around which most pairs with the dollar are likely to be more volatile. Jerome Powell is due to comment to the Senate this week. While he’s unlikely to reveal new information, watching the news on Tuesday afternoon GMT is important because markets might react to the comments.
Key data this week
Bold indicates the most important releases for this symbol.
Experienced writer and journalist, working in the global online trading sector, Steffy is the Editor of LeapRate. She has previous experience as a copywriter and has been with the company since January 2020. Steffy has a British and American Studies degree from St. Kliment Ochridski University in Sofia.
