Gold rises on renewed Fed-cut bets, crude oil falters at resistance

Market Summary:

A set of softer inflation figures for Canada weakened bolstered bets that the BOC and central banks in general will begin cutting interest rates sooner
CAD was the weakest major with the USD a close second, the Canada’s OIS curve curling lower on refreshed easing bets
A slim majority of economists expect the Fed will cut their interest rate by 25bp in June, according to a Reuters poll (which would lower the Fed’s target band to 5.00 – 5.25%)
This is in line with Fed fund futures ricing, which also imply with a slim majority of 51.2% of such a move
US traders returned to their desks after the long weekend and provided a volatile session for FX majors; the US dollar index fell to a 12-day low before recouping around half of the day’s losses to close above 104, sending EUR/USD back above 1.08
AUD/USD rose for a fifth day, but once again saw a false intraday break above 0.6550 to closed with a wide-legged hammer, whilst NZD/USD reached a 5-week high but met resistance at 62c before pulling back
US yields were lower across the curve (particularly at the lower end which is more sensitive to monetary policy) which weighed on the US dollar and allowed gold rise for a fourth day and tag $2030
New Zealand’s producer prices in Q4 were hotter than expected, although lower than Q3 which keeps the pressure on the RBNZ to potentially hike – or at reintroduce a tightening bias at their next meeting
Nvidia fell -4.5% during its worst day of the year ahead of a key earnings report, and managed to take Wall Street indices down with it
Options markets imply an +/-11% move on the stock, which in turn could turn into a make or break situation for Wall Street indices as the week progresses
The Nasdaq 100 and S&P 500 fell to a 4-day low, with the S&P closing back below 5000

Events in focus (AEDT):

10:30 – Australian leading index (Melbourne Institute)
10:50 – Japan’s trade data
11:00 - Australian wage price index

Gold technical analysis:

With gold now having risen for a fourth consecutive day, it has allowed a nice bullish trend has develop on the 1-hour chart. The recent leg higher was accompanied with rising volume, which diminished as prices retraced. Prices are now trying to build support around the 10-day EMA and prior highs / double top around $2024 and RSI (2) is oversold, so perhaps a inflection point is near. Also note that RSI 14 is holding above 50, which backs up momentum of the overall trend.

Bulls could seek dips with a view to target the $2036 to $2040 region, near the weekly R1 pivot and monthly pivot point. A weaker US dollar and lower yields would be the ideal scenario for gold to extend its current rally. However, I suspect the $2040 region may provide some resistance or a pullback.

Crude oil technical analysis:

In the first week of the month crude oil produced a nice bounce from the 2024 open price, in line with my bullish bias. Although it is now struggling to make a break above the 2023 open. A bearish engulfing candle formed around this key level at the end of January, and we have since seen a subsequent bearish engulfing and bearish outside day form which both failed to retest the January high. The only thing that appears to be holding it up at this stages is the 200-day EMA, but as we can see a bearish divergence with RSI 2 coupled with failed attempts to retest the Jan high, I suspect a move lower is in order – even if the 200-day EMA sits nearby.

Bears can either seek shorts beneath the 200-day EMA, or fade into rallies towards the 2023 highs with a stop above either the January high or $80 handle, with $76 and $74 being viable downside targets (assuming it provides a satisfactory reward to risk ratio).

View the full economic calendar

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the market you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.