AUD/USD advanced modestly on Wednesday. Australian CPI lent support to a pause by the RBA. Next risk event will be the release of US CPI. In line with the broad-based positive sentiment in the risk-associated space, AUD/USD clocked a decent advance on Wednesday, this time managing to reclaim, albeit briefly, the area north of 0.6700 the figure. The small pullback in the greenback prompted the USD Index (DXY) to keep orbiting around the low-102.00s amidst the continuation of the downward bias in US yields, at a time when market participants kept their focus on the imminent release of US inflation figures gauged by the CPI and their implication on the Fed's plans to start trimming its interest rates. Speaking about inflation, consumer prices in Australia rose less than initially estimated by 4.3% in the year to November, the slowest rate since January 2022 when tracked by the RBA's Monthly CPI Indicator. Indeed, further signs of disinflationary pressures in the economy could prompt the central bank to stay on the sidelines at its upcoming meeting in February, despite inflation continuing to run well above the bank's target. In addition, the mixed performance of the commodity complex saw copper prices regain some composure following their decline since late December, while iron ore traded slightly on the defensive, although keeping the $140.00 barrier per tonne intact. Looking at Friday's docket in Oz, Trade Balance figures are expected to show a A$7.5B trade surplus in November (vs. October's A$7.129B). AUD/USD short-term technical outlook The resumption of the selling pressure could drag AUD/USD to the 2024 low of 0.6640 (January 5) before reaching the 200-day SMA at 0.6581. The December 2023 low of 0.6525 comes next ahead of the intermediate 100-day SMA of 0.6502. If bulls regain control, the attention will shift to the December 2023 top of 0.6871 (December 28), which will emerge before the July 2023 peak of 0.6894 (July 14) and the June high of 0.6899 (June 16). If the pair breaks out of this range, the psychological level of 0.7000 will be the next to be watched. The significant conflict zone, according to the 4-hour chart, is approximately 0.6650. There are no notable disagreement levels until 0.6525 and 0.6452 if this zone is exceeded. The MACD remains in the negative zone, and the RSI approaches 40, both of which appear to signal additional losses in the near future. The bullish trend, on the other hand, may face first resistance around the 55-SMA at 0.6752, which is seen as the last line of defense before the previous top at 0.6870. View Live Chart for the AUD/USD

Further progress in terms of disinflation and the room this creates for central bank easing seem to be the only economic 'certainties' for 2024. What is left is a list of important questions that should be answered as the year progresses. What will be the pace and extent of rate cuts? Is there a risk of underestimating the impact of past rate hikes that still must manifest itself? What about the timing and strength of the pickup in growth in reaction to lower inflation and the start of policy easing? Is there a downside to the scenario of a soft landing in the US? The answers to these questions matter for the real economy but are especially important for financial markets and the policy rate expectations. From a macroeconomic perspective, one of the defining characteristics of 2023 was the ongoing tightening of monetary policy, with the Federal Reserve and the ECB raising rates more than expected. These decisions, in combination with accumulating evidence in the latter part of the year of a clear downward trend in core inflation, changed the outlook for interest rates for 2024. 2022 was the year of the start of a tightening cycle, 2023 saw the terminal rate being reached and 2024 should be the year of cuts in official interest rates. In the US, the FOMC members' December projections pencil in three 25 basis points cuts in 2024. The message from the ECB is more opaque although recent comments of several governing council members suggest that the debate has clearly shifted from whether further hikes are warranted to how long rates should be kept at present levels. The consensus expects the ECB to start reducing rates in July, bringing the deposit rate back to 3.25% by the end of the year, compared with the current level of 4.00% (chart 1).[1] A similar survey in the US expects the first rate cut by the Fed in June and a cumulative reduction of the federal funds rate this year of 125 basis points.[2] It is safe to conclude that there is hardly any or even no debate on the question whether policy rates will go down this year. Further progress in terms of disinflation should warrant a reduction in official interest rates, if only to avoid that otherwise, real interest rates would increase thereby causing an unwanted further tightening in the monetary environment. Download the Full Report!

XAU/USD Current price: 2,029.15 Wall Street trades with a positive tone, shrugs off the sour tone of its overseas counterparts. The United States Consumer Price Index will likely take markets out of their lethargy. XAU/USD holds within familiar levels, risk skews to the downside. Gold trades within familiar levels on Wednesday, with a scarce macroeconomic calendar and upcoming first-tier events maintaining investors in cautious mode. Wall Street opened with a positive tone and holds on to modest gains, partially reverting its latest losses but also trading uneventfully. XAU/USD bottomed at $2,016.61 on Monday, falling from an early high of $2,046.55 and holding within such an area ever since. The lethargy is set to end on Thursday, when the United States (US) will release the December Consumer Price Index (CPI). The index is expected to post an annualized increase of 3.2%, slightly above the previous 3.1%. The core reading, however, is seen shrinking to 3.8% from 4% in November. Market participants are betting the US Federal Reserve (Fed) could start cutting rates as soon as next March. Indeed, easing inflationary pressures will confirm such an idea, regardless of the latest data showing the tight labour market. The CPI readings will likely impact sentiment, with the US Dollar then trading accordingly. XAU/USD short-term technical outlook The daily chart for XAU/USD reflects the lack of directional strength. The bright metal develops below a mildly bullish 20 Simple Moving Average  (SMA), which provides dynamic resistance at around $2,040.30. Meanwhile, a modestly bullish 100 SMA crosses a flat 200 SMA, both in the $1,960 price zone. Finally, technical indicators edge marginally lower within neutral levels, not enough to confirm another leg south. The near-term picture skews the risk to the downside as the XAU/USD pair develops below all its moving averages. Furthermore, a bearish 20 SMA is crossing below the 200 SMA, while the 100 SMA remains directionless above them. At the same time, the Momentum indicator hovers around its 100 line, while the Relative Strength Index (RSI) indicator gains downward traction within negative levels, supporting another leg south towards the weekly low at $2,016.61. Support levels: 2,016.60 1,998.65 1,987.20 Resistance levels: 2,040.30 2,052.30 2,065.45

EUR/USD Current price: 1.0948 Easing government bond yields put a cap on the US Dollar's advance. Stock markets trade mixed as market participants await fresh clues on US economic developments. EUR/USD remains confined to familiar levels, a directional breakout unlikely in the near term. The EUR/USD pair trades at the upper end of its latest range, still lacking directional momentum. Market participants stand cautious ahead of a United States (US) inflation update on Thursday, with no other relevant figures released so far in the US or the Eurozone (EU). Markets trade on sentiment, as reflected by stocks' behavior, which trade mixed. Most Asian indexes edged lower, although the Nikkei 225 soared to a fresh multi-year high on speculation the Bank of Japan (BoJ) will not be able to drop the ultra-loose monetary policy anytime soon. In the meantime, European stocks trade mostly in the red, although not far from their opening levels. Meanwhile, softening US Treasury yields weigh on the US Dollar. The 10-year note currently offers 4%, while the 2-year note offers 4.34%, down 3 basis points (bps) ahead of Wall Street's opening. On a positive note, the US published MBA Mortgage Applications for the week ending January 5. According to the report, applications to refinance a home loan jumped 19% from the previous week and were 30% higher than the same week one year ago, despite an uptick in the fixed interest rate. Later in the day, the country will publish November Wholesale Inventories. EUR/USD short-term technical outlook The daily chart for the EUR/USD pair shows it holds on to modest intraday gains but also that it retains the neutral stance. The pair develops below a still bullish 20 Simple Moving Average (SMA), which provides dynamic resistance in the 1.0970 area. The 100 and 200 SMAs continue to lack directional strength well below the current level. Finally, technical indicators remain stuck to their midlines, reflecting the absence of speculative interest. The near-term picture is quite alike. In the 4-hour chart, the pair seesaws around a flat 20 SMA, while the 200 SMA provides support around 1.0920 and the 100 SMA lies flat just ahead of the 1.1000 figure. To top it all, technical indicators head nowhere, stuck around their midlines since Jan 5. A directional breakout seems unlikely in the near term, with the pair set to remain within familiar levels until the release of the US Consumer Price Index (CPI). Support levels: 1.0920 1.0885 1.0840   Resistance levels: 1.0970 1.1015 1.1060

EUR/USD stays below 1.0950 after closing in the red on Tuesday. Technical sellers could take action if the pair breaks below 1.0900. Markets will keep a close eye on the 10-year US Treasury note auction later in the day. EUR/USD edged lower on Tuesday as the risk-averse market atmosphere helped the US Dollar (USD) gather strength against its rivals. The pair struggles to stage a rebound early Wednesday and trades below 1.0950.

Good Morning! Dollar Index could continue to trade within 102-103 while Euro is headed towards 1.09 and should bounce back to head higher towards 1.10 as we have been expecting over the last few days. EURJPY and USDJPY have bounced back well yesterday and if the rise continues, we may soon see 159-160 and 145-146 soon in the next few sessions. This has been contrary to our earlier expected fall. USDCNY has been rising slowly and could test 7.20/22 on a break above 7.18. Aussie could be trading within 0.6650-0.6750 for the next few sessions while Pound has fallen and needs to remain above 1.26 to move back to higher level within the 1.26-1.28 range. USDRUB has broken below 90 and could now test 89-88.50 before again bouncing back to higher levels. USDINR can rise towards 83.20/30 again while above 83-82.90. EURINR can be ranged for a while. The US Treasury yields sustain higher but stable. There is room to rise further from here before the broader downtrend resumes. The US CPI data release tomorrow is important to watch. The German yields are moving up in line with our expectation. More rise is on the cards before a reversal is seen. The 10Yr GoI is coming down as expected and keeps intact our bearish view. The 5Yr GoI is coming close to the lower end of its range. Bias is bearish to see a downside breakout of this range eventually. Dow Jones and Nifty are stuck in a narrow range. DAX has dipped and failure to sustain above 16600 will be vulnerable to fall further. Nikkei has broken above its upper end of the range and can head towards its immediate resistance. Shanghai has scope to rise as long as it holds above 2865. Crude prices are likely to remain ranged for the near term. Gold and Silver look vulnerable while below the resistance at 2060 and 23.50 respectively. Copper can rise towards its immediate resistance while above 3.75. Natural Gas can come down towards 3.0. Visit KSHITIJ official site to download the full analysis

Gold has outperformed both stocks and bonds since the turn of the century. Gold was among the best-performing assets of 2023. According to analysis by the World Gold Council, gold outperformed emerging market stocks, U.S. bonds, the U.S. dollar, global treasuries, and commodities in general. The only asset classes that performed better than gold were U.S. stocks and developed-market foreign stocks.  But if we go back deeper in time to 1999, gold has narrowly outperformed stocks on an annualized basis as well. Dow Jones Commodity Index Gold (DJCI) tracks the gold market using the futures index. Dating back to the turn of the century, the DJCI has produced a 7.8 percent annualized return, according to S&P Dow Jones Indices head of commodities Brian Luke. That compares to a 7 percent return for the S&P500 over the same period. Bonds are even further behind in the race. The iBoxx USD Overall Index, measuring the performance of government and corporate bonds, has charted an average return of 4.1 percent since 1999. Adjusting for volatility, gold has also demonstrated better risk-adjusted returns than stocks in the 21st century, with a Sharpe ratio of 0.48 versus 0.45 for equities. The DJCI reached an all-time high in December, charting a 12.8 percent return. That outpaced both bonds and the broader commodity markets. Equity markets won 2023 with a 26.3 percent return for the S&P500. Gold charted a strong performance in 2023 despite significant headwinds, including a strong dollar and rising interest rates. Gold is a non-yielding asset. It doesn't pay dividends like many stocks, and it doesn't produce interest income like bonds. That means there is a higher opportunity cost when holding gold in a higher interest rate environment. This is often cited as a knock on the yellow metal, and it certainly impacted gold's performance through the first three quarters of 2023. Nevertheless, gold has proven to be a strong addition to an investment portfolio through the 21st century. Luke noted that central banks have taken notice of gold's performance over the long haul. Total central bank gold buying in 2022 came in at 1,136 tons. It was the highest level of net purchases on record dating back to 1950, including since the suspension of dollar convertibility into gold in 1971. That buying spree continued into 2023 with central banks adding another 800-plus tons of gold to their reserves through November of last year. Gold has historically provided investors an alternative to fiat currency," Luke wrote. "Digging into the central bank purchase data, countries including Russia and China have led the increase in central bank holdings. Foreign central banks appear to increasingly value gold's hedge against inflation, debt default and dollarization.

Gold price consolidates around $2,030, as traders await US inflation data for fresh direction.  The US Dollar pauses Tuesday's turnaround amid sluggish US Treasury bond yields and risk-aversion. Gold price ranges between 21-day SMA and 50-day SMA as bearish RSI counters Bull Cross.   Gold price is replicating the recovery move seen in Tuesday's Asian trading early Wednesday, as broad risk-aversion underpins the traditional safe-haven. Geopolitical risks keep Gold price afloat  Simmering geopolitical tensions in the Middle East and increased cautiousness ahead of Thursday's US inflation report keep investors away from riskier assets, scurrying for safety in the Gold price, as the US Dollar struggles to capitalize on the downbeat mood. The US Treasury bond yields also stay directionless, with the benchmark 10-year bond yields at around the 4.0% level. Iran-backed Houthi militants launched the largest attack to date on commercial merchant vessels, CNBC News reported on Tuesday, citing a senior US Defense Department official. Further, investors call for prudence, as markets keenly await the critical US Consumer Price Index (CPI) data on Thursday to gauge the pace and timings of the US Federal Reserve (Fed) interest rate cuts later this year. The current market positioning suggests a 62% chance of a rate cut by the Fed in March, according to the CME Group's FedWatch tool. The US CPI is expected to rise at an annual pace of 3.2% in December, up slightly from a 3.1% increase in November. The Core CPI inflation is set to decline to 3.8% YoY in the reported period versus 4.0% in November. The US Dollar (USD) came under renewed selling pressure at the start of the week on Monday after the New York Fed's latest Survey of Consumer Expectations showed Tuesday that US consumers' projection of inflation over the short run fell to the lowest level in nearly three years in December. However, the US Dollar regained upside traction on Tuesday, as uncertainty before the US government shutdown and the fourth-quarter earnings reports fuelled a flight to safety in American trading. Looking ahead, Gold price is likely to extend its range trade, in the absence of top-tier US economic data and pre-CPI data nervousness. But Gold traders could find fresh impetus from the sentiment on Wall Street and Fedspeak. In case risk-aversion intensifies, the Gold price rebound could be checked by the resurgent safe-haven demand for the US Dollar. Conversely, dovish Fed expectations could keep the downside cushioned in Gold price. Gold price technical analysis: Daily chart Gold price is likely to maintain its side-ways momentum so long as it remains confined between the 21-day Simple Moving Average (SMA) and 50-day SMA at $2,045 and $2,015 respectively. The 14-day Relative Strength Index (RSI) indicator sitting just beneath the midline, restricting Gold buyers while they continue to find support from the Bull Cross confirmed last Friday.. The 100-day SMA closed above the 200-day SMA on Friday, confirming the bullish crossover. If the rebound sustains, the immediate resistance is seen at the 21-day SMA at $2,045. The next bullish target for Gold price is envisioned at Friday's high of $2,054, above which doors reopen for a test of the $2,100 barrier. On the downside, the initial support is seen at the $2,015 confluence, where the 50-day SMA and Monday's low coincide. A daily closing below the latter is critical to resuming the downtrend toward the $2,000 mark.

AUD/USD lost the 0.6700 mark on Tuesday. A deeper pullback could see the 200-day SMA revisited. Investors' focus shifts to key inflation data on Wednesday. The decent rebound in the greenback put the broader risk-associated universe under extra downside pressure on turnaround Tuesday, exposing the Aussie dollar to extra weakness. Against that backdrop, AUD/USD broke below the key 0.6700 contention zone and seems to have paved the way for another potential test of the support region near 0.6650, or yearly lows. In the meantime, cautious trade is expected to emerge around AUD ahead of the publication of key inflation readings gauged by the Monthly CPI Indicator by the RBA. So far, consensus points to another soft print from domestic inflation, which should in turn support the idea of a pause by the RBA in a context where the central bank has not ruled out extra interest rate hikes. Sport also derived further selling pressure from another poor session in the commodity galaxy, where copper prices and iron ore extended their negative activity, while the absence of inspiring news from China is expected to keep the Australian currency under scrutiny. A quick look at the domestic calendar saw flash Building Permits expanding at a monthly 1.6% in November, while preliminary readings showed Retail Sales increasing by 2.0% in November vs. the previous month. AUD/USD daily chart AUD/USD short-term technical outlook Further AUD/USD weakness might reach the 2024 low of 0.6640 (January 5) before the critical 200-day SMA at 0.6582. Down from here is the December 2023 low of 0.6525 prior to the interim 100-day SMA at 0.6500. If bulls recover control, the focus will transfer to the December 2023 high of 0.6871 (December 28), which will appear before the July 2023 top of 0.6894 (July 14) and the June peak of 0.6899 (June 16). If the pair breaks out of this range, the psychological 0.7000 level will be the next to watch. According to the 4-hour chart, the significant conflict zone is around 0.6650. If this zone is breached, there are no noteworthy disagreement levels until 0.6525 and 0.6452. The MACD sank to the negative zone, while the RSI trading below 50 all seem to point to further losses in the short-term horizon. The bullish trend, on the other hand, may encounter first resistance at the 55-SMA at 0.6766, which is seen as the last line of defence before the previous high at 0.6870. View Live Chart for the AUD/USD

MARKETS With fingers tapping nervously amid the calm before the profit storm and uncertainties centred around the upcoming US CPI data, U.S. stock markets showed a mixed performance overnight, with the S&P 500 and Dow Jones Industrial Average experiencing losses as the Nasdaq Composite recorded marginal gains. At the same time, broader markets remain tied to the hip of the 10-year Treasury yield amid growing concerns the bullish narrative may flip, questioning whether bets on Federal Reserve rate cuts are overdone. We should have a more conclusive read on that after Thursday's US CPI data. After a recent stock market dip, attention gradually shifts to the upcoming earnings season to gain insights into companies' growth trajectories. Mega-cap technology firms, part of the Magnificent 7 group, are under close scrutiny due to their significant influence and substantial weight in the S&P 500. Their earnings outcomes will be crucial in determining the stock market's overall direction. Investors are keen to discern whether recent declines are justified or whether companies' profits remain robust enough to revive the end-of-year rally. The impact of the Federal Reserve's rate hike policy, cautious consumer behaviour, macro uncertainty, and signs of economic contraction in Q4 have raised concerns about the forthcoming fourth-quarter corporate earnings season. High valuations and thoughts of a broader economic slowdown may cast a shadow on corporate earnings, even if profits exceed expectations—a situation that stock market operators likely aim to avoid. OIL MARKETS Brent crude settled around $78 per barrel, and traders are assessing factors such as disruptions in the Red Sea, a critical shipping lane, and an unexpected decrease in Russian seaborne exports amid weakening demand. Seaborne tracking data indicates that Russia has reduced exports by 500,000 barrels, aligning with quotas and demonstrating a notable level of compliance from Russia, which has triggered a short-covering rally. However, few believe Russia will remain compliant when they need Petrol revenue to fight the war.  

XAU/USD Current price: 2,030.25 Investors hope easing inflation readings could help the Fed decide a rate cut. US Treasury yields tick north ahead of the US Consumer Price Index release. XAU/USD gains bearish traction amid renewed US Dollar demand, remains neutral. Spot gold keeps trading within familiar levels, with XAU/USD staying at the lower end of Monday's range. The US Dollar gathered momentum after Wall Street's opening as stocks edged sharply lower, reflecting a dismal market mood, although gains are restricted ahead of key macroeconomic figures. Market players hope the United States Federal Reserve (Fed) will soon start trimming interest rates, but await for the Consumer Price Index (CPI) figures to be out next Thursday to further support such a view. Over the past week, American employment-related data indicated the labor sector remains relatively tight, which may end up pushing inflation higher, undermining the Fed's tightening policy. At the same time, the pair has pushed rates to multi-year highs, which risks a major economic setback. The central bank is at a point where hiking rates seems a major risk for economic progress compared to the benefits it may bring in taming price pressures. That's why inflation-related data is so relevant this week. If the CPI eases more than anticipated, the figures will somehow "confirm" that the Fed will proceed with rate cuts. At the time, speculative interest believes there's a good chance for a cut as soon as March. Meanwhile, US Treasury yields advance, supporting USD advance. The benchmark 10-year yield stands above 4%, while the 2-year note offers  4.37%. XAU/USD short-term technical outlook XAU/USD trades around $2,030, retreating from an intraday high of $2042.09. Technical readings in the daily chart show that the risk skews to the downside, with the pair developing below a directionless 20 Simple Moving Average (SMA). Meanwhile, the 100 and 200 SMAs converge around $1,962, providing long-term dynamic support. Finally, technical indicators turned marginally lower but remain within neutral levels without enough directional strength to confirm another leg south. In the near term, however, and according to the 4-hour chart, bears are in control. The pair trades below all its moving averages while technical indicators gain downward traction below their midlines. The 20 SMA gains downward traction between the longer ones, providing near-term resistance at around $2,036. Support levels: 2,016.60 1,998.65 1,987.20 Resistance levels: 2,036.00 2,052.30 2,065.45

EUR/USD Current price: 1.0933 The focus remains on the United States Consumer Price Index. Mixed European data undermines demand for the Euro. EUR/USD is bearish in the near term, support at 1.0920. The EUR/USD pair trades with a soft tone on Tuesday, hovering around 1.0930. The pair trades within a well-limited range since the week started as market participants await fresh inflation data from the United States (US). The country will publish the December Consumer Price Index (CPI) next Thursday, foreseen at 3.2% YoY. Investors believe there is roughly a 60% chance the Federal Reserve (Fed) will proceed with a rate cut as soon as next March, despite the Fed repeatedly stating upcoming decisions will be data-dependant. Meanwhile, the US Dollar benefits from firmer US Treasury yields. The 10-year note offers 4.04%, up 4 basis points (bps) ahead of the opening and not far from last week's peak of 4.10%. At the time being, the 2-year note yields 4.38%. Stock markets, on the other hand, trade with a sour tone, with European indexes trading in the red and dragging US futures alongside. Data-wise, European figures were mixed. On the one hand, German Industrial Production fell by 0.7% MoM in November, worse than anticipated. On the other hand, the Eurozone Unemployment Rate contracted to 6.4%. As for the US, the country released the NFIB Business Optimism Index, up in December to 91.9, better than anticipated. The country will later publish the November Goods and Services Trade Balance and January TIPP Economic Optimism. EUR/USD short-term technical outlook Technically, there has been no progress. The daily chart for EUR/USD offers a neutral-to-bearish stance, as the pair keeps meeting sellers around a bullish 20 Simple Moving Average (SMA) at around 1.0970, the immediate resistance area. At the same time, the longer moving averages remain lifeless far below the current level, while technical indicators turned lower within neutral levels, lacking enough strength to support a leg lower. In the near term, however, the risk of a downward extension is higher. The 4-hour chart shows the pair is developing below its 20 and 100 SMAs while facing immediate support around a flat 200 SMA at 1.0920. Finally, the Momentum indicator hovers directionlessly around its midline, while the Relative Strength Index (RSI) indicator gains downward traction at 43, reflecting persistent selling interest. Support levels: 1.0920 1.0885 1.0840   Resistance levels: 1.0970 1.1015 1.1060