The near-term pressure is back on for gold in trading today. The precious metal had been holding in a consolidative phase coming into this week, above the $2,300 mark. But amid a break of key near-term support today, we are seeing sellers pick up the momentum now. Here’s a look at the hourly chart:

Gold buyers did manage to hang on at the 100-hour moving average (red line) since the end of last week. But they were unable to force a breakthrough, as price action did not challenge the upper near-term limit of the 200-hour moving average (blue line). In turn, sellers are pushing price back down now and that sees the near-term bias turn more bearish.

So, are there any notable downside levels to watch from here?

The first one will be the $2,300 mark itself. That will be one to watch especially on the daily chart. Then, there is the 23 April low at $2,391 to contend with. However, I’d argue that a firm break below $2,300 will help to set off further downside momentum in gold in any case.

The 38.2 Fib retracement level at around $2,260 and then the $2,200 mark will be the next two key technical levels to watch. That is should the correction lower run much deeper on a break under $2,300. Those are the recognised risk levels to be mindful of.

As for the fundamental plays, the dollar is seeing some push and pull this week. But all eyes are now on the Fed tomorrow next. That will be the first key risk event for gold, before the US jobs report on Friday factors into play.

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

USD

• The Fed left interest rates unchanged as expected at the last meeting with basically no
  change to the statement. The Dot Plot still showed three rate cuts for 2024 and
  the economic projections were upgraded with growth and inflation higher and the
  unemployment rate lower.
• The US Q1 GDP
  surprisingly missed expectations although the core components showed a strong
  economy, nonetheless.
• The US PCE came in line with expectations.
• The US NFP beat expectations across the board
  although the average hourly earnings came in line with forecasts.
• The US PMIs missed expectations in April with the
  commentary citing lower inflationary pressures but also increased layoffs.
• The market expects the first rate cut in
  September.

NZD

• The RBNZ kept its official cash rate
  unchanged as
  expected with no change as the central bank continues to state that the OCR
  will need to remain at restrictive level for a sustained period.
• The latest New Zealand inflation data printed in line with expectations
  supporting the RBNZ’s patient stance.
• The labour market report beat expectations across the
  board with lower than expected unemployment rate and higher wage growth.
• The Manufacturing PMI improved in February remaining in
  contraction while the Services PMI increased further holding on in
  expansion.
• The market expects the first cut in
  August.

NZDUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that NZDUSD managed
to erase most of the losses from the US CPI release and almost reached the key trendline
resistance around the 0.60 handle where we had also the 61.8% Fibonacci retracement level
for confluence. The
price couldn’t push right into it as the pair rolled over before that. We may
be heading back into the 0.5860 support but the
sellers will need to break some key levels on the lower timeframes to keep
pushing to the downside.

NZDUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the price bounced
from the key support zone around the 0.5920 level where the buyers stepped in
with a defined risk below it to position for a rally back into the major
trendline targeting a break above it. The sellers, on the other hand, will want
to see the price breaking lower to increase the bearish bets into the 0.5860
support.

NZDUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price has been diverging with
the MACD for
some time as it was rallying into the major trendline. This is generally a sign
of weakening momentum often followed by pullbacks or reversals. In this case, it
led to a pullback into the support zone but a break below it would confirm a
reversal. This week is full of economic data which will likely give us a
direction for the next few weeks.

Upcoming Events

Today, we have the US Q1 Employment Cost Index and
the Consumer Confidence report. Tomorrow, we get the New Zealand Jobs data, and
later in the day the US ADP, the ISM Manufacturing PMI, the Job Openings and
the FOMC rate decision. On Thursday, we will see the latest US Jobless Claims
figures. On Friday, we conclude the week with the US NFP and ISM Services PMI.

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

Following Monday’s strengthening of the Japanese yen, several hedge funds have started to dump Japanese equities, signaling the end of popular long positions in the country.

Could it be that the direction of the yen is even more critical than that of the economy for the markets?

It is hard to say whether it is more crucial, but it is evident that Japanese stocks have become exceptionally sensitive to yen movements over the past two years. In simpler terms, where the currency goes, so goes the market.

It should, therefore, come as no surprise that after the yen strengthened earlier in the week, the Nikkei 225 index also experienced a correction.

Similar moves have already been observed, especially ahead of the Bank of Japan’s March meeting, when the regulator was expected to announce a monetary policy review.

How much does the Nikkei get affected by the yen moves?

According to some estimates, a 1% rise in the Japanese currency could cause the blue-chip index to fall by about 2%. However, this effect tends to soften over time.

For example, although the USDJPY rate has risen by around 0.76% since the start of the week, the Nikkei index has only increased by 0.36%. Therefore, it is clear that relying solely on the yen’s movements to invest long-term in Japanese stocks can be risky.

As elsewhere and with any other instrument, it is impossible to guarantee the prediction of the direction of movement using only one indicator. It is necessary to look at the big picture.

So why should the index go down when the yen strengthens?

The rising yen puts pressure on exporters‘ earnings, which are crucial to the Japanese economy, given its heavy dependence on international trade.

Looking ahead, the unwinding of bearish yen bets by hedge funds and asset managers could strengthen the Japanese currency to 139 against the dollar by the end of 2024.

In addition, further rate hikes by the Bank of Japan or government interventions could also favor the country’s currency. Another positive factor could be the Fed’s dovish rhetoric.

What should we pay attention to?

The Bank of Japan will release its current account balance forecast tomorrow, which could help determine whether the authorities intervened in the foreign exchange market on Monday.

If they did, it suggests that the regulator is willing to intervene when necessary, and therefore, bearish investors should exercise caution. If not, the yen’s slide could resume.

The problem is that spending foreign exchange reserves is only temporary, which is unlikely to lead to a turnaround. In the end, the government will simply deplete the funds.

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