Gold Price Forecast: XAUUSD awaits US CPI for a fresh upswing

• Gold price is fading the rebound but holds above the $1,700 mark.   
• The US Dollar resumes its correction but a weak CPI print could revive the downside.
•  XAUUSD buyers gather strength before the next push higher.

Gold price is posting small gains above the $1,700 mark, as bulls turn cautious ahead of the critical Consumer Price Index (CPI) from the United States. The US inflation data is of utmost significance in determining the US Federal Reserve’s rate hike outlook. A softer US core CPI print is likely to bolster expectations of a 50 bps December Fed rate hike. The monthly US CPI is seen rising to 0.6% while the annualized inflation rate is seen softening to 8.0%. The Core CPIs are likely to ease across the time horizon, suggesting signs of peak inflation. Gold price could resume its uptrend on a softer US CPI-induced renewed US Dollar weakness and a risk rally. Markets are currently pricing a 57% probability of a 50 bps December Fed rate hike.

Gold Price: Key levels to watch

The Technical Confluence Detector shows that the gold price is facing a wall of stiff resistance levels at around $1,710. At that level, the Fibonacci 38.2% one-day coincides with the SMA10 four-hour.

The next upside target is seen at the previous high four-hour at $1,713, above which a test of the $1,715 level cannot be ruled out, where the Fibonacci 61.8% one-day and SMA100 one-day meet.

Alternatively, a sustained break below the Fibonacci 23.6% one-day at $1,706 will revive the selling momentum toward the previous low four-hour at $1,704.  

The last line of defense for Gold price is seen at the confluence of the pivot point one-month R1 and one-week R1 at $1,703.

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EURUSD Price Analysis: Solid resistance emerges around 1.0100

• EURUSD comes under pressure near 1.0100 on Wednesday.
• The surpass of this area could allow for extra gains near term.

EURUSD’s strong recovery appears to have met a tough hurdle at the 1.0100 zone so far this week.

If the pair manages to surpass this zone in a sustainable fashion, it could then challenge the September top at 1.0197 (September 12) prior to the August high at 1.0368 (August 10).

While above the 9-month resistance line, today near 0.9840, extra gains look likely.

In the longer run, the pair’s bearish view should remain unaltered while below the 200-day SMA at 1.0450.

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 AUDUSD loses recovery momentum before testing 0.6500

• AUDUSD managed to erase its daily losses but lost its recovery momentum.
• US Dollar holds its ground amid cautious market mood.
• Investors will keep a close eye on Wall Street in the absence of high-impact data releases.

AUDUSD came under bearish pressure and dropped to a fresh daily low below 0.6450 during the Asian trading hours on Tuesday. Although the pair managed to erase its daily losses in the European session, it lost its recovery momentum before reading 0.6500. As of writing, AUDUSD was virtually unchanged on the day at 0.6478.

Eyes on US stocks

Earlier in the day, the data from Australia showed that the National Australia Bank's Business Conditions Index declined to 22 in October from 25 in September. Additionally, the Business Confidence Index fell to 0 from 5. Combined with the disappointing sentiment data, the risk-averse market environment forced AUDUSD to continue to push lower.

In the meantime, the US Dollar Index holds in positive territory near 110.50 after having registered modest losses on Monday. Nevertheless, US stock index futures are up between 0.35% and 0.6% on the day and a positive opening in Wall Street could allow risk flows to dominate the action in financial markets.

The NFIB Business Optimism Index in the US declined to 91.3 in October from 92.1 in September but this data failed to trigger a noticeable market reaction.

Later in the session, the IBD/TIPP Economic Optimism Index for November will be the only data featured in the US economic docket. The US Mid-Term Elections will also take place but the outcome is likely to be finalized toward the end of the week. 

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The US Dollar is at an advantage against the Euro thanks to the Fed – Commerzbank

Whose monetary policy is more attractive? A comparison of the Fed and ECB shows the US Dollar is more attractive than the Euro, economists at Commerzbank report.

Dollar holds advantage over the Euro

“Fed Chair Jay Powell has pointed out that the Fed is aiming for a key rate level above inflation medium-term. That means the Fed will only stop hiking interest rates or lower them again once it can be sufficiently certain that inflation is easing notably. The impression the ECB is giving to observers is completely different. One gets the impression that Europe’s central bankers have to be forced by high inflation data to get them to hike rates. From the FX market’s point of view that means the Dollar is at an advantage against the Euro.”

“If inflation were to not fall or ease much less than the central banks expect the ECB would always be chasing inflation developments, would stand little chance of anchoring it and would produce negative real interest rates medium-term as a result. The Fed on the other hand would hike its key rate more significantly than it is planning so far. In the end, US Dollar real interest rates would also be positive in that scenario.”

“What is decisive from the FX market’s point of view depends on the rule the central bank applies to set its rates. The Fed’s rule seems to be more suited for protection against negative inflation surprises. That too makes the Dollar attractive, not just the current rate advantage.”

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EURUSD: On course to test the October 13 low near 0.9635 – BBH

EURUSD extends the corrective decline and revisits the 0.9750 region. Economists at BBH expect the worl's most popular currency pair to challenge the October 13 low near 0.9635.

ECB tightening expectations have fallen back a bit

“EURUSD is on track to test the October 21 low near 0.9705 and then the October 13 low near 0.9635.”

“With a big chunk of the eurozone already tipping into recession, can the ECB hike as aggressively as anticipated? It appears that the market is starting to have it doubts.”

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Gold Price Forecast: XAU/USD holds steady above $1,650 ahead of the key Fed decision

• Gold edges higher for the second straight day amid modest USD weakness.
• Hopes for a less hawkish Fed continue to exert pressure on the greenback.
• The upbeat US ADP report fails to impress the USD bulls or provide impetus.
• The market focus remains on the crucial FOMC monetary policy decision.

Gold gains some positive traction for the second successive day on Wednesday and maintains its bid tone through the early North American session. The XAU/USD is currently placed near the top end of its daily range, just above the $1,655 level, as traders keenly await the highly-anticipated FOMC monetary policy decision.

In the meantime, expectations for a less hawkish Fed prompt fresh US dollar selling, which, in turn, is seen offering some support to the dollar-denominated gold. Market participants expect that the US central bank might slow the pace of its rate-hiking cycle amid the deteriorating outlook for the US economy. Even the upbeat ADP report, showing that private-sector employers added 239K jobs in October against 193K expected, fails to boot the USD.

Despite the supporting factor, the XAU/USD lacks bullish conviction ahead of the crucial central bank event risk. The Fed will announce its policy decision later during the US session and is expected to deliver another supersized 75 bps rate hike for the fourth time in as many meetings. The market focus, however, will remain glued to the accompanying monetary policy statement and Fed Chair Jerome Powell's comments at the post-meeting press conference.

Investors will look for fresh clues about the pace of future policy tightening by the Fed, which will play a key role in influencing the USD price dynamics. This, in turn, will help determine the next leg of a directional move for the non-yielding gold. The current market pricing indicates over a 50% chance of a 50 bps Fed rate hike move in December. A more hawkish signal will set the stage for the resumption of the recent bearish trend for the XAU/USD.

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GBP/USD remains stuck between two key DMAs ahead of central banks’ bonanza

• GBP/USD starts November on the right footing amid USD weakness, risk flows.
• Fed and BOE are set to hike policy rates by 75 bps each this week.
• Cable is likely to extend range play between 100 and 50DMAs.

GBP/USD is consolidating the rebound above 1.1500 so far this Tuesday, kicking off November on the right footing. Investors brace for the critical Fed and BOE rate hike decisions, with both the central banks set to announce 75 bps rate increases later this week.

Ahead of the central banks’ bonanza, investors are breathing a sigh of relief, thanks to the FX market repositioning and the rally in Chinese stocks. The risk-on market environment is boding well for the higher-yielding pound sterling at the expense of the safe-haven US dollar.

Attention turns towards the US ISM Manufacturing PMI release, although not much reaction is expected on the data release unless the figure disappoints expectations by a wide margin. Meanwhile, the UK S&P Global Final Manufacturing PMI improved to 46.2 in October vs. 45.8 expected and the first reading of 45.8.

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