Gold price consolidates the previous rebound near $2,030 amid a weaker US Dollar. Risks of further geopolitical escalation counter falling March Fed rate cut bets. Gold price could stay rangebound due to mixed technical indicators, ahead of US jobs data.   Gold price is treading water near $2,030 early Tuesday, consolidating the previous rebound to a four-day high of $2,038. Gold price is weighing the further escalation in the geopolitical tensions between the Middle East and the United States (US) against the backdrop of reduced bets for a March Federal Reserve (Fed) interest rate cut. Gold price looks to US JOLTs data for fresh impetus Amidst the latest development on the Middle East and the US geopolitical conflict, Sky News reported that US President Joe Biden is likely to authorize military action in the Middle East as early as Monday night. This comes in response to the killing of three US service members by an unmanned aerial drone attack on forces stationed in northeastern Jordan near the Syrian border. Markets stay risk-averse and trade with caution, as they also remain wary amid a deepening real estate crisis fuelled Chinese demand worries, after a Hong Kong court ordered the liquidation of property giant China Evergrande Group on Monday. The traditional safe-haven, Gold price, draws support from these concerning factors alongside a broad-based US Dollar weakness and the extended selling in the US Treasury bond yields so far in Tuesday's trading. On Monday, Gold price staged a solid turnaround and hit multi-day highs above $2,030, capitalizing on a sell-off in the US Treasury bond yields, which limited the US Dollar upside. The US Treasury bond yields tumbled following a sharp rally in the US government bonds after the Treasury cut its first-quarter borrowing estimate. The Treasury Department said Monday it expects to borrow $760 billion in the first quarter, which is $55 billion lower than the October estimate. The decline was driven, in part, by "higher net fiscal flows" and a higher cash balance. Intensifying Middle East geopolitical tensions also turned in favor of Gold price amid a global flight to safety theme.   Attention now turns toward the US JOLTs Job Openings data for fresh signs on the labor market conditions ahead of Wednesday's Fed policy announcements and Friday's Nonfarm Payrolls data release. Markets are now pricing a 46% probability of a March Fed rate cut while no rate change is expected following this week's policy meeting. However, comments from Fed Chair Jerome Powell will be closely scrutinized for repricing of the rate cut expectations, having a significant impact on the value of the US Dollar and the Gold price. The Fed begins its two-day policy meeting on Tuesday, with the verdict likely to be announced on Wednesday. Gold price technical analysis: Daily chart As observed on the daily chart, Gold price is managed to yield a daily closing above $2,030, the intersection of the 50-day Simple Moving Average (SMA) and and the 21-day SMA. Gold buyers, however, ran into static resistance near the $2,038 level, which capped the upside. The 14-day Relative Strength Index (RSI) indicator recaptured the midline, providing much-needed support to Gold buyers. But an impending Bear Cross continues to warrant caution for them, keeping the recovery in check. The 21-day SMA is on the verge of crossing the 50-day SMA from above, which if happens will confirm the Bear Cross. Acceptance above the $2,038 barrier will put the psychological $2,050 level back in play. Further up, Gold optimists will target the December 12 high of 2,062. On the downside, an immediate cushion is seen at the previous day's low of $2,018, below which the rising trendline support of $2,012 could be threatened.   The next strong downside cap is seen around the $2,000 region.

It appears more and more likely that the Federal Reserve is poised to completely abandon any pretense of fighting inflation, despite the fact CPI remains well above the 2 percent target. The Fed has already paused interest rate hikes, and most analysts expect rate cuts later this year. Now, the financial news networks have started chattering about the possibility of the central bank either slowing or even ending its balance sheet reduction plan. Speculation about the end of balance sheet reduction started early this month with the release of the FOMC meeting minutes. They revealed that some committee members thought they needed to "begin to discuss" technical factors that would direct their decision to slow the runoff of maturing bonds from its balance sheet.  Dallas Fed President Lorie Logan was the first committee member to talk about it publicly, saying that the central bank should begin tapering the runoff of bonds from its balance sheet when its reverse-repo facility fell below a certain level. More recently, Federal Reserve Governor Christopher Waller said it would be "reasonable" to start thinking about tapering off quantitative tightening this year. If the Fed has done enough to slay price inflation, ending balance sheet reduction would make sense. But has it really done enough? FED BALANCE SHEET REDUCTION IN PRACTICE The Fed announced a balance sheet reduction plan in March 2022 when it could no longer convince everybody that price inflation was "transitory." It called for $30 billion in US Treasuries and $17.5 billion in mortgage-backed securities to roll off the balance sheet in June, July, and August of 2022. That totaled $45 billion per month. The Fed said it would increase the pace to $95 billion per month in September 2022, capping the U.S. Treasury roll-off at $60 billion. It wasn't exactly an ambitious plan.  If the Fed followed the blueprint, it would take 7.8 years for the Fed to shrink its balance sheet back to pre-pandemic levels. To date, the Fed has rolled about $1.29 trillion off the balance sheet. This sounds impressive until you realize that the central bank blew up the balance sheet by $4.81 trillion in just two years in response to the pandemic. And they are already talking about ending quantitative tightening. Stop and consider what this means. The central bank only wrung a little more than a quarter of the inflation it created during the pandemic out of the economy. This explains why despite rate hikes and quantitative tightening, financial conditions remain loose in historical terms. As of the week of January 19, the Chicago Fed Financial Conditions Index stood at -0.57. A negative number indicates loose financial conditions.  It has been an unimpressive inflation fight. That's why I say the pivot by the Fed isn't victory, it's surrender. Inflation won. The Fed is throwing in the towel. Why? Because everybody knows that this debt-riddled economy can't keep plugging along without easy money. Furthermore, the Federal Reserve can't shrink its balance sheet in a meaningful way. A BALANCE SHEET HISTORY LESSON When the economy is bad, the Fed ramps up quantitative easing. It buys bonds on the open market with money created out of thin air. By putting its big fat thumb on the bond market and creating artificial demand, it keeps bond prices higher than they otherwise would be. Conversely, interest rates stay lower. This benefits the U.S. Treasury, allowing it to continue borrowing at lower interest rates. This is called debt monetization. The Fed literally transforms U.S. government debt into money. Debt monetization is inflationary. It expands the money supply and ultimately pushes consumer prices higher than they would be. In practice, Americans pay an inflation tax to help sustain the debt. When times are good, the Fed should theoretically pull that liquidity out of the economy, but in practice, the central bank is very slow to shrink the balance sheet. Why? Because once it injects trillions in liquidity into the economy, it can't get it out without popping the bubbles it blew up and driving the economy into a recession. We witnessed this song and dance after the 2008 financial crisis. In the early days of the Great Recession, then-Federal Reserve Chairman Ben Bernanke assured Congress that he was not monetizing debt. Bernanke claimed the difference between debt monetization and the Fed's plan was it was not providing a permanent source of financing. He insisted the bonds would only remain on the Fed's balance sheet for a short time and assured Congress that once the crisis was over, the Fed would sell the bonds it bought during the emergency.  That never happened. Bernanke ran three rounds of quantitative easing, pushing the balance sheet from $8.98 billion before the financial crisis to just over $4.5 trillion by December 2014. The central bank tried to unwind its balance sheet in 2018. The FOMC said balance sheet...

AUD/USD maintains the trade around the 0.6600 region. Australia's Inflation Rate takes centre stage later in the week. The FOMC gathering and US NFP are seen as key drivers. Another day, another erratic performance of AUD/USD, which remains trapped within the multi-session consolidative phase in place since the middle of the current month. This time, however, spot managed to start the week in quite a positive fashion. The daily strengthening of the Australian dollar contrasts with noticeable gains in the greenback. The resilience of the Australian currency is evident in recent reports indicating additional stimulus measures by the People's Bank of China (PBoC) to bolster China's stock market and ignite economic recovery in the post-pandemic era, which has been slower to materialize thus far. The influence of China, along with the anticipated decision of the Reserve Bank of Australia (RBA) to maintain its current policy stance next month, continues to be perceived as a factor that will restrict the potential for the pair to rise in the coming weeks. This also suggests that there may be more subdued trading in the short-term future, at least.   Regarding the Reserve Bank of Australia (RBA), the recorded decrease in inflation metrics during December, coupled with the still perceived tight labour market, appears to have strengthened the prevailing consensus among market participants that the central bank will maintain its current interest rates at the upcoming event in February. Speaking about central banks, the likelihood that the Federal Reserve could extend its ongoing restrictive stance for longer than anticipated should be supportive of extra gains in the US Dollar, and therefore a drag for AUD/USD. AUD/USD daily chart AUD/USD short-term technical outlook Further losses may cause the AUD/USD to retest its 2024 bottom of 0.6524 (January 17). The loss of this region may cause a drop to the provisional 100-day SMA of 0.6525, an area coincident with the December 2023 bottom (December 7). Down from here come the 2023 low of 0.6270 (October 26) and the round level of 0.6200, all of which are previous to the 2022 low of 0.6169 (October 13). On the contrary, there is a temporary hurdle at the 55-day SMA at 0.6638. The breakout of this zone could motivate the pair to set sails to the December 2023 top of 0.6871 (December 28) ahead of the July 2023 peak of 0.6894 (July 14) and the June 2023 high of 0.6899 (June 16), both of which are just above the important 0.7000 level. On the 4-hour chart, the pair appears to be consolidating more. On the upside, the 100-SMA is currently at 0.6629, with the 200-SMA at 0.6682. The surpass of this area suggests a potential advance to 0.6728. On the downside, there is preliminary disagreement at 0.6551 prior to 0.6525. If this zone is breached, there is no significant dispute until 0.6452. The MACD flirts with the positive limit, while the RSI eases towards the 50 threshold. View Live Chart for the AUD/USD

Summary The Animal Spirits Index (ASI) had a strong close to 2023, shooting up by 0.51 points in December. In all, the ASI was somewhat volatile throughout 2023, largely reflecting the surprising turn that the year took. While oscillating consumer confidence and economic policy uncertainty weighed heavily on the ASI, financial markets showed remarkable strength and boosted the index throughout the year. We suspect 2024 will bring continued volatility in the ASI. While we expect the FOMC to begin their cutting cycle this year, which will likely boost the index, a pull back in consumption may accelerate the labor market's moderation, which could weigh heavily on the ASI via lower consumer confidence. A Year in Review The Animal Spirits Index had a strong close to 2023. The index shot up by 0.51 points in December, marking the largest increase since February 2019. Strong gains in both the consumer confidence and S&P 500 components of the index drove the uptick. In all, the ASI was somewhat volatile throughout 2023, trending up until August, then sharply decreasing through November, and finishing out with a year-end rally in December. Our previous reports detail the methodology of the index, but on a basic level, an ASI value above zero indicates optimism and a value below zero suggests pessimism.1 The ASI's changing nature largely reflects the surprising turn that 2023 took. By the end of 2022, the Federal Reserve had hiked rates by 425 bps, leading many to believe 2023 would see sluggish growth and a modest recession. Yet, even as the Fed continued to hike rates through last summer, the economy remained surprisingly resilient. Real income growth remained strong, which helped to boost real consumer spending; payrolls continued to expand and inflation slowed considerably. In all, real GDP expanded 2.5% in 2023—an outstanding performance compared to the 0.3% growth rate predicted by the Blue Chip consensus at the beginning of the year. In this report, we dive deeper into how the components of the ASI changed throughout 2023 and provide a brief outlook for what to expect in 2024. Download the Full Report!

As the events of 2024 unfold on the world stage, the Brent oil market is being driven by many factors. Most interestingly, 2023 ended with global oil inventories, especially Brent, at their lowest level since mid-2022. According to the International Energy Agency (IEA), this fluctuation in inventories has added an even more significant element of unpredictability to the market, so it is more important than ever to understand where the price of oil will move! This analysis explores the intricacies of supply, geopolitical influences, economic conditions, and internal OPEC+ dynamics that combine to shape the trajectory of oil prices. Geopolitical tensions and price forecasts  The geopolitical landscape in the Middle East remains a critical factor for the Brent market in 2024. Tensions in the Red Sea and Yemen pose significant risks to oil flow along major trade routes. For example, Brent prices experienced a spike following US and UK airstrikes on Houthi targets, reflecting the market's sensitivity to regional conflicts. Wall Street analysts expect a moderate recovery in Brent crude oil prices in 2024, averaging around $85 per barrel. Forecasts for Brent crude oil in 2024 present a diverse picture. The US Energy Information Administration (EIA) forecasts an average price of around $82 per barrel, while Barclays and Citi have adjusted their forecasts to $93 and $74 per barrel, respectively. These forecasts consider potential overproduction issues, geopolitical risks, and global economic growth trends. For example, S&P Global Commodity Insights emphasizes the impact of OPEC+ production decisions on these price forecasts. But what about oil demand?  Global oil supply is set for a significant increase in 2024, with an expected rise of 1.5 million b/d, bringing the total to 103.5 million b/d. Key participants are non-OPEC+ countries such as the US, Brazil, Guyana, and Canada. However, this supply surge could lead to a glut in the market, especially if OPEC+ decides to abandon its additional voluntary cuts in the second quarter of 2024. At the same time, demand growth is expected to slow down, influenced by various factors, including technological advancements in energy efficiency and vehicle electrification. Challenges of OPEC+ There are growing concerns within OPEC+ about the unity and future strategy of the group. Angola's recent withdrawal from the agreement has raised questions about the alliance's stability. This withdrawal and production adjustments from other member countries could significantly change the group's collective output. For example, Russia and Saudi Arabia, critical players in OPEC+, have different thresholds for acceptable oil prices - $85 and $100 per barrel, respectively. This difference in interests could lead to problems in reaching a consensus on production levels, potentially affecting global oil prices. XBR/USD, Daily Timeframe In the Daily timeframe, XBRUSD is moving in a downtrend, and the price is below the 23.6 Fibonacci level. In the short term, it is possible to expect a test of the 85.00 resistance area, which creates two possible scenarios. If the resistance of 85.00 is broken and the trend line is crossed, we can expect a rise to the level of 93.00, which corresponds to 38.2 Fibonacci. However, if the price bounces off the resistance, the target will be the support at 70.00.  OPEC+ faces many challenges that depend on whether the cartel members can continue to work in concert. However, current problems within the cartel, increased supply from non-OPEC+ countries, falling demand from significant consumers, and pressure from the green agenda could put severe pressure on Brent's price. In addition, the US and China, still leading in oil consumption, are not interested in prices rising above 75-85 dollars per barrel, which could have serious consequences. With similar dynamics, the oil price in 2024 could be 70-72 dollars per barrel.  However, prices could increase if OPEC+ can solve internal problems and reach a consensus. Also, one should not rule out the factor of geopolitical tension, which may push oil prices up and reach the level of 90-100.  Conclusion To sum up, the oil market in 2024 is characterized by diverse and sometimes conflicting factors. Declining global inventories, heightened geopolitical tensions, differing price forecasts, and a complex supply-demand balance set the stage for a year of cautious navigation.  The impact of OPEC+, while significant, is being tested by domestic challenges and external market dynamics, making forecasting oil prices more challenging than ever. This complex scenario emphasizes stakeholders' need for vigilance and adaptability as they respond to changing global oil market conditions. FBS is an international brand present in over 150 countries. Independent companies united by the FBS brand are devoted to their clients and offer them opportunities to trade Margin FX and CFDs. FBS Markets Inc: license IFSC/000102/310. Tradestone Ltd.: CySEC license number 331/17. FCA temporary permit 808276. Intelligent Financial Markets Pty Ltd/: ASIC Licence number 426359.

EUR/USD Current price: 1.0821 European Central Bank policymakers maintain a cautious stance on rate cuts. The macroeconomic calendar is scarce on Monday but is packed this week. EUR/USD flirts with fresh January lows, could extend its slide towards 1.0760. The Euro is the weakest US Dollar rival at the beginning of a new week, as the EUR/USD pair barely holds above the 1.0800 mark. Market participants are pushing bets of a 25 basis points (bps) rate cut in April higher, despite comments from European Central Bank (ECB) officials against such a move. ECB Governing Council official Peter Kazimir said that a rate cut is more probable in June than in April, adding that signs of disinflation are positive but that there is not enough information to make a confident conclusion. Finally, he noted that the ECB is not behind the curve, it's the market getting ahead of events. Also, Vice-President of the ECB Luis de Guindos said that the central bank will cut rates when policymakers are sure inflation meets the 2% goal. As his colleague, de Guindos, remarked on the good progress in inflation but clarified they are not still there.   Meanwhile, the macroeconomic calendar has little to offer on Monday, with no data from the Eurozone and the United States (US) offering the January Dallas Fed Manufacturing Business Index. However, the week will be packed with first-tier events, including the Eurozone and Germany's Gross Domestic Product, the US Federal Reserve (Fed) monetary policy decision, and the January Nonfarm Payrolls report. EUR/USD short-term technical outlook The EUR/USD pair bounced modestly from a fresh January low of 1.0813, as broad US Dollar weakness prevents it from falling further. Technical readings in the daily chart support another leg south. EUR/USD is finding sellers around the 200 Simple Moving Average, located at around 1.0845. The former support has now become resistance. At the same time, the 20 SMA accelerates south above the longer one. Finally, technical indicators remain within negative levels, with neutral-to-bearish strength. The near-term picture is also bearish. EUR/USD develops below all its moving averages, with the 20 SMA heading firmly south below the longer ones. At the same time, technical indicators develop below their midlines, gaining bearish strength in line with a downward extension, particularly on a break below the 1.0800 threshold. Support levels: 1.0800 1.0760 1.0720 Resistance levels: 1.0845 1.0890 1.0945