EUR/USD holds above 1.0700 after closing in positive territory on Wednesday. ECB President Lagarde reiterated that they will continue to follow a data-dependent approach. US economic docket will feature Retail Sales and weekly Initial Jobless Claims data. Following Tuesday's sharp decline, EUR/USD staged a technical correction and closed in positive territory on Wednesday. The pair struggles to gather recovery momentum on Thursday and continues to fluctuate below 1.0750 as markets await US data releases. The improving risk mood and retreating US Treasury bond yields made it difficult for the US Dollar (USD) to build on Tuesday's rally that was fuelled by the stronger-than-expected Consumer Price Index (CPI) data. 

It needs to cut interest rates because this debt-riddled economy simply can't function in a high-rate environment. But the Fed can't plausibly cut rates with price inflation still far above its target.  As Mike Maharrey explains in this episode of Money Metals' Midweek Memo, the Fed is damned if it does and damned if it doesn't. Mike opens the show with a Monty Python movie analogy to highlight the Fed's dilemma. He then pivots into a breakdown of the January CPI report. He argues that it's clear from the data that price inflation is far from defeated. The markets were particularly displeased with this CPI print and threw quite a temper tantrum. Mike presents some of the highlights and offers his theory as to why the markets are responding this way.  He notes that it is indeed a strange world when people sell an inflation hedge with evidence of elevated inflation. But it appears the markets are most concerned about getting interest rates down. Mike talks about just one of the reasons why – the skyrocketing interest payments on the national debt. Therein lies the rub. Everybody wants rate cuts. But inflation clearly isn't dead. This is despite the fact monetary conditions aren't historically tight. This is another aspect of the Fed's dilemma. It needs to tighten more, but it knows it can't because it will break the economy. In fact, Mike argues that the Federal Reserve broke the economy a long time ago. He explains how and points out some of the symptoms that the mainstream isn't paying attention to. Mike summed it up this way: No wonder everybody, including the central bankers over at the Fed, wants to cut rates. But price inflation is still there. And there they are, stuck between a rock and a hard place. It's damned if you do, damned if you don't.  Do they pick more price inflation? Or do they pick an economic crash and financial crisis due to high rates? Or do we maybe get both? Mike closes out the show with a call to action, pointing out that the selloff in gold and silver after the CPI report presents a potential buying opportunity for bargain hunters.

Gold price turns positive early Thursday, snapping a six-day losing streak.   US Dollar corrects with Treasury bond yields amid mixed Fedspeak, ahead of Retail Sales data.  Gold price remains 'sell the bounce' trade as technicals favor sellers. Gold price is building on Wednesday's rebound from two-month lows of $1,984 early Thursday, as the US Dollar (USD) resumes correction alongside the US Treasury bond yields. Gold price could find fresh support from weak US Retail Sales data The market mood remains mixed so far this Thursday's trading, as investors assess the conflicting messages from US Federal Reserve (Fed) policymakers and its implications on the pricing of the dovish policy pivot this year. The uncertainty around the timing of Fed interest rate cuts, following strong US Nonfarm Payrolls (NFP) and Consumer Price Index (CPI) data for January, keeps the corrective mode intact in the US Dollar, as well as, the US Treasury bond yields. Fed Vice Chair for Supervision Michael Barr said on Wednesday, the Fed remained confident, but the January CPI numbers show the United States' path back to 2% inflation "may be a bumpy one." Barr said that he fully supported what he called a careful approach to considering policy normalization given current conditions. Meanwhile, investors also remain unnerved amid fresh worries concerning the Japanese economic outlook, after Japan unexpectedly slipped into recession after reporting two consecutive quarters of negative growth. Recession fears could likely support the traditional safe-haven Gold price. Further, expectations of a drop of 0.1% in the US Retail Sales for January also help the Gold price recover some ground. Disappointing US Retail Sales data could suggest weakening consumer demand and revive the Fed rate cut expectations. Markets are currently pricing in a no-Fed rate cut in March and a lower than 50% chance of easing in May. The odds of a Fed pivot pivot are now seen for the June meeting. Apart from the US Retail Sales data release, the focus will also remain on the Jobless Claims and speeches from Fed officials for fresh cues on the Fed rate cut expectations, eventually impacting the US Dollar-denominated Gold price. Gold price technical analysis: Daily chart As observed on the daily chart, Gold price closed Wednesday below the 100-day Simple Moving Average (SMA) at $1,993, opening the floor for further downside. The 14-day Relative Strength Index (RSI) is attempting a recovery but remains well below the midline, suggesting that any rebound in Gold price could likely be temporary. Meanwhile, the 21-day and 50-day SMAs Bear Cross, confirmed last week, also remains in play, supporting Gold sellers. Against these bearish technical indicators, any corrective upside in Gold price is expected to be a 'sell the bounce' trade' in the near term. Key support levels are now seen at the December 13 low of $1,973 and the horizontal 200-day SMA at $1,966. A sustained move below the latter will put the $1,950 psychological level at risk. On the contrary, if Gold price manages to recapture the 100-day SMA support-turned-resistance at $1,993 on a daily closing basis, a fresh recovery toward the 21-day SMA of $2,024 cannot be ruled out. Ahead of that, Gold price needs to find a strong foothold above the $2,000 barrier.

AUD/USD bounced off yearly lows near 0.6440. The Dollar's knee-jerk favoured the risk complex. The upcoming Australian jobs report gathers all the attention. The Australian dollar managed to regain some composure and rebounded from Tuesday's yearly lows near the 0.6440 region vs. the US Dollar (USD), re-shifting its attention to a potential test of the key 0.6500 zone in the short term. The daily bounce in AUD/USD came in tandem with the inconclusive session in the Greenback amidst further investors' reassessing of a potential start of the Fed's easing cycle in June, a view that was strengthened further after sticky US inflation figures in January. Despite the ongoing recovery in the pair, Tuesday's significant retracement to new yearly lows opened the possibility of further near-term weakness in the Aussie dollar, always in response to dynamics around the US Dollar, the ongoing yearly decline in copper and iron ore prices, and persistent uncertainty surrounding the Chinese economy. On a positive note, the recent hawkish stance maintained by the Reserve Bank of Australia (RBA), coupled with a tight labour market and robust fundamentals, should somewhat mitigate downward pressure on the Australian currency. Following the Reserve Bank of Australia's (RBA) hawkish hold at its February meeting, it appears that the bank's stance could somehow limit the downside potential in spot for the time being. In addition, it is worth mentioning that the RBA's Statement on Monetary Policy (SoMP) adjusted the bank's inflation forecasts downward, anticipating both indicators to remain below 3% by the fourth quarter of 2025. Additionally, the RBA revised its GDP growth projections lower, reflecting a less optimistic outlook for short-term consumer spending and housing investments. AUD/USD daily chart     AUD/USD short-term technical outlook The resurgence of selling pressure may prompt AUD/USD to initially test its 2024 low of 0.6452 (February 13). Breaching this level could potentially lead to a retest of the 2023 low of 0.6270 (October 26), followed by the psychological level of 0.6200 and the 2022 low of 0.6169 (October 13). On the upside, the significant 200-day Simple Moving Average (SMA) at 0.6566 stands out as the next target to monitor, followed by the intermediate 55-day SMA at 0.6635. A breakout above this range may prompt the pair to challenge the December 2023 top of 0.6871 (December 28), followed by the peaks of July 2023 at 0.6894 (July 14) and June 2023 at 0.6899 (June 16), all preceding the pivotal 0.7000 threshold. It's important to emphasize that for AUD/USD to see further short-term gains, it needs to convincingly surpass the key 200-day SMA. On the 4-hour chart, there are indications of an incipient recovery in the near term. Meanwhile, breaching 0.6442 could lead to a decline towards 0.6347 and then 0.6338. On the bullish side, immediate resistance lies at 0.6610, followed by the 200-SMA at 0.6613. Surpassing this zone suggests a potential advance towards 0.6728. The MACD retreated to the negative zone, while the RSI climbed past the 45 mark.

Australia is expected to have added 30,000 new job positions in January. The Reserve Bank of Australia Governor Michele Bullock delivered a confident message. AUD/USD bounced modestly from fresh 2024 lows and could extend recovery but remains bearish. Australia will unveil January employment figures on Thursday, alongside February Consumer Inflation Expectations. Market participants anticipate the country has added 30,000 new jobs in the month, after losing 65,100 in December. Breaking down the previous figure, Australia lost roughly 106,600 full-time positions and added around 41,400 part-time ones. Additionally, the Unemployment Rate is foreseen to have ticked higher, from 3.9% to 4%, while the Participation Rate is expected to have advanced to 66.9% from 66.8%. Meanwhile, Consumer Inflation Expectations, released by the Melbourne Institute, stood at 4.5% in January. The higher the figure, the lesser the odds are for a soon-to-come rate cut from the Reserve Bank of Australia (RBA). Reserve Bank of Australia gaining confidence  The RBA met early in February, and policymakers noted inflation continued to moderate at the end of 2023, but added that it remains too high. Regarding employment, the monetary policy meeting statement reads: "Conditions in the labor market continue to ease gradually, although they remain tighter than is consistent with sustained full employment and inflation at target." Policymakers are showing modest signs of confidence regarding inflation falling back to target. Last week, Governor Michele Bullock noted that the central bank may not wait for it to reach the 2%-3% band to cut rates if the economy continues to head in the right direction. Bullock added the Board may consider removing the restrictive policy if policymakers believe inflation will continue to recede. However, market participants are not looking for soon-to-come rate cuts, more likely in 2025. Recent United States (US) data showing heating inflation at the beginning of the year indeed adds to speculative caution. AUD/USD possible scenarios AUD buyers may welcome better-than-anticipated figures and push the AUD/USD higher, as recent comments from Governor Bullock may offset concerns of a too-tight labor market. Generally speaking, tight employment conditions increase the upward risks of inflation. Ahead of the announcement, the AUD/USD pair trades around 0.6480, not far from a fresh 2024 low of 0.6442. The ongoing bounce is more likely related to downward exhaustion after Tuesday's sell-off rather than to renewed AUD strength.   From a technical perspective, the 23.6% Fibonacci retracement of the latest daily slump comes at 0.6542, a potential near-term bullish target, should the employment report result upbeat. Such an advance, however, will not invalidate the longer-term bearish stance, as the pair would need to run past the next Fibonacci resistance, the 38.2% retracement at 0.6606. Disappointing figures could push the AUD/USD pair below the aforementioned yearly low, moreover, if the market sentiment turns sour ahead of the event. The pair may then have room to extend the slump towards the 0.6400 figure, while once below the latter, the next relevant level to watch is 0.6370.

XAU/USD Current price: 1,991.05 The market sentiment stabilized following risk-off movements post-US CPI. The latest United States data confirmed the Federal Reserve's caution stance. XAU/USD is in corrective mode, but bears could still push it lower. Spot Gold extends its yearly slide on Wednesday, trading as low as $1,984.03, a level not seen since last December. XAU/USD recovered the $1,900 mark in the mid-American session as demand for the US Dollar lost steam amid a better market mood. Wall Street is up after plummeting on Tuesday, with the three major indexes posting modest gains. Additionally, government bond yields retreated from the multi-week peaks posted on Tuesday, adding to the USD's near-term weakness. Market players seem to have accepted the latest day on rate-cut decisions. Global policymakers have been pouring cold water on a looser monetary policy since the last quarter of 2023, but the market bet against them. Their words have been optimistic but cautious, and the message remains unchanged. The difference is macroeconomic data showing that labor markets remain tight, and inflation is above central banks' target bands. Particularly in the United States (US), the surprise increase in January inflation, following a solid Nonfarm Payrolls report, diluted hopes for a rate cut in the near term. Federal Reserve's (Fed) Chairman Jerome Powell clarified it after the latest monetary policy meeting, while macroeconomic data confirmed it. XAU/USD short-term technical outlook The daily chart for XAU/USD shows that it trades around its opening after posting a lower low, while technical readings suggest the risk remains skewed to the downside. The pair barely holds above a mildly bullish 100 Simple Moving Average (SMA), while the 20 SMA stands directionless far above the current level. At the same time, technical indicators head south with uneven strength, close to oversold readings and without signs of bearish exhaustion. In the 4-hour chart, XAU/USD seems poised to correct. Technical indicators turned higher within extreme readings, still developing in oversold territory. At the same time, the 20 SMA heads south almost vertically above the current price but below the longer moving averages. Recoveries will likely attract sellers on approaches to the $2,000 mark as bears retain control.  Support levels:  1,976.50 1,962.70 1,949.30 Resistance levels: 2,005.90 2,018.50 2,032.10

EUR/USD Current price: 1.0703 Market players are concerned the timing for rate cuts will be further extended. Stock markets struggle to revert recent losses, yields remain near fresh highs. EUR/USD consolidates at around 1.0700, has scope to extend the slump. The EUR/USD pair struggles around the 1.0700 mark on Wednesday as the US Dollar maintains the firm footing triggered by higher-than-anticipated United States (US) inflation. Financial markets turned risk-averse on Tuesday following the release of the US Consumer Price Index (CPI), which rose beyond expectations in January. The figures supported the Federal Reserve's (Fed) case of waiting longer before loosening the monetary policy through rate cuts. Stocks plummeted and government bond yields soared, resulting in the 10-year Treasury note offering as much as 4.31%, its higher since last December. Fears receded during Asian trading hours, with local stocks trading with a better tone and limiting USD gains. Government bond yields are also down ahead of Wall Street's opening, with the 10-year note currently offering 4.29%. Meanwhile, European Central Bank (ECB) officials commented on monetary policy. ECB Vice-President Luis de Guindos said on Wednesday that while the Eurozone inflation appears to be heading back to 2%, policymakers should not get ahead of themselves. "It will take some more time before we have the necessary information to confirm that inflation is sustainably returning to our 2% target," de Guindos noted. Also, Governing Council member Boris Vujcic added that the central bank seems to be getting the inflation fight "right," refraining from commenting on the timing for a policy shift. Data-wise, the EU published December Industrial Production, up 2.6% MoM against a 0.2% slide anticipated. The second estimate of the EU Gross Domestic Product (GDP) was confirmed at 0% QoQ and at 0.1% YoY as previously calculated. The US will not release relevant data, although several ECB and Fed speakers will be on the wires. EUR/USD short-term technical outlook The EUR/USD pair traded as low as 1.0694, a level that was last seen in mid-November. The daily chart shows it is marginally lower from its opening level and that it is developing below all its moving averages. The 20 Simple Moving Average (SMA) has already crossed below a flat 200 SMA, while the 100 SMA remains directionless at around 1.0790, reflecting the prevalent selling interest. On the other hand, technical indicators lack directional momentum and are currently consolidating near oversold readings. The bearish case dominates the near term. The 4-hour chart shows EUR/USD develops far below firmly bearish moving averages, with the 20 SMA providing resistance at around 1.0750. Finally, technical indicators have lost their downward strength but are far from suggesting a possible reversal, consolidating near their recent lows. Support levels: 1.0695 1.0650 1.0610 Resistance levels: 1.0750 1.0790 1.0840   (This story was corrected on February 14 at 13:15  GMT to say that "The figures supported the Federal Reserve's (Fed) case of waiting longer before loosening the monetary policy through rate cuts," previously reported as "tightening the monetary policy.")

EUR/USD declined sharply on broad US Dollar strength on Tuesday. The pair could extend its decline toward 1.0660 in case 1.0700 support fails. Markets favor a no change in the Fed policy rate in May after inflation data. EUR/USD came under heavy bearish pressure in the American session on Tuesday and touched its lowest level since mid-November at 1.0700. The pair stays in a consolidation phase slightly above this level early Wednesday but the technical outlook shows that the bearish bias remains intact. The US Dollar (USD) outperformed its rivals in the second half of the day on Tuesday and forced EUR/USD to decline sharply. Inflation in the US, as measured by the change in the Consumer Price Index, edged lower to 3.1% in January from 3.4% in December. This reading came in above the market expectation of 2.9%. Additionally, the Core CPI, which excludes volatile food and energy prices, rose 3.9% in the same period, matching December's increase and surpassing analysts' estimate of 3.7%. The probability of the Federal Reserve (Fed) leaving the policy rate unchanged at the next two policy meetings climbed to 60% from 40% after inflation data, according to the CME FedWatch Tool. There won't be any high-tier data releases featured in the US economic docket. Chicago Fed President Austan Goolsbee and Atlanta Fed President Raphael Bostic will be delivering speeches later in the day. In case Fed officials adopted a concerned tone regarding the latest inflation data, the USD could preserve its strength. On the other hand, the currency could correct lower if policymakers reiterate the need to see more data before deciding on the timing of the policy pivot. EUR/USD Technical Analysis EUR/USD trades in the lower half of the descending regression channel and the Relative Strength Index (RSI) indicator stays below 40, reflecting the bearish bias. On the downside, 1.0700 (psychological level, static level) aligns as immediate support before 1.0660 (static level from November, lower limit of the descending channel) and 1.0600 (psychological level). On the upside, first resistance is located at 1.0735 (mid-point of the descending channel) ahead of 1.0770 (50-period Simple Moving Average (SMA)) and 1.0800 (100-period SMA, psychological level, upper limit of the descending channel).

Yesterday's inflation data from the US didn't go smoothly down the market's throat. Instead, the stronger-than-expected set of inflation data dashed hopes of seeing the Federal Reserve (Fed) cut rates anytime in the first half of this year. Honestly, one can tell you if June or July would be a better time for the Fed to start cutting. The data will decide when the time comes. Yet the incoming data shows a surprising strength in the US economy. Atlanta Fed's GDP estimate, for example, prints a 3.4% growth for the Q1 – far from a number that would push the Fed to start cutting rates. As such, the 'blip' in yesterday's disinflation is more understandable than not given how strongly the US consumers spend. As a result, US yields jumped, equities sold off, the US dollar rallied against its major peers and gold slipped below $2000 per ounce. And the dollar's strength was further backed by softer-than-expected inflation data in the UK and Switzerland. 

GBP/USD trades in negative territory below 1.2600 early Wednesday. Annual CPI inflation in the UK held steady at 4% in January. Improving risk mood helps the pair limit its losses for now. After closing in negative territory on Tuesday, GBP/USD continued to push lower in the European session on Wednesday and touched its lowest level in over a week below 1.2550. The near-term technical outlook suggests that the pair has more room on the downside before turning technically overbought. January Consumer Price Index (CPI) readings from the US triggered a US Dollar rally in the American trading hours on Tuesday and caused GBP/USD to decline sharply. On a monthly basis, the CPI and the Core CPI, which excludes volatile food and energy prices, rose 0.3% and 0.4%, respectively. Both of these reading came in above analysts' estimates and provided a boost to the USD.  Early Wednesday, the UK's Office for National Statistics (ONS) reported that the annual CPI inflation and core CPI inflation held steady at 4% and 5.1%, respectively. Monthly CPI declined 0.6% in January, while the monthly Retail Price Index fell 0.3%. Although these prints are not weak enough for Bank of England policymakers to reconsider the timing of a policy pivot, they still make it difficult for Pound Sterling to stage a rebound. In the meantime, the UK's FTSE 100 Index opened higher on Wednesday and US stock index futures turned positive on the day after spending the Asian session moving sideways. In case risk flows start to dominate the action in financial markets in the second half of the day, the USD could lose some interest and help GBP/USD find a foot hold. Later in the day, BoE Governor Andrew Bailey will be testifying before the Lords Economic Affairs Committee. In case Bailey acknowledges the latest inflation data as welcoming news, GBP/USD could struggle to gain traction. On the other hand, Pound Sterling could find demand if Bailey adopts a cautious tone regarding a policy pivot, citing underlying strength in inflation despite January's encouraging prints.  GBP/USD Technical Analysis The Relative Strength Index (RSI) indicator on the 4-hour chart declined below 40, highlighting a buildup of bearish momentum. On the downside, 1.2520 (February 5 low) aligns as interim support before 1.2500 (psychological level, static level) and 1.2450 (Fibonacci 50% retracement of the latest uptrend). Looking north, 1.2600 (former support, static level) could be seen as first resistance before 1.2650 (Fibonacci 23.6% retracement) and 1.2700 (static level).

Overview: The underlying momentum in inflation is picking up in the US while it continues to move lower in the euro area. Inflation drivers paint a mixed picture with weak goods inflation and strong service inflation, but inflation is likely to trend lower in 2024. Freight rates have picked up due to the tensions in the Red Sea, but not to the extent that we would expect another significant pick-up in core goods inflation. Oil prices have stabilized, and gas prices have continued trending lower. Tight labour markets continue to support upside risks to core inflation going forward and points to a cautious approach in central banks' easing cycles. Inflation expectations: Both market and survey-based inflation expectations have declined further over the past month amid some volatility in the US. Market based inflation expectations are now almost consistent with the 2% inflation targets. US: January CPI came out above expectations with a core inflation print of 0.39% m/m (consensus 0.3% m/m) while headline inflation was up 0.3% m/m (consensus 0.2% m/m). The surprise was driven by a broad-based increase of service prices with the 'super core' (services ex. shelter) rising 0.85% m/m putting it on a rising trend. On the other hand, core goods prices were low at -0.3% m/m. The sharp monthly rise in the 'super core' signals some one-off effects from companies adjusting only prices in January. But overall, the CPI report points to risks of more persistent underlying inflation in the US and lowers the probability of a cut already next month. Euro: Headline inflation printed 2.8% y/y (-0.4% m/m) in January, which was broadly as expected while core inflation increased 3.3% y/y (prior: 3.4%). Food and service inflation drove the print while goods inflation continued to fall significantly. There were a lot of one-offs affecting inflation from different government measures that ended as well as the fact that companies tend to adjust prices in January. While these factors were visible in core services and energy inflation it was not to a large extent. Hence, the current momentum in core inflation stopped falling but it is likely to turn lower as one-offs fade. Overall, the January print should not have changed ECB's assessment. China: January CPI fell to -0.8% y/y from -0.3% y/y in December. CPI is still held down by a big decline in food prices, but core CPI also fell from 0.6% y/y to 0.4% y/y. Download The Full Global Inflation Watch

Gold price licks wounds as US inflation data pares Fed easing expectations.   US Dollar pauses before the next push higher; focus shifts to Fedspeak.  Gold price appears 'sell the bounce' trade amid bearish technicals. Gold price is flirting with the lowest level in two months near $1,990 early Wednesday, consolidating the previous day's steep sell-off. The US Dollar (USD) rally has taken a breather alongside the US Treasury bond yields, allowing Gold price a temporary relief.   Hot US CPI data reinforces Gold sellers Having briefly extended Tuesday's slide in Asian trading on Wednesday, Gold price is nursing losses, as markets resort to profit-taking on the US Dollar upsurge that followed the hotter-than-expected US Consumer Price Index (CPI) inflation data. The annual CPI inflation in the US fell to 3.1% in January following a brief increase to 3.4% in December but outpaced forecasts of 2.9%. The US CPI edged up 0.3% MoM, the most in four months, and above forecasts of 0.2%. Further, annual core CPI rose 3.9%, compared to expectations of a 3.7% growth. The monthly inflation rate edged up to 0.4%. Hot US inflation report reinforced the US Federal Reserve's (Fed) pushback against early and aggressive interest rate cut expectations, triggering a fresh rally in the US Treasury bond yields and the US Dollar. The benchmark 10-year US Treasury bond yields hit fresh three-month highs of 4.33%, where it now wavers. The US Dollar Index tested 105.00, a new three-month top. Asian traders hit their desks early Wednesday and reacted to the US CPI data, keeping Gold price under pressure. Markets now price out a March Fed rate cut while chances of a May easing are seen around 65%. Looking ahead, the US Dollar could resume its uptrend if risk aversion intensifies and the Fed policymakers back the hawkish interest rate outlook. Global markets are in a downward spiral following the hot US CPI data. In such a scenario, Gold price is likely to continue its bearish momentum. A potential rebound in Gold price, however, cannot be ruled out should investors take profits off the table. Gold price technical analysis: Daily chart As observed on the daily chart, Gold price managed to close Tuesday above the 100-day Simple Moving Average (SMA) at $1,993. However, it opened Wednesday below that level, keeping sellers hopeful.   The 14-day Relative Strength Index (RSI) is trading well below the 50 level, suggesting that there is more pain in store for Gold buyers. Meanwhile, the 21-day and 50-day SMAs Bear Cross, confirmed last week, also remains in play.  Therefore, any corrective upside in Gold price could be seen as a good selling opportunity for Gold sellers in the near term. Key support levels are now seen at the December 13 low of $1,973 and the horizontal 200-day SMA at $1,966. A sustained move below the latter will put the $1,950 psychological level at risk. On the contrary, if Gold price manages to recapture the 100-day SMA support-turned-resistance at $1,993 on a daily closing basis, a fresh recovery toward the 21-day SMA of $2,024 cannot be ruled out. Gold price needs to find a strong foothold above the $2,000 barrier once again, at first.