European inflation was higher than anticipated in December, according to preliminary estimates. The United States employment sector remains tighter than what the Fed wishes. EUR/USD battles to resume its bullish trend, increasing chances of a bearish breakout. The US Dollar kick-started the year on a strong footing, appreciating against most major rivals. The EUR/USD pair fell to 1.0876, further retreating from its late December peak of 1.1139, and heads into the weekend trading at around 1.0980. Financial markets returned from the winter holidays and are looking for fresh direction. Speculative interest took some profits out of the table after thin trading helped EUR/USD reach a multi-month high. But investors also chose to reduce bets on upcoming rate cuts after macroeconomic figures confirmed the economic contraction extended into December 2023, while inflation in the Eurozone remained elevated at the end of the year. Concerning macroeconomic developments On the one hand, S&P Global released the final estimates of its December Producer Manager Indexes (PMIs), which showed manufacturing and services output remained below 50 - the line that separates contraction from expansion- in the European Union (EU) and the United States (US). The latter published the official ISM PMIs, with the manufacturing index printing at 47.4 and the services one resulting in 51.4, which provides some support to the US Dollar. On the other hand, Germany unveiled the preliminary estimate of the Harmonized Index of Consumer Prices (HICP), which unexpectedly jumped to 3.8% YoY in December, according to preliminary estimates. At the same time, the EU HICP rose 2.9% in the year to December, much higher than the previous 2.4%. Finally, German Retail Sales plunged by 2.5% MoM in November, much worse than anticipated. Restricted growth but still high inflation could affect central banks' decisions. The idea of slower progress is welcome as long as it comes by the hand of easing price pressures. The aforementioned figures suggest the European Central Bank (ECB) should stick to the "higher for longer" mantra, as additional rate hikes risk a steep recession. Across the pond, however, the Federal Reserve (Fed) seems to be dealing with a slightly better situation, but macroeconomic figures are falling short of suggesting a rate cut in the first quarter of the year. Speaking of which, the Federal Open Market Committee (FOMC) unveiled the Minutes of the December meeting. Officials noted that "the policy rate is likely at or near its peak for this tightening cycle," not actually a surprise after three consecutive on-hold decisions. Also, the document showed policymakers believe a rate cut is possible in 2024 but gave no hints on when or how it might occur.    US labor market remains tight A critical clue on where the Fed is heading next came from the labor sector. The US published multiple employment-related figures, including the ADP survey and the Nonfarm Payrolls (NFP) report. ADP indicated that the private sector added 164K new positions in December, much higher than the 115K anticipated by market participants. The NFP report showed the country created 216K new jobs in December, while the Unemployment rate held steady at 3.7% according to the US Bureau of Labor Statistics (BLS), both readings beating expectations. Average Hourly Earnings climbed 4.1% YoY up from 3.9% in November. The upbeat report gave the US Dollar a near-term boost, as it means the Fed would need to maintain rates at current levels for longer than previously anticipated. The upcoming week will bring fresh clues on US price pressures. The country will release next Thursday the December Consumer Price Index (CPI), foreseen up by 0.2% MoM. On Friday, it will be the turn of the Producer Price Index (PPI) for the same month, expected to post a modest 0.2% monthly increase. EU November Retail Sales stand out in the European macroeconomic calendar. EUR/USD technical outlook From a technical point of view, the EUR/USD pair is ending the week with substantial losses, and while bears dominate, they are still lacking control. The weekly chart shows the pair met sellers around a flat 200 Simple Moving Average (SMA) late in December but develops far above mildly bearish 20 and 100 SMAs. Technical indicators, in the meantime, have turned marginally lower within positive levels, still far above their midlines. In the daily chart, however, the risk of another leg south has increased. EUR/USD is battling to recover above a bullish 20 SMA, which limits the upside at around 1.0950. A directionless 200 SMA provides support at around 1.0845, the first level to beat to the downside next week. Finally, technical indicators seesaw around their midlines, lacking clear directional strength. EUR/USD needs to recover the 1.1000 threshold to shrug off the negative stance, with resistance then at 1.1060 and 1.1120. Below 1.0900, the aforementioned 1.0845 is the immediate support level, with a break below it exposing...

GBP/USD started 2024 on a positive note. Auspicious results from the UK docket reinforced the upside bias in spot. The key 200-week SMA continues to cap the upside. Price action around the Pound Sterling (GBP) was highly influenced by the US Dollar (USD) dynamics in the first week of the new trading year, while market participants continued to shrug off the holiday mood. GBP/USD navigated choppy waters initially, although it made a U-turn and the pair managed to advance in the subsequent sessions, largely surpassing the 1.2700 barrier on Friday. Despite Friday's post-NFP knee-jerk reaction, the Cable and the rest of the risk-associated assets grabbed fresh oxygen and extended the positive streak for the fourth week in a row in response to the sudden change of heart around the Greenback. This was accompanied by a U-turn in US yields and increasing speculation of interest rate cuts as soon as in March. The week that was: GBP/USD now looks to revisit 1.2800 and beyond The weekly recovery in the quid followed firm prints from both Manufacturing and Services PMIs in the UK for the month of December, which somehow managed to offset the bullish momentum in the US Dollar that was happening at the same time. Additional encouraging data in the UK docket saw a recovery in house prices tracked by Halifax as well as a decent bounce in the Construction PMI during December. Gains in the Cable, in the meantime, were bolstered by the resurgence of a strong upward trend in the UK 10-year gilt yields, which climbed to multi-week highs and approached the key 4.0% barrier towards the end of the week, an area last visited in mid-December. Still around the UK money markets, investors continued to reprice the likelihood of interest-rate cuts by the Bank of England (BoE) later in the year. Currently, these expectations seem to gyrate around 120 basis points (bps) of rate cuts in 2024, a tad lower than the previous estimate. A glimpse at the upcoming events across the Channel suggests that investors' attention should be focused on the release of UK GDP figures, Industrial and Manufacturing Production for November, all due in the latter half of the next week. GBP/USD: Technical Outlook GBP/USD remains supported by the vicinity of the 1.2600 region. In case sellers regain control, there is an immediate contention at the so far 2024 low of 1.2610 recorded on January 2. If the Cable breaks below this level, it could prompt a test of the 200-day Simple Moving Average (SMA) at 1.2532 to emerge on the horizon ahead of the December 2023 low of 1.2500 (noted on December 13). Further south aligns the interim 55-day and 100-day SMAs at 1.2484 and 1.2446, respectively, prior to the weekly low of 1.2187 of November 10, the October low of 1.2037 (October 3), the crucial 1.2000 threshold, and finally, the 2023 bottom of 1.1802, clinched on November 10.  If the upward trend picks up pace, the pair might revisit the December peak of 1.2827 (observed on December 28). It could then approach the weekly high of 1.2995 from July 27, 2023, just slightly above the significant threshold of 1.3000. The daily Relative Strength Index (RSI) improves to 58, and the MACD points to a near-term rebound.

Gold staged a late rebound to close the week little changed. XAU/USD could stretch higher once $2,060 is confirmed as support. December inflation data from the US could trigger the next big action in the pair. After posting three consecutive weekly gains to end 2023, Gold started the new year on the back foot and lost nearly 1% before erasing its weekly losses late Friday. The short-term outlook for Gold hinges on US inflation data for December, which could influence the Federal Reserve (Fed) interest-rate outlook and trigger a big reaction in XAU/USD next week. Gold price edged lower to begin 2024 The market action remained subdued on Tuesday as trading conditions started slowly to normalize following the long weekend. As the US Dollar (USD) staged a technical rebound following the dismal performance seen in the last couple of weeks of 2023, XAU/USD closed the day in negative territory. On Wednesday, the US ISM Manufacturing PMI improved to 47.4 in December from 46.7 in November. Additionally, the number of job openings on the last business day of November stood at 8.79 million, down modestly from 8.85 million in October. Although these data failed to trigger a noticeable market reaction, the USD benefited from risk aversion and caused XAU/USD to continue to push lower. As Wall Street's main indexes lost about 1% on the day, Gold dropped to its lowest level in nearly two weeks at $2,030. Private sector employment in the US rose by 164,000 in December and annual pay was up 5.4%, the Automatic Data Processing (ADP) reported on Thursday. The benchmark 10-year US Treasury bond yield climbed above 4% after this data and didn't allow XAU/USD to stage a meaningful rebound. The probability of the Federal Reserve (Fed) lowering the policy rate by 25 basis points in March declined to 65% on Thursday from 85% earlier in the week following employment-related US data. The monthly data published by the US Bureau of Labor Statistics showed on Friday that Nonfarm Payrolls (NFP) rose by 216,000 in December, surpassing the market expectation for an increase of 170,000. On a concerning note, the previous two NFP readings were revised lower by a total of 71,000. The Unemployment Rate held steady at 3.7% in the same period, but the Labor Force Participation Rate fell to 62.5% from 62.8% in November. Although the initial reaction provided a boost to the USD, underlying details of the jobs report didn't allow the currency to preserve its strength. In turn, XAU/USD recovered back above $2,050 after falling below $2,030 with the immediate reaction. Finally, the ISM Services PMI declined to 50.6 in December from 52.7 in November, putting additional weight on the USD's shoulders.  Gold price could show significant reaction to US inflation data Next week's economic calendar will not offer any high-tier data releases in the first half of the week. Hence, market participants are likely to assess technical developments for trading opportunities. On Thursday, the US Bureau of Labor Statistics (BLS) will publish Consumer Price Index (CPI) data for December. The Core CPI, which excludes volatile food and energy prices, is forecast to rise 0.3% on a monthly basis to match November's increase. A monthly core CPI print of 0.5% or higher could fuel another leg higher in US yields and weigh on XAU/USD. On the other hand, a softer-than-forecast reading could revive expectations for a Fed policy pivot in March. On Friday, CPI data from China, the world's biggest demander of Gold, will be watched closely by investors as well. In November, monthly CPI declined by 0.5%. Another negative print could highlight the lack of momentum in consumer spending and hurt Gold. Gold technical outlook The Relative Strength Index (RSI) indicator on the daily chart advanced to 60 on Friday, pointing out to a bullish tilt in the near-term bias. $2,060 (static level) aligns as a pivot level for XAU/USD. In case the pair starts using that level as support, it could target $2,080 (end-point of the latest uptrend) and $2,100 next.  On the downside, the 20-day Simple Moving Average (SMA) and the ascending trend line coming from early October form a key support level at $2,040. If Gold falls below this level and fails to reclaim it, $2,020-$2,015 (Fibonacci 23.6% retracement level of the latest uptrend, 50-day SMA) and $2,000 (psychological level, static level) could be set as next bearish targets.

EUR/USD edged lower early Friday after posting small gains on Thursday. An upbeat December jobs report from the US could weigh on the pair ahead of the weekend. 1.0920 aligns as key near-term technical support for the pair. EUR/USD gained traction during the European trading hours on Thursday but struggled to extend its rebound in the second half of the day as rising US Treasury bond yields supported the US Dollar (USD). The pair stays on the back foot and trades in negative territory below 1.0950 as the market focus shifts to December jobs report from the US.

Good Morning! The Dollar Index is holding below 102.72 and could dip to 102 or slightly lower before resuming a rise towards 103. Euro has bounced well from 1.09 and could rise towards 1.10 before pausing. EURJPY and USDJPY are bullish to 160 and 146 respectively. USDCNY rose above 7.17 but has dipped back from there. Unless it sustains rise past 7.17, it looks bearish for a fall back to 7.14/12. Aussie is near its support of 0.67 from where a bounce towards 0.675-0.68 is expected. Pound continues to trade within 1.26-1.28 region. USDRUB has declined from resistance at 92.60 and could now fall back towards 90-89. The range of 83.35-83.20/15 could hold in USDINR for now. EURINR has held the support at 90.80 and risen back. It could see a further rise towards 91.5 before possibly pausing. Important data releases to watch today are US NFP data and the US Avg Hourly Earnings. The US Treasury yields have risen back sharply. A break above their immediate resistances can see an extended corrective rise going forward. The US NFP and the Unemployment data release today is important to watch. The German yields are moving up towards their resistances in line with our expectation. The yields can resume their downtrend after testing the resistance. The 10Yr GoI is coming close to its resistance from where we expect it to see a fresh leg of fall. The 5Yr GoI on the other hand continues to remain mixed and stable within the narrow range. Dow Jones keeps alive the chances of seeing a fall on the downside first before a fresh leg of rally happens again. DAX is in a wait and watch situation. Nifty has bounced back but needs a strong rise above 21700 to avoid the danger of falling below 21500 and to clear the path towards its resistance. Nikkei is expected to trade sideways within 32500-34000 with a bullish view. Shanghai appears range bound. Crude prices look mixed and are likely to be ranged for a while. Gold sustains higher above its key support and is expected to move further in the near term. Silver has bounced back but the support turned resistance might cap the upside. Copper remains subdued and is vulnerable while below the resistance at 3.88-3.90. Natural Gas has dipped slightly but overall outlook is bullish for the near term. Today key focus is on the US NFP data which could bring in some volatility for commodity market. Visit KSHITIJ official site to download the full analysis

AUD/USD lost further ground on Thursday despite directionless dollar. Auspicious Caixin figures failed to lend support to the Aussie dollar. The loss of the 0.6700 region should open the door to extra losses. The selling pressure remained unabated around the Aussie dollar for yet another session on Thursday, this time prompting AUD/USD to put the 0.6700 support to the test. In fact, the pair failed to regain balance in spite of auspicious prints from the Chinese services sector, as per the Caixin PMI for the month of December, while the vacillating price action surrounding the greenback did nothing to lend some much-needed oxygen to the high-beta currency. Also contributing to the bearishness around the pair emerged another negative session in the commodity complex in spite of the recovery to multi-month tops of iron ore prices, which approached the $145.00 region per tonne. At present, the Australian dollar is expected to be influenced by several key factors in the upcoming weeks. These factors include the actions of the Fed and the potential for interest rate cuts, potentially as early as Q2, with March being a possibility. Additionally, the performance and recovery of the Chinese economy in the post-pandemic era will also play a significant role. All of these factors will unfold against the backdrop of the RBA maintaining its current stance. In the very near term, AUD/USD is predicted to closely follow the release of the US labour market report for the month of December, due on Friday. On this, Nonfarm Payrolls are expected to increase by 150K jobs, and the Unemployment Rate is seen to be higher at 3.8% in the last month of 2023.   AUD/USD short-term technical outlook Further AUD/USD decline should leave the 0.6700 support behind, putting a potential visit to the important 200-day SMA at 0.6582 back on the table. Prior to the December 2023 low of 0.6525 (December 7), the loss of this area should face a temporary support at the 55-day SMA at 0.6561. If bulls recover control, the focus is anticipated to transfer to the December 2023 high of 0.6871 (December 28) ahead of the 0.6900 zone, which coincides with the June and July tops. Once the pair clears this range, the psychological 0.7000 level will be the next to watch. A look at the 4-hour chart reveals the significant conflict region to be around 0.6700. Once breached, spot might return to the 0.6663 level before moving on to another strong support at the 200-SMA at 0.6657. The MACD is still in the red zone, while the RSI is flirting with the oversold territory. The resurgence of the bullish trend could encounter an initial resistance around the 55-SMA at 0.6790, which is seen as the last line of defense before previous high around 0.6870. View Live Chart for the AUD/USD

XAU/USD Current price: 2,044.10 A stronger than anticipated US ADP survey hints at a firmer Nonfarm Payrolls report. FOMC Meeting Minutes put mild pressure on the US Dollar late on Wednesday. XAU/USD is comfortable at around $2,040, lacks directional strength. XAU/USD trades little changed in the $2,040 area on Thursday, trimming early gains in the American session. The US Dollar came under mild pressure late Wednesday, pressured by mixed United States (US) data and the FOMC Meeting Minutes. The Federal Reserve (Fed) met in mid-December, and Chair Jerome Powell said policymakers put rate cuts on the table. Still, the Minutes provide no clues on when the Fed plans to proceed but only mention it's possible in 2024. Meanwhile, the US published the ADP survey on private job creation. The report showed 164K new positions were added, much more than the 115K anticipated by market players. The document also showed that the labor market is very much "aligned with pre-pandemic hiring," somehow signaling a more stable situation. On Friday, the US will publish the monthly Nonfarm Payrolls (NFP) report, which is expected to show the economy added 170K new jobs in September. XAU/USD short-term technical outlook The daily chart for XAU/USD shows it met buyers for a second consecutive day around its 20 Simple Moving Average (SMA), which lacks directional strength. Meanwhile, the 100 and 200 SMAs converge around $1,950 without clear slopes. At the same time, technical indicators stand within neutral levels, the Relative Strength Index (RSI) indicator flat, but the Momentum is still heading lower. Overall, the bearish potential seems limited as long as the bright metal retains the $2,030 base. In the near term, and according to the 4-hour chart, the pair is neutral. XAU/USD trades below a bearish 20 SMA but above a flat 100 SMA. At the same time, technical indicators remain within negative levels, but turned marginally higher, suggesting buyers outpace sellers intraday. Support levels: 2,031.00 2,015.50 1,998.65 Resistance levels: 2,040.20 2,052.30 2,065.45

OK – now the minutes are out!  And they appear to be quite clear. Some traders stamp their feet – I say – 'stop the whining': 5 – 7 cuts were always an unreasonable narrative – 1 or 2 maybe, maybe. 2023 underperformers are leading the way higher in 2024!  And the 2023 outperformers are leading the way lower in 2024. (I know it's early…relax – I'm just having fun!) Oil UP – rising tensions in the region are starting to boil. The VIX is up 15% in 2 days…. Capisce? Try the Spaghetti Arrabiatta. Oh WOW!!!  Would you look at that!  The FOMC mins came out (as expected) at 2 pm yesterday and guess what happened?  Just guess what they said…Go on…. make a guess…. "Officials reaffirmed that it would be appropriate for policy to REMAIN AT A RESTRICTIVE STANCE FOR SOME TIME UNTIL INFLATION WAS CLEARLY MOVING DOWN SUSTAINABLY*.  The committee expressed a willingness to cut the benchmark lending rate in 2024 should that trend continue, though they gave NO INDICATION easing could begin as soon as March, as futures traders expect."  (*Capitals are for emphasis - I'm not yelling! LOL)  And if that is not enough - It went onto say that. "Almost all participants indicated that reflecting the improvements in their inflation outlooks, their baseline projections implied that a lower target range for the federal funds rate would be appropriate by THE END of 2024." Let me repeat – they gave NO INDICATION of a rate cut in March…zero…nada…. and a lower rate would be appropriate by the END of 2024…not late winter, not spring, not summer……they said the END of 2024 – so that means late fall/early winter…. So, I have to ask – is it any clearer now?  Is the whole 5 – 7 rate cut narrative DEAD now?  Can we stop with the ridiculousness?  I mean it's amazing that what people hear vs. what is being said….  Now – what the did confirm is that the FED 'thinks' that they are done raising rates – ok – great, we knew that…that should not really surprise anyone….IF inflation continues to trend lower…but remember – IF it starts to trend higher – then all bets are off – but – I'm fairly confident that if they hold them higher for longer then we will see inflation continue to trend lower…but not get anywhere near the 2% target until sometime in 2025…. Ok – so with that – we had more 'adjusting' taking place….stocks continued to 're-price'….and by that I mean trade lower…..as the closing bell rang – the Dow shed 285 pts or 0.8%, the S&P's lost 38 or 0.8%, the Nasdaq gave up 174 pts or 1.2%, the Russell lost 54 pts or 2.6%, the Transports gave back 270 pts or 1.7% while the Equal Weighted S&P ended the day FLAT….and this suggests that while money is moving out of some of the 'sexy' names – it is being put back into the broader market….the two gainers yesterday?  Utilities – XLU + 0.4% and Energy – XLE up 1.6%....and as the year gets started look who is in the lead…. Energy - XLE is up 2.7%, Utilities - XLU are up 1.8%, Healthcare – XLV is up 1.6%, and Consumer Staples – XLP are up 0.35%.... – all sectors that were the UNDERPERFORMERS in 2023…. Last year's darlings - Tech – XLK is down 3.6%, Consumer Discretionary – XLY is down 3%, Communications – XLC is off by 1%.  And further down the totem pole – you find Semi's – SOXX – 5.6% this year, Cybersecurity down 4%, Disruptive Tech – ARKK down 7.4% - are you seeing a pattern here???  Does 'technology' ring a bell at all?  And rightly so, the end of year narrative – (think 5-7 rate cuts) is being poo – pooed – so the 'amazing' rally that saw the indexes surge is now being questioned…and that means – that some investors are 'shooting first and asking questions later'…..while other investors take advantage of the angst… Remember – for every trade there is both a buyer and a seller….it's just that when the angst rises (see the VIX below) buyers are happy to let the sellers panic a little as they bid lower…..and the opposite is true when the sentiment changes and that was front and center during the final 8 weeks of the year….that saw buyers tripping over each other to 'get in'. And speaking of angst – have you seen the VIX?  Remember how complacent it was?  Well – it has surged by 15% in 2 days…and the VIXY is up 5%.  And just like the RSI – that we discussed on Tuesday – investors need to pay attention to 'extreme readings' and the VIX has been in...

EUR/USD rebounded modestly after testing 1.0900 on Wednesday. German inflation and employment-related data from the US will be watched closely. Near-term technical outlook doesn't yet point to a build-up of recovery momentum. EUR/USD staged a technical correction and stabilized below 1.0950 early Thursday after testing 1.0900 on Wednesday. The pair's technical outlook is yet to point to an extended recovery as investors remain cautious while waiting for key macroeconomic data releases. The US Dollar (USD) benefited from the cautious market stance mid-week and continued to outperform the Euro. Meanwhile, the relatively hawkish tone seen in the minutes of the Federal Reserve's (Fed) December meeting minutes helped the currency hold its ground later in the American session.

Summary The U.S. economy remains the largest economy in the world. But, will the U.S. be able to maintain that status forever? In our view, the answer is no. We believe China is on a path to eventually overtake the U.S. and become the world's largest economy. However, China's structural challenges and vulnerabilities combined with tense geopolitical relations are taking a greater toll on the economy than we previously expected and earlier than originally anticipated. So, while China's rise to the world's largest economy is inevitable, reaching the top of the economic throne will likely take longer than we previously estimated. China's Rise To The World's Largest Economy Is Delayed Over the years, we have expressed a pessimistic outlook toward China's economy in multiple forums. Most recently, we highlighted the challenges that China faces in our 2024 International Economic Outlook publication. Our 2024 outlook mentions the fact that China has severe demographic problems, specifically a shrinking overall population as well as a dwindling labor force. In addition, we commented on how China's ongoing real estate crisis, deflation, elevated corporate sector debt and softening consumer demand are likely to contribute to a sharp slowdown in growth prospects. Tack on an unclear outlook for the overall direction of economic policy as well as geopolitical tensions that has China being removed from global supply chains and the country being questioned as an investment destination, and China's growth outlook is not particularly robust. In our view, the days of double-digit real GDP growth—even annual growth of 6%—are likely in the past. We do, however, believe China's economy will continue to grow at a faster pace than the United States, both in nominal and real terms, going forward. Which is why we continue to believe China will ultimately overtake the U.S. and at some point become the largest economy in the world. With that said, these structural issues are taking a bigger toll on China's economy than we previously expected, and that impact is materializing perhaps earlier than we initially thought. At the beginning of 2022, we published a report suggesting China could become the world's largest economy in 2032. Under a set of economic and FX views as well as longer-term assumptions, we believed China would ascend to the largest economy in the world in ten years as nominal GDP growth would outpace the U.S. well into the next decade. However, the way China's economy and financial markets have evolved, as well as the evolution of geopolitical trends, in our view mean that China's rise to the economic throne will likely be delayed. In fact, under our forecasts and assumptions for both China and the United States, we still believe China will overtake the U.S.; however, rather than the ascension taking place in 2032, our new estimate is 2042,10 years later than our original timeline. Our revised estimate is rooted in a Chinese economy that has underperformed even relative to our already pessimistic outlook. Over the last few years, China has been plagued by a number of developments that has pushed out the timeline for challenging the U.S. in economic size. These developments include a short-lived post "Zero-COVID" rebound in activity, a weaker renminbi than we previously forecast, worsening geopolitical relations due to exogenous military conflicts in Europe and the Middle East, and structural imbalances that have intensified more than expected. In addition, and perhaps a consequence of those developments, inflation has fallen rapidly to the point that China is currently experiencing deflation (Figure 1). As of November, CPI is -0.5% year-over-year, well below China's long-run average inflation rate of around 2%. Deflation is arguably one of the primary drivers, in addition to a U.S. economy that has outperformed recently, why China will now take an additional decade to become the world's largest economy. Not only can deflation place additional pressure on already sluggish consumer spending and contribute to softer activity, but deflation will contribute to lower nominal GDP growth. Going forward, we believe China's economy will continue to decelerate and inflation will remain rather subdued. We expect many of China's structural issues and tail-risks to remain in place (i.e. a real estate induced financial crisis, invasion of Taiwan etc.); however, our base case scenario for China does not include a large-scale crisis unfolding. Rather, we believe Chinese authorities will pursue policies consistent with supporting the economy over the next few years, although more accommodative policy will, in our view, do little to change the direction of China's economy or alter underlying trends. As a result of shifting to more accommodative policy, we assume authorities will further pause its deleveraging campaign. Leverage has historically been a growth mechanism for China's economy; however, with the local real estate sector under pressure, we have our doubts deploying fiscal resources toward property development will yield more than only...

Summary December marked the 14th month of contraction for ISM manufacturing, at least it was a slightly milder pace of contraction. Production is back above 50 and November's jump in prices proved to be the anomaly we suspected it would be. Labor prospects remain dim.   Download the Full Report!

XAU/USD Current price: 2,031.70 Encouraging US data fueled demand for an already strong US Dollar. The FOMC Meeting Minutes could shed light on potential rate cuts. XAU/USD pressures daily lows with a strong bearish momentum, aims for $2,000. XAU/USD extended its slide on Wednesday, trading near an intraday low of $2,031.20 mid US-afternoon. The US Dollar maintained its positive momentum for most of the day, reaching fresh weekly highs against most major rivals. XAU/USD trades at levels that were last seen on December 21, ahead of the release of the Federal Open Market Committee (FOMC) Meeting Minutes. Good news in the United States (US) fueled the USD rally after Wall Street's opening, as the ISM Manufacturing PMI improved by more than anticipated in December, hitting 47.4 after posting 46.7 in November. Additionally, the US Bureau of Labor Statistics (BLS) reported that the number of job openings on the last business day of November stood at 8.8 million little changed from the previous monthly reading. A cooling labour market will help the Federal Reserve (Fed) to stay on the pivot path. Fresh clues on what the central bank may be into will come mid-US afternoon with the FOMC Minutes. The document could clarify how deep the discussion on rate cuts has been when policymakers met in mid-December. It could also shed light on the potential date of the first rate cut, which the market currently prices in for May. XAU/USD short-term technical outlook The daily chart for XAU/USD shows the bright metal is sharply down for a fourth consecutive day, and currently battles with a flat 20 Simple Moving Average (SMA), with a clear break below it opening the door for additional slides. The longer moving averages maintain their modest bullish slopes far below the current level, providing little directional clues. Finally, technical indicators gain downward traction within positive levels, reflecting increased selling interest. The bearish momentum remains strong in the near term, and according to the 4-hour chart. XAU/USD is breaking below a directionless 100 SMA, while the 20 SMA accelerated south far above the current level. At the same time, technical indicators maintain firm downward slopes after piercing their midlines, in line with a continued slide. Support levels: 2,031.00 2,015.50 1,998.65 Resistance levels: 2,040.20 2,052.30 2,065.45