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Gold and USD Brace for the US Inflation Report

Mahmoud Alkudsi Mahmoud Alkudsi 13/09/2022
Gold and USD Brace for the US Inflation Report  Gold and USD Brace for the US Inflation Report
Gold and USD Brace for the US Inflation Report Mahmoud Alkudsi
Economic data released
 
The German inflation number released earlier has come in line with expectations of 7.9% yet higher than the prior read of 7.5% while the European ZEW economic sentiment of September - 60.7 missed expectations of - 58.3 and has come in lower than the previous - 54.9. Both releases had barely a noticeable effect on the Euro price against major currencies such as the US Dollar.

Looking Ahead, the market awaits the US inflation levels for August at 4:30 pm UAE time.
 
 Indices and Bonds Yield
 
The European stocks and the US equity future extended their rally as markets expect the US inflation headline to fall from 8.5% (Jul) to 8.1%(Aug) thanks to the fall in oil prices. The WTI declined by nearly 9% in August from $98.38 to $89.50. Investors believe that cooling inflation pressures could lead the Fed to reconsider its tight policy by the end of the year and possibly cut interest rates in 2023.  
 
The US 10-year bond yields stabilized above 3.20% levels while the 10 -2 yield curve remains inverted hinting that investors think that the Fed may continue hiking interest rates this year and consider cutting them next year to save the economy from a severe recession.
 
Major FX Currencies
 
The US dollar has fallen further as the market risk appetite has improved on hopes that the Fed could end its tightening policy sooner and due to the progress achieved by the Ukrainian forces on the ground in the war against Russia.
It should be noted that the Fed is unlikely to change its policy any time soon even if we see a significant decline in today’s CPI headline print because it is still high and far from the 2% target. Therefore, it is highly likely to see a 75 bp hike in September nonetheless we may see the central bank hiking by lower percentages in the coming meeting in November and December.
Technically, the US dollar index could be on the way for a test of 105.48 levels however, a daily close above 108.11 opens the door for traders to rally the price towards 110.09.
 
The euro has rallied as markets priced in more rate hikes from the ECB. The central banks’ board members assured their commitment to bringing down inflation levels to the 2% target.
Technically, the EUR/USD could rally towards 1.0334 and 1.0415 respectively however, any daily close below 1.0000 could encourage traders to press towards 0.9701 nonetheless, the support levels at 0.9858 and 0.9780 should be kept in focus.
 
 
Commodities
 
The Gold price settled around 1720 levels on a growing sentiment in the market that US inflation levels reached their peak last June, and the Fed could end its tightening cycle sooner.
Technically, a daily close above 1720 could embolden traders to rally the price towards 1747 and 1765 respectively. A daily close below 1705 could send the price 1685 and 1661 respectively.
 
The oil price rose on a weaker US dollar and on the US Secretary of State statement that reviving the Iran nuclear deal is unlikely any time soon.
 
Oil WTI Daily Price Chart


Chart Source: ThinkTrader

On September 8 the WTI declined to an eight-month low at 81.36. The price rallied after as some traders took profit.
 
Currently, the price moves in the trading zone 90.50 - 79.82 therefore, a daily close above the high end of the zone signals a possible rally towards 98.65 however, resistance levels at 92.94 and 95.98 should be monitored. On the other hand, a daily close below the low end of the zone could send the price even lower towards 74.97.
 
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

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Meet our contributors
Carl Capolingua
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Carl Capolingua
Market Analyst, Melbourne

Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions. Specialising in Australian and US stock markets in particular, Carl uses a top-down approach to assess the global macro picture before using both technical and fundamental techniques to select stocks. He regularly appears as an expert commentator on a number of media outlets throughout the Asia-Pacific region.
 
 
 

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Lesego Mthombothi
Market Research Analyst, South Africa

Lesego Mthombothi is an experienced market research analyst and investment professional who proudly holds an honours degree in investment management and completed her CFA level 1.
 
 
 

Mahmoud Alkudsi
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Mahmoud Alkudsi
Chief Markets Analyst, MENA

Mahmoud is a market analyst, with over a decade of experience in financial markets. He follows main market movers and tracks their effect on the price chart. Mahmoud mixes technical and fundamental tools with a deeper focus on the technical side, and with his wide experience in providing educational and guidance materials to all levels of traders, he helps them in making informed trading decisions. Before joining ThinkMarkets, Mahmoud was head of market research departments in different reputed financial companies, where he provided market analysis for a variety of asset classes, including FX, equities, indices, and commodity futures. As an experienced market commentator, he was hosted by too many print and broadcast media, including not limited to Sky News Arabia, France 24, Alarabyia, Alsharq-Bloomberg, and CNBC Alarabyia to discuss key risk events their clear impact on the price action. Mahmoud holds a Master of Business Administration (MBA) from Cardiff Metropolitan University of Wales, UK, and speaks Arabic, English, and Spanish.

Shawn
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Shawn Lee
Market Analyst, Malaysia

Shawn Lee has over eight years of experience in the financial market as a market analyst. Shawn provides market key insights and trade ideas through the market and technical analysis. He also held trader roles and guided traders in maximising one’s trading success.

Carl Capolingua
Carl Capolingua
Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions.
Lesego
Lesego Mthombothi
Lesego Mthombothi is an experienced market research analyst and investment professional who proudly holds an honours degree in investment management and completed her CFA level 1.
Mahmoud Alkudsi
Mahmoud Alkudsi
Mahmoud is a market analyst with over a decade of experience in financial markets. Mahmoud mixes technical and fundamental tools with a deeper focus on the technical side, and has experience in providing guidance to all levels of traders.
Shawn
Shawn Lee
Shawn Lee has over eight years of experience in the financial market as a market analyst. Shawn provides market key insights and trade ideas through the market and technical analysis. He also held trader roles and guided traders in maximising one’s trading success.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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