The sharp move higher in Treasury yields and the dollar yesterday resulted in a steep drop in gold. Of note, the fall took out the January low as well as the $2,000 mark. But at least for the time being, buyers are able to hang on as the 100-day moving average (red line) at $1,989.90 is not firmly broken just yet.

As mentioned earlier, the next leg higher in the dollar might be tougher to come by. And gold is part of that consideration as well, amid its correlation with bond yields for the most part. As such, it might require 10-year Treasury yields breaking its own 100-day moving average of 4.342% to really move the needle lower in gold.

That said, there are still some critical support layers that buyers can rely on even if we do see a continued drop this week. The December lows around $1,973-75 will be the first before the 200-day moving average (blue line) at around $1,965.54. Thereafter, the November low of $1,949 will come into play.

Gold is stuttering so far to start the new year. However, I still retain a more bullish conviction on the precious metal in the long-term. The structural view remains that gold is likely to shine once central bank rate cuts start being realised. It is a bet on the disinflation narrative essentially and I’d argue that right now, we’re just in a pit stop.

But for trading this week, the downside might not be done just yet. There is still US retail sales and PPI figures still to come later in the week. Those might be catalysts for traders to react further following the CPI yesterday.

This article was written by Justin Low at www.forexlive.com.

Yesterday,
the Nasdaq Composite sold off following a hot US CPI report
that sent Treasury yields and the US Dollar higher as the market priced out
rate cuts further. The most frightening part was that the Fed Chair Powell’s
preferred measure, the Core Services ex-Housing, jumped by 0.85% M/M which was
the biggest increase since April 2022. The market might even look past this
report as the Fed is not expected to restart hiking rates anyway, but it should
start getting harder and harder for the bulls to keep the conviction at these
levels.

Nasdaq Composite Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Nasdaq Composite
yesterday fell into the key trendline where we
have also the red 21 moving average for confluence. This is
where we can expect the buyers to step in with a defined risk below the
trendline to position for another rally into the all-time high. The sellers, on
the other hand, will want to see the price breaking lower to invalidate the
bullish setup and position for a drop into the 15150 support.

Nasdaq Composite Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that besides the
trendline and the moving average, we have also the 50% Fibonacci retracement level
standing around the 15635 support. This gives the buyers another layer of
confluence. What happens here will likely decide where the market will go in
the next few weeks as a strong bounce should lead to a rally into the all-time
high, while a break lower will likely trigger a selloff into the 15150 level.

Nasdaq Composite Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that the
buyers will need to break above the most recent swing high at 15765 to confirm
the rally into the all-time high. If the price fails and falls back into the
trendline, the chances of a downside breakout will increase.

Upcoming
Events

Tomorrow we will see latest US Jobless Claims figures
and the US Retail Sales. On Friday, we conclude the week with the US PPI data
and the University of Michigan Consumer Sentiment survey.

This article was written by FL Contributors at www.forexlive.com.

• Prior -0.3%; revised to +0.4%

That’s a big jump in industrial output on the month but it comes with a bit of a caveat. Of note, Ireland saw a 23.5% jump in industrial output on the month so that is skewing the overall data slightly. Looking at the breakdown, the outlier there sees a 20.5% increase in capital goods on the month. Meanwhile, durable consumer goods (+0.5%), energy (+0.3%) and non-durable consumer goods (+0.2%) also saw increases. The production for intermediate goods (-1.2%) was the only one to see a decline.

This article was written by Justin Low at www.forexlive.com.

No changes to the initial estimate as the euro area economy grounded to a standstill in Q4 last year.

This article was written by Justin Low at www.forexlive.com.

With the
US presidential election drawing closer, the question of which outcome would be
better for the global economy is gaining urgency. Both sides have their sound
strategies, but let’s focus on the impact on the dollar by taking a
closer look at the dollar index chart.

Analysts
suggest that a Trump victory would be a more bullish scenario for the dollar,
while a Biden re-election is seen as more neutral. Overall, the dollar is
expected to continue strengthening against major currencies ahead of the US
presidential election and depreciate afterward.

Why is
the former president beneficial to the dollar?

Donald
Trump reportedly considers imposing new trade restrictions with the EU if he
returns to the White House, essentially reigniting the trade wars.

This
includes the introduction of a minimum 10% tariff and countermeasures against
European taxes on digital services. In addition, he promises substantial
tariffs that could significantly affect trade with China.

Biden,
for his part, has already prepared new restrictions against China, which the
administration is ready to implement before the elections. Overall, the trend
towards protectionism has only just begun.

But what
about the Federal Reserve’s possible interest rate cut?

Amid continuing tensions in the Middle East and the
reluctance of the parties to agree on a peace plan, businesses face rising
logistics costs.

This
increase in transport costs is likely to be reflected in the prices of consumer
goods in the future. In this context, the regulator seems hesitant to address
the issue with an early rate cut.

For
instance, Atlanta Fed President Raphael Bostic, who is voting on the Federal
Open Market Committee’s policy decisions this year, suggests that the first
move might come sometime in the summertime.

However,
two factors could force the regulator to reconsider its stance. First, as has
been repeatedly pointed out, keeping rates at a high level affects not only the
population but also the commercial real estate market and regional banks.

As a
result, the latter’s paper losses have soared again to record levels. If
investors start withdrawing money, as they did last year, a banking crisis
could resume.

To avoid
this scenario, the regulator is likely to initially resort to printing more
money and may have to consider a sudden rate cut if that is not enough.

The
second potential pressure factor is the labor market. Officially, January’s
monthly employment report surprised economists with creating 353,000 new jobs, well above expectations.

However,
every month, there are reports of massive layoffs in various companies. Perhaps
some of the newly unemployed are not being considered, and not everything is as
rosy as it seems.

What
should traders do?

Frankly
speaking, it is impossible to be ready for every scenario, so it is more
reasonable to act depending on the developments, keeping an eye on
macroeconomic indicators and pre-election polls.

This article was written by FL Contributors at www.forexlive.com.