Travelers streamed into China by air, land and sea on Sunday, many eager for long-awaited reunions, as Beijing opened borders that have been all but shut since the start of the COVID-19 pandemic, reported Reuters.

Key quotes

Market implications

The news appeared to have favored the market sentiment and the prices of commodities and Antipodeans.

Also read: Gold Price Forecast: XAU/USD grinds higher ahead of United States Inflation

• The Swiss Franc asset has sensed significant barricades around 0.9280 amid a risk-appetite theme.
• A Double Top formation indicates a failed attempt of exploring fresh upside.
• The RSI (14) is failing to shift into the bullish range of 60.00-80.00.

The USD/CHF pair is likely to continue its downside journey below the immediate support of 0.9267 as investors have underpinned the risk-appetite theme in the market. The Swiss Franc asset has sensed significant barricades around 0.9280, which might infuse more pressure on the US Dollar ahead.

The US Dollar Index (DXY) is looking to re-test its six-month low around 103.05 amid risk-on profile as the Federal Reserve (Fed) is expected to slow down its pace of hiking interest rates after the release of the downbeat United States Average Hourly Earnings data.

The formation of a Double Top chart pattern on a four-hour scale around 0.9400 triggered immense selling pressure on USD/CHF. The aforementioned chart pattern indicates a failed attempt of exploring a fresh upside due to weak buying interest. Also, the 200-period Exponential Moving Average (EMA) around 0.9377 is acting as a major barricade for the US Dollar.

It is worth noting that the Relative Strength Index (RSI) (14) has faced barricades in shifting into the 60.00-80.00 range, which indicates that the upside bias is not solid anymore.

For further downside, the Swiss Franc bulls need to push the asset below December 30 low around 0.9200, which will drag the asset towards March 1 low at 0.9150 followed by January 21 low at 0.9108.

On the flip side, a decisive break above January 6 high at 0.9410 will drive the major towards December 6 high at 0.9456. A breach above the latter will send the major to psychological resistance around 0.9500.

USD/CHF four-hour chart

• NZD/USD begins the week on a softer footing after Friday’s heavy jump, picking up bids of late.
• US data drowned Treasury yields, DXY but Fed Officials flash mixed signals.
• China-linked headlines favor bulls amid a sluggish start to the key week.
• US, China CPI will be crucial amid indecision on the Fed’s next move, PBOC’s optimism.

NZD/USD picks up bids to 0.6355 as it pares the week-start gap towards the south, after rising the most in two months the previous day. In doing so, the Kiwi pair takes clues from the market’s cautious optimism amid mostly downbeat US data and the risk-positive headlines from China, one of the key consumers of New Zealand and the world’s biggest commodity user.

While portraying the mood, the S&P 500 Futures print 0.20% intraday gains following Friday’s heavy run-up as the weekend updates from the officials of the US Federal Reserve (Fed) and People’s Bank of China (PBOC) have been mostly against the US Dollar.

That said, Atlanta Federal Reserve President Raphael Bostic highlighted the fears of the US economic slowdown while outgoing Chicago Fed President Charles Evans favored a 0.50% rate hike in December. Further, Kansas City Fed President Esther George highlighted inflation fears whereas Richmond Federal Reserve Bank President Thomas Barkin praised the last two months of inflation reports by terming them as “a step in the right direction,” but marked fears from the higher median figures.

It should be noted that the Fed officials’ mixed comments could be linked to the downbeat prints of the US ISM Services PMI as well as the Factory Orders that drowned the Treasury bond yields. On the contrary, price-positive updates from China help the NZD/USD pair to remain firmer.

“The world’s second-largest economy is expected to quickly rebound because of the country’s optimized Covid-19 response and after its economic policies continue to take effect,” Bloomberg quotes an interview from Guo Shuqing, party secretary of the People’s Bank of China (PBOC), to People’s Daily published on Sunday.

Elsewhere, China’s reopening of the national border after a three-year pause and early signals suggesting heavy shopping during the festive season also underpin the NZD/USD pair’s upside momentum.

However, the cautious mood ahead of the Consumer Price Index (CPI) for December from China and the US, up for publishing on Wednesday and Thursday respectively, will be crucial amid the market’s indecision over the Fed’s next move, as well as PBOC’s favor for easy money policies. Should the inflation fears remain well-anchored, the US Dollar may consolidate the latest losses, which in turn could weigh on the NZD/USD prices.

Technical analysis

A clear upside break of the three-week-old descending trend line, around 0.6340 by the press time, keeps NZD/USD buyers hopeful. It’s worth noting, that the Kiwi bears remain off the table unless witnessing a daily closing below the 50-DMA support of 0.6233.

The US Federal Reserve will raise interest rates to just under 5.5% by May, with an economic recession likely sometime in the second half of 2023, predicts Citigroup CEO Jane Fraser, reported Nikkei Asia during the weekend.

Additional comments

Also read: Latest talks of Fed officials flash mixed signals for markets

• USD/CAD is expected to remain rangebound till the release of a potential trigger ahead.
• The catalyst that has triggered volatility for the USD index is the weak Average Hourly Earnings data.
• Oil prices remain sideways amid ambiguity over the Covid situation in the Chinese economy.

The USD/CAD pair is displaying a sideways profile below 1.3450 in the early Tokyo session. A rangebound action is expected from the Loonie asset as sheer volatility is generally followed by volatility contraction.

A significant improvement in the risk appetite of the market participants after a decline in the United States Average Hourly Earnings strengthened risk-sensitive assets such as S&P500. The 500-stock US basket snapped its 10-day subdued performance and jumped heavily. While the US Dollar Index (DXY) witnessed carnage amid a decline in safe-haven’s appeal. The return on 10-year US Treasury bonds witnessed a marginal sell-off and dropped to 3.56%.

An upbeat US Nonfarm Payrolls (NFP) was already expected by the market participants after a solid addition of payrolls in December reported by the US Automatic Data Processing (ADP) Employment Change. The catalyst that triggered volatility in the USD Index was the decline in Average Hourly Earnings to 4.6% vs. the expectations of 5.0%. This might support a further downward shift in the extent of an interest rate hike by the Federal Reserve (Fed).

Chicago Fed President Evans quoted in Wall Street Journal (WSJ), “It was possible the economic data would support raising the policy rate by 25 basis points at the Fed's next gathering” as reported by Reuters.

On the Canadian Dollar front, Net Change in Employment released stronger-than-anticipated at 104K than the consensus of 8K and the prior release of 10.4K. The Unemployment Rate dropped to 5.0% along with Average Hourly Wages (Dec) which was trimmed to 5.2%. This is going to create hurdles for the Bank of Canada (BoC) ahead.

Meanwhile, oil prices are struggling to find direction from the $73.00-75.00 range. Investors are in a fix on whether to support black gold considering an improvement in long-term economic projections of the Chinese economy due to reopening or to punish for short-term pain in oil demand led by a spike in Covid-19 infections.

• GBP/USD struggles to defend the previous day’s bounce off seven-week low.
• Sustained break of three-week-old descending trend line, 100-SMA favor buyers.
• Bullish MACD signals, firmer RSI also underpin bullish bias.
• Sellers need validation from 1.2050 to retake control.

GBP/USD bulls flirt with the 1.2100 threshold during Monday’s Asian session, after posting the biggest daily jump in five weeks on Friday. Even so, the Cable pair remains on the bull’s radar as it defends the previous day’s technical breakouts.

Not only the upside break of a descending resistance line from December 19, as well as the 100-SMA, but the bullish MACD signals and firmer RSI (14) also keep the GBP/USD buyers hopeful.

However, the 200-SMA level surrounding 1.2125 challenges the quote’s immediate advances.

Following that, the 1.2200 round figure and the late December swing high near 1.2245 could act as additional upside filters before directing previous toward the previous monthly top of 1.2446.

It’s worth noting, that December 05 swing high near 1.2345 acts as an extra filter towards the north.

On the flip side, the 100-SMA and the resistance-turned-support line, respectively around 1.2075 and 1.2050, put a short-term floor under the GBP/USD prices.

In a case where the quote drops below 1.2050, a slump toward 1.2000 becomes imminent.

Though, the latest swing low around 1.1840 could challenge the GBP/USD bears afterward.

GBP/USD: Four-hour chart

Trend: Further upside expected

“The world’s second-largest economy is expected to quickly rebound because of the country’s optimized Covid-19 response and after its economic policies continue to take effect,” Bloomberg quotes an interview from Guo Shuqing, party secretary of the People’s Bank of China (PBOC), to People’s Daily published on Sunday.

Additional comments

Market implications

 The news should help the Gold price in keeping the latest advances due to China’s status as one of the world’s biggest XAU/USD consumers.

Also read: Gold Price Forecast: XAU/USD grinds higher ahead of United States Inflation

Japanese Prime Minister Fumio Kishida said on Sunday his government and the central bank must discuss their relationship in guiding economic policy after he names a new Bank of Japan (BOJ) governor in April, reported Reuters.

The news also adds that the remark heightens the chance the government may revise its a decade-long blueprint with the central bank that focuses on beating deflation, a move that would lay the groundwork for an exit from the BOJ's ultra-loose monetary policy.

"The government and the BOJ must work closely together, but also each play its own role" in achieving price stability and higher wage growth, Kishida said in a program on public broadcaster NHK.

Additional comments

Market implications

USD/JPY reacts to the diplomatic comments by extending Friday’s pullback from a three-week high, depressed around 132.00 by the press time.

• AUD/USD is aiming to explore above 0.7000 as risk-on impulse hogs limelight.
• A sheer decline in US Average Hourly Earnings has triggered volatility in the US Dollar Index.
• The Australian Dollar will remain in action ahead of the release of the monthly CPI data and Retail Sales data.

The AUD/USD pair is expected to turn sideways after a juggernaut rally to near the crucial resistance of 0.6880. For further upside, more buying interest will be required from the investing community to push the Australian Dollar above the aforementioned hurdle. Positive market sentiment will continue to provide support to the risk-sensitive currencies.

The risk appetite of investors soared heavily after a downside revision of the Average Hourly Earnings data, released on Friday. Risk-perceived assets like S&P500 witnessed immense buying interest from the market participants as downbeat wage inflation provided the message ‘loud and clear’ that the United States Consumer Price Index (CPI) will continue its downside momentum ahead. Things are falling in place as desired by the Federal Reserve (Fed), therefore the central bank won’t be needed to hike terminal rate projections.

The US Dollar Index (DXY) is expected to re-test its six-month low at around 103.05 amid a soaring market mood. Also, the demand for US government bonds escalated, which led to a decline in 10-year US Treasury yields to 3.56%.

Going forward, the Australian Dollar will remain in action ahead of the release of the monthly CPI data, which is scheduled for Wednesday. As per the consensus, the annual CPI (Nov) will escalate to 7.3% vs. the prior release of 6.9%. Also, the Australian Retail Sales data will hog the limelight, which is seen higher at 0.7% against the former figure of -0.2%.

AUD/USD technical outlook

On a four-hour scale, AUD/USD is hovering around the horizontal resistance plotted from December 13 high around 0.7000. Advancing 20-and50-period Exponential Moving Average (EMAs) at 0.6813 and 0.6790 respectively add to the upside filters.

The Relative Strength Index (RSI) (14) is looking to shift into the bullish range of 60.00-80.00, which will trigger a bullish momentum ahead.

Having witnessed firmer US employment numbers and a disappointment from the ISM Services PMI for December, multiple Federal Reserve (Fed) officials opined for the US economic conditions and the central bank’s next move.

Notable among them were Atlanta Federal Reserve President Raphael Bostic, Outgoing Chicago Fed President Charles Evans, Kansas City Fed President Esther George and Richmond Federal Reserve Bank President Thomas Barkin.

Firstly, the Wall Street Journal (WSJ) quoted Chicago Fed President Evans saying, “It was possible the economic data would support raising the policy rate by 25 basis points at the Fed's next gathering.”

“The Fed is in a good spot having stepped down to a 50-basis-point increase in December,” added Fed’s Evans per WSJ reported Reuters.

The news also mentioned Chicago Fed President as saying, "If they step it down again to 25 basis points that allows a little more time - as they continue to increase the funds rate to the same point that I was expecting - to let the data evolve.”

Following him were the additional comments from Atlanta Fed President Bostic who mentioned that the holiday shopping numbers could influence rate decision, “if consumers proved more or less resilient”. The policymaker previously raised possibilities of the US economic slowdown on Friday.

Also read: Fed's Bostic: US economy is definitely slowing

Additionally, Kansas City Fed President Esther George signalled that the longer inflation stays high, the greater the chance it will get embedded and will be more costly to combat. The policymaker also stated that the renewed inflation pressures from energy, crop prices are ‘very real risk’. “How much additional policy tightening will be needed is an ‘essential aspect’ of deliberations,” per Fed’s George.

Richmond Fed President Barkin praised the last two months of inflation reports by terming them as “a step in the right direction,” but marked fears from the higher median figures. “Studies forecast 6-12 months before pullbacks in demand quiet the rate of inflation,” added Fed’s Barkin.

The policymaker also stated that more gradual interest rate path should limit harm to economy while also adding, “(It) makes sense to steer more deliberately on rates in context of policy lags.”

Market implications

Despite the mixed comments from the Fed officials, the majority of them do support softer rate hikes, which in turn suggests further hardships for the US Dollar.

Also read: EUR/USD Weekly Forecast: US Dollar starts off 2023 on the right foot

British Prime Minister Rishi Sunak said on Sunday he was willing to discuss pay rises for nurses in a bid to end strikes that have deepened a crisis within the health service the day before the government meets with trade union leaders, reported Reuters.

The government was willing to have conversations with union leaders about pay, despite ministers previously refusing to reopen talks about this year's deal.

"We want to have a reasonable, honest, two-way conversation about pay," Sunak told the BBC per Reuters. "The door has always been open to talk about the things that nurses want to talk about, and the unions want to talk about more generally."

Additional comments

As a general policy I wouldn’t ever talk about me or my family’s healthcare situation. It’s not really relevant.

You have to continue to be disciplined and make the right responsible decisions in order to bring inflation down.

It's really important that we do. Its (inflation) not an abstract thing. Its impacting people.

Market implications

The news should help the GBP/USD pair to extend the latest run-up towards crossing the 1.2130 hurdle, around 1.2090 by the press time.

Also read: GBP/USD Weekly Forecast: Will Pound Sterling sellers retain control?

• Gold price makes rounds to seven-month high as bulls take a breather.
• Mixed data from United States weighed on Treasury bond yields, US Dollar and propelled XAU/USD price.
• Upbeat signals from China also underpinned Gold price upside.
• Firmer US inflation data could probe XAU/USD bulls.

Gold price (XAU/USD) seesaws around the highest levels since June, close to $1,866 by the press time, after printing the biggest daily jump in five weeks the previous day.

The yellow metal cheered broad US Dollar selling, despite a mostly upbeat United States employment report, while posting the gains on Friday. The reason could be linked to the downbeat prints of the US ISM Services PMI as well as the Factory Orders that drowned the Treasury bond yields. On the contrary, price-positive updates from China helped the XAU/USD to remain firmer.

United States economics weigh on Treasury bond yields, propel Gold price

On Friday, United States Nonfarm Payrolls (NFP) rose by 223,000 in December compared to the market expectations of 200,000 and November's increase of 256,000 (revised from 263,000). Further details of the US December jobs report revealed that the Unemployment Rate declined to 3.5% from 3.6% in November and 3.7% expected. More importantly, the Average hourly earnings rose 0.3% in December versus 0.4% prior while the YoY figures eased to 4.6% from 4.8% in November.

Further, US ISM Services PMI slumped to the lowest levels in 31 months while suggesting a contraction in activities with 49.6 figures for December, versus the market expectations of 55 and 56.5 marked in November. On the same line, US Factory Orders also slumped, falling 1.8% in November after gaining 0.4% in October.

Despite the mixed readings of the key US data, Atlanta Federal Reserve bank president Raphael Bostic stated that the US economy is definitely slowing, which in turn drowned the key US Treasury bond yields and the US Dollar. That said, the US 10-year Treasury yields dropped 16 basis points (bps) to 3.56%, the lowest levels in three weeks, whereas the US Dollar Index (DXY) marked the biggest daily slump since November 11. Given the inverse relationship between the Gold price and the US Dollar, the yellow metal managed to refresh the multi-day high afterward.

China-linked optimism adds strength to XAU/USD upside

Considering China’s status as one of the world’s biggest Gold consumers, recent positive developments from the dragon nation seemed to also have underpinned the XAU/USD upside.

On Sunday, China opened air, land and sea borders for travelers after a three-year shutdown and marked the last effort to unlock the Covid-led economy. “After three years, mainland China opened sea and land crossings with Hong Kong and ended a requirement for incoming travelers to quarantine, dismantling a final pillar of a zero-COVID policy that had shielded China's 1.4 billion people from the virus but also cut them off from the rest of the world,” mentioned Reuters.

Additionally, the dragon nation’s recent piling of the Gold holdings also favors the XAU/USD bulls. As per the latest updates from the People's Bank of China (PBOC) website, China increased its holdings of gold by 30 tonnes in December to 2,010 tonnes. That said, Beijing previously added 32 tonnes in November. It should be noted that such high levels of Gold inflows were earlier spotted in September 2019 and October 2016.

US inflation is the key

The mixed US data and a slump in the United States Treasury bond yields recently pushed multiple Federal Reserve (Fed) officials to flag recession fears. However, a firmer US Consumer Price Index (CPI) for December, up for publishing on Thursday, won’t hesitate to shift the market’s focus on the Fed rate hike concerns and could propel the US Dollar, which in turn will challenge the Gold buyers.

Also read: Gold Price Weekly Forecast: Bulls retain control ahead of key US inflation data

Gold price technical analysis

Gold price grinds near a multi-day high after crossing an upward-sloping resistance line from early October 2022, now immediate support around $1,860. The upside momentum also takes clues from the Moving Average Convergence and Divergence (MACD) indicator’s bullish signals and the firmer Relative Strength Index (RSI) line, placed at 14.

It’s worth noting, however, that the RSI line is near the overbought territory and also portrays a lower-high formation since early November, which in turn suggests a limited upside room for the XAU/USD.

As a result, June’s high near $1,880 and the 61.8% Fibonacci Retracement level of the Gold’s March-September 2022 downturn, near $1,897, quickly followed by the $1,900 threshold, gain the market’s attention.

In a case where the Gold price remains firmer past $1,900, multiple hurdles surrounding $1,915, $1,935 and $1,965 could challenge the buyers before directing them to the $2,000 psychological magnet.

Alternatively, a downside break of the $1,860 resistance-turned-support could drag the XAU/USD to the 50% Fibonacci retracement level of $1,842. However, the 21-Day Moving Average (DMA) and August month’s high, respectively around $1,811 and $1,807, could restrict the Gold price downside afterward.

Overall, Gold seems to have a limited upside room even if the bullish bias remains intact.

Gold price: Daily chart

Trend: Further upside expected

• EUR/USD is expected to extend a rally above 1.0650 on less-hawkish Fed bets.
• A sheer drop in US Average Hourly Earnings will be added to the downside inflation filters.
• The USD Index witnessed a bloodbath, dropping to 103.50 amid the risk-on market mood.

The EUR/USD pair is hovering around 1.0650 in the early Asian session after a juggernaut rally on Friday. The major currency pair picked a sheer demand despite the release of the upbeat United States Nonfarm Payrolls (NFP) data. As per the US official employment data, the United States economy added 223K fresh jobs in December month, much higher than the consensus of 200K but lower than the former release of 256K.

The sentiment of the market participants turned highly positive as the impact of upbeat NFP was already discounted after solid Automatic Data Processing (ADP) Employment Change data. Apart from that, the catalyst that triggered the risk-appetite theme was the decline in the Average Hourly Earnings (Dec). S&P500 had a ball as the index soared more than 2.25%.

The Average Hourly Earnings dropped to 4.6% vs. the consensus of 5.0% and the former release of 4.8%. Investors were worried about the fact that a rise in labor demand would be offset by higher wage inflation as firms would offer higher wages to attract talent. Higher wage growth might lead to a rebound in overall inflation and will force the Federal Reserve (Fed) to either hike terminal rate projections or continuation of maintaining hawkish monetary policy beyond CY2023 or both.

The US Dollar Index (DXY) witnessed a bloodbath, dropping heavily from 105.00 to critical support around 103.50. The USD Index is highly expected to continue its downside momentum further. While the 10-year US Treasury yields dropped to 3.56%.

On the Eurozone front, the annual Harmonized Index of Consumer prices (HICP) (Dec) dropped to 9.2% vs. the expectations of 9.7% and the former release of 10.1%. Inflationary pressures dropped in Eurozone led by falling energy prices, which are delighting the European Central Bank (ECB).