• WTI picks up bids to refresh three-week high.
• Bullish MACD signals, clear break of previous resistance line favor buyers.
• Descending resistance line from June, 100-EMA challenge further upside.

WTI crude oil buyers keep the reins as they poke the 50-Exponential Moving Average (EMA) to refresh a three-week high around $80.90 during early Tuesday.

In doing so, the energy benchmark justifies the previous week’s upside break of a descending resistance line from November 07, as well as the bullish MACD signals.

As a result, the black gold is likely to overcome the immediate EMA hurdle surrounding $80.80, which in turn will allow buyers to aim for the downward-sloping trend line stretched from June, close to $83.60.

It’s worth noting, however, that the WTI’s upside past $83.60 appears difficult as the 100-EMA level surrounding $84.40 challenges the oil buyers afterward.

In a case where the quote rises past $83.60, November’s peak surrounding $93.00 should lure the commodity bulls.

Alternatively, pullback moves could initially aim for the $80.00 round figure before the mid-December swing high of around $77.80.

Though, a 12-day-old upward-sloping support line near $77.30 will precede the resistance-turned-support line from early November, close to $74.50, to challenge the WTI crude oil sellers.

Should the price remains weak past $74.50, the odds of witnessing a slump toward the monthly low near $70.30 can’t be ruled out.

WTI: Daily chart

Trend: Further upside expected

• USD/CAD takes offers to refresh intraday low, snapped three-week uptrend in the last.
• Oil prices rally more than 1.0% on headlines surrounding Russia, China.
• Softer US PCE Inflation data weighed on hawkish Fed bets.
• Light calendar, year-end holiday mood to restrict USD/CAD moves but risk catalysts are crucial to watch.

USD/CAD holds onto the previous week’s bearish bias, first in the last four, as it renews the intraday low of around 1.3565 during early Tuesday.

The Loonie pair’s latest losses could be linked to the broad-based US Dollar weakness on softer US data, as well as firmer prices of Canada’s key export item, namely WTI crude oil.

US Dollar Index (DXY) printed a two-week downtrend by the end of Friday as downbeat US statistics pushed back hawkish expectations from the Federal Reserve (Fed), especially when the policymakers are hesitant on strong rate hikes. That said, the Core US Personal Consumption Expenditures (PCE) Price Index, mostly known as the Fed’s favorite inflation gauge, matched 4.7% YoY forecasts for November versus 5.0% prior.

Further, the Durable Goods Orders for the said month marked a contraction of 2.1% compared to -0.6% expected and 0.7% previous readings. More importantly, the Nondefense Capital Goods Orders ex Aircraft marked improvement of 0.2% compared to 0.0% expected and 0.3% revised down prior. Additionally, the Federal Reserve (Fed) Bank of Atlanta’s GDPNow tracker rose to show +3.7% annualized growth for the fourth quarter (Q4) versus +2.7% previous estimates.

On the other hand, WTI crude oil renews its intraday high near $80.70, up 1.65% on a day, as China’s easing of Covid restrictions joins the fresh Russia-Ukraine tussles. On Monday, China’s National Health Commission (NHC) said that China will stop requiring inbound travelers to go into quarantine starting from January 8. It should be noted that Russian Foreign Minister Sergei Lavrov was recently quoted saying that Moscow's proposals for "demilitarisation" and "denazification" of Ukraine are well known to Kyiv and it is up to Ukrainian authorities to fulfill them. During the weekend, the Ukrainian Foreign Ministry mentioned that Ukraine calls for Russia's removal from United Nations.

Amid these plays, S&P 500 Futures print mild gains around 3,885 while the US Treasury bond yields struggle for clear directions after posting the biggest weekly jump since early April.

Looking forward, USD/CAD is likely to remain pressured amid expected inactivity due to the holiday season and a light calendar. However, the risk catalysts may entertain the Loonie pair traders.

Technical analysis

A daily closing below the six-week-old ascending trend line, around 1.3585 by the press time, directs USD/CAD towards the 50-DMA support surrounding 1.3535.

• Easing China’s Covid curbs is failing to support the New Zealand Dollar.
• The 200-EMA at 0.6320 is acting as a major barricade for the New Zealand Dollar.
• A 40.00-60.00 range oscillation by the RSI (14) is hinting a consolidation ahead.

The NZD/USD pair is aiming to surpass the immediate resistance of 0.6300 in the early Asian session. The Kiwi asset is showing strength amid positive risk sentiment in the FX domain after a gradual decline in the pace of the United States Personal Consumption Expenditure (PCE) Price Index.

The New Zealand Dollar is capitalizing on the headlines of easing Covid restrictions by the Chinese administration. China will no longer subject inbound travelers to quarantine in early January, putting the country on track to emerge from three years of self-imposed global isolation under a Covid Zero policy, as reported by Bloomberg.

On an hourly scale, the Kiwi asset is oscillating back and forth in a range of 0.6253-0.6322 as investors are awaiting a fresh trigger for a decisive move ahead. Also, a volatility contraction is bolstering expectations for an expansion in tick size and volume ahead. The 50-period Exponential Moving Average (EMA) at 0.6300 is overlapping with the asset, which indicates a consolidation while the 200-EMA at 0.6320 is acting as a major barricade for the asset.

Meanwhile, the Relative Strength Index (RSI) (14) is oscillating in a 40.00-60.00 range, which signals rangebound movements ahead.

For an upside move, the New Zealand Dollar needs to push the Kiwi asset above 0.6320, which will drive the major towards the round-level resistance at 0.6400, followed by December 9 high at 0.6428.

On the flip side, a breakdown of the previous week’s low at 0.6230 will drag the major towards November 18 high around 0.6200. A slippage below the latter will expose the asset for more downside towards November 28 low around 0.6165.

NZD/USD hourly chart

• GBP/USD crosses two-week-old resistance line to aim for recovery.
• Short-term descending trend line, 100-HMA guard immediate advances, upward-sloping support line from Thursday challenges bears.
• RSI conditions suggest further consolidation of recent losses.

GBP/USD picks up bids to 1.2067 as the Cable traders lick their wounds after three consecutive weekly losses during early Tuesday. In doing so, the quote also justifies the recent upside break of a two-week-old resistance line, now support around 1.2055.

The resistance breakout joins a firmer RSI (14) to also suggest the GBP/USD pair’s further advances.

However, the convergence of a downward-sloping resistance line from December 20, as well as the 100-HMA, challenges short-term advances of the Cable pair near 1.2100.

Following that, a run-up towards the 200-HMA level surrounding 1.2190 can’t be ruled out. Though, December 19 swing high near 1.2245 holds the key to the GBP/USD pair’s further upside.

On the contrary, the GBP/USD pair’s declines below the resistance-turned-support line, near 1.2055 by the press time, could test an ascending support line from Thursday, close to 1.2030.

Should the GBP/USD prices remain weak past 1.2030, the 1.2000 psychological magnet will challenge the bears before directing them to the latest bottom, also the monthly low, surrounding 1.1990.

Overall, GBP/USD remains on the bear’s radar despite the latest recovery moves. However, an upside clearance of 1.2245 could give control to the buyers.

GBP/USD: Hourly chart

Trend: Limited upside expected

• EUR/USD is aiming to reclaim the crucial resistance of 1.0650 despite a gradual drop in US PCE Inflation.
• The US Dollar Index has turned choppy amid an absence of potential triggers.
• ECB Knot is hoping that the central bank has just passed the halfway point of its tightening cycle.

The EUR/USD pair has delivered an upside break of the potential resistance formed around 1.0630 after a long struggle. The major currency pair is aiming to recapture the critical resistance of 1.0650 on expectations of a further decline in United States Consumer Price Index (CPI) data.

S&P500 recovered on Friday despite better-than-anticipated US Personal Consumption Expenditure (PCE) inflation data. The headline inflation indicator was released at 5.5%, higher than the expectations of 5.3% but lower than the prior release of 6.1%. Investors are expected to keep the focus on the decline, no matter the extent, as it has cemented further decline in the inflationary pressures in the United States. This has also improved the risk appetite of investors.

Meanwhile, the US Dollar Index (DXY) is displaying signs of volatility contraction ahead amid its lackluster behavior. The USD Index is hovering in a 10-pip range amid an absence of potential triggers this week. Also, the 10-year US Treasury yields are oscillating around 3.75%.

A gradual decline in the pace of inflation is cementing slower interest rate hikes by the Federal Reserve (Fed). No doubt, the Fed will continue to keep interest rates solid for a long time as the inflation rate is still significantly higher and will demand ‘blood and sweat’ from Fed policymakers. Also, a contraction in demand for durable goods in the United States economy has supported consensus for lower inflation ahead.

On the Eurozone front, European Central Bank (ECB) Governing Council member, as well as Dutch Governor, Klaas Knot sees more policy tightening in the five policy meetings between now and July 2023 to tame firmer inflation. Earlier, ECB policymakers were advocating that the central bank has done much in tightening the monetary policy. However, ECB Knot is of the view that ‘The risk of us doing too little is still the bigger risk’.

Gold price grinds higher after snapping two-week downtrend.

US Dollar eases as mixed statistics from United States weigh on hawkish bias for Federal Reserve.

China announces more easing in Covid policy, readiness for stimulus and underpins Gold price recovery.

Holiday season could restrict Commodity price moves but XAU/USD bulls are in the driver’s seat as traders await 2023.

Gold price (XAU/USD) grinds higher towards $1,800 after posting the first weekly gain in three. In doing so, the yellow metal begins the week’s trading, following Monday’s off in multiple markets, amid the holiday season. Even so, the recent mixed United States data and risk-positive headlines from China keep XAU/USD buyers hopeful.

Gold cheers mostly softer United States data

Recently downbeat data from the United States seemed to have offered a bid to the Gold price, mainly via the softer US Dollar.

On Friday, the US Core Personal Consumption Expenditures (PCE) Price Index, mostly known as the Fed’s favorite inflation gauge, matched 4.7% YoY forecasts for November versus 5.0% prior. Further, the Durable Goods Orders for the said month marked a contraction of 2.1% compared to -0.6% expected and 0.7% previous readings. More importantly, the Nondefense Capital Goods Orders ex Aircraft marked improvement of 0.2% compared to 0.0% expected and 0.3% revised down prior.           

On the same line, the Federal Reserve (Fed) Bank of Atlanta’s GDPNow tracker rose to show +3.7% annualized growth for the fourth quarter (Q4) versus +2.7% previous estimates.

Previously, the US economy expanded at an annualized rate of 3.2% in the third quarter (Q3), per the final readings of the Gross Domestic Product (GDP), versus 2.9% previous estimates. Further, the Personal Consumption Expenditure (PCE) Prices match 4.3% QoQ estimations during Q3 2022 whereas the Core PCE improved to 4.7% QoQ versus 4.6% market forecasts.

Following the data, the US Dollar retreated as the same suggests the much-awaited easiness in the world’s largest economy’s inflation conditions, which in turn requires a less-hawkish approach from the Fed and the same could propel the Gold price.

China Covid announcements favor XAU/USD bulls

Considering China’s status as the world’s largest metal consumer, Gold price cheers any positive announcements from Beijing. Recently, the dragon nation is on the run to ease the Covid restrictions and the same has favored prices of XAU/USD.

On Monday, China’s National Health Commission (NHC) said that China will stop requiring inbound travelers to go into quarantine starting from January 8. The news also stated that China's management of COVID-19 will also be downgraded to the less strict Category B from the current top-level Category A.

Geopolitics probe Gold buyers

Although the easing hawkish bias on the Federal Reserve (Fed) and optimism surrounding China favor Gold buyers, the looming geopolitical concerns surrounding China and Russia challenge the metal’s immediate upside.

Recently, Russian Foreign Minister Sergei Lavrov was quoted saying that Moscow's proposals for "demilitarisation" and "denazification" of Ukraine are well known to Kyiv and it is up to Ukrainian authorities to fulfill them.

During the weekend, the Ukrainian Foreign Ministry mentioned that Ukraine calls for Russia's removal from United Nations. Also highlighting the geopolitical tension was a drone from North Korea that briefly flew over South Korea and couldn’t be shot down by Seoul, as per Yonhap news. Additionally, the Chinese military conducted “strike drills” around Taiwan’s sea and air space in reaction to the provocation by the US-Taiwan ties.

A quiet week to let the Gold bulls dominate

Considering the lack of major data/events up for publishing during the rest of the week, due to the holiday season, the Gold price is likely t continue extending the latest run-up. It’s worth noting, however, that China’s official Purchasing Managers’ Indexes (PMIs) for December, up for publishing on Saturday, will be important to watch for fresh impulse. Additionally, the risk noises surrounding Ukraine and China may also entertain the XAU/USD traders.

Gold price technical analysis

Gold price defends Friday’s bounce off a one-month-old ascending support line, as well as stays beyond the 100-Exponential Moving Average (EMA), as bulls eye the consecutive second monthly gain.

The receding bearish bias of the Moving Average Convergence and Divergence (MACD) indicator also keeps the XAU/USD buyers hopeful.

That said, the $1,800 threshold precedes the early December swing high, near $1,810, to restrict the short-term upside of the Gold price.

Following that, a two-week-old horizontal resistance region near $1,813 and the double tops near $1,825 could challenge the XAU/USD upside.

On the downside, an upward-sloping support line from late November, around $1,792 by the press time, restricts immediate declines of the yellow metal.

Also acting as the short-term key support is the 100-EMA and an ascending trend line support from November 28, respectively around $1,790 and $1,788.

In a case where prices drop below $1,788, the mid-month swing low of around $1,774 and the monthly low of $1,765 will gain the Gold bear’s attention.

Overall, the Gold price is likely to remain firmer even as the upside room appears limited.

Gold price: Four-hour chart

Trend: Further upside expected

Moscow's proposals for "demilitarisation" and "denazification" of Ukraine are well known to Kyiv and it is up to Ukrainian authorities to fulfil them, otherwise, the Russian army will decide the issue, Russian Foreign Minister Sergei Lavrov said, per Reuters.

Key quotes

Market reaction

The news fails to gain any major attention amid the year-end holiday season. That said, the risk barometer pair AUD/USD remains mildly bid around 0.6725 by the press time.

• AUD/USD is looking to shift its operations above 0.6720 on lower US inflation expectations.
• A decline in demand for durable goods will trim the core inflation price index further ahead.
• The US Dollar Index is expected to remain sideways due to lower volume impacted by the holiday season.

The AUD/USD pair is attempting to shift its auction profile above the immediate resistance of 0.6720 in the early Asian session. The Aussie asset is inclining higher on a flat core United States Personal Consumption Expenditure (PCE) Inflation data. Risk sentiment has turned positive as a decline in the US inflation indicator has secured expectations for a less-hawkish monetary policy by the Federal Reserve (Fed) in CY2023.

The US Dollar Index (DXY) is oscillating in a range of 104.30-104.40 amid less trading activity due to the holiday season. The US Dollar is expected to display a volatility contraction amid the unavailability of a potential trigger ahead, therefore, investors will keep an eye on macro-economic activities for further guidance.

Meanwhile, S&P500 revived on Friday on lower US PCE-Price Index data. The headline US PCE data landed at 5.5%, higher than the expectations of 5.3% but lower than the prior release of 6.1%. While the core PCE data remained in line with expectations. The economic data landed at 4.7% lower than the prior release of 5.0%. This has supported expectations of a small rate hike by the Fed. While the 10-year US Treasury yields remained sideways around 3.75%.

Apart from the softer US PCE data, a significant decline in Durable Goods Orders has raised red flags for the US Dollar. The economic data contracted by 2.1% while the street was expecting a contraction of 0.6%. A decline in demand for durable goods will trim the core inflation price index further ahead.

Meanwhile, Australia’s credit growth is creating worries for the Australian Dollar. A note from ANZ Bank claims that “Private sector credit grew 0.5% m/m in November, in line with market expectations. This is yet another sign of caution in the economy as higher interest rates and inflation bite both households and businesses. Our new forecasts show a sharper slowdown in economic growth through 2023.”

China will stop requiring inbound travelers to go into quarantine starting from Jan. 8, the National Health Commission said on Monday in a major step towards easing curbs on its borders, which have been largely shut since 2020, reported Reuters.

Additional details

China's management of COVID-19 will also be downgraded to the less strict Category B from the current top-level Category A.

Travelers entering China will still have to undergo PCR testing 48 hours before departure.

Arrangements for foreigners to come to China, such as for work and business will be improved and the necessary visas will also be facilitated.

But passenger entry and exit at sea and land ports will gradually resume, while the outbound travel of Chinese nationals will be restored "in an orderly manner".

Epidemic prevention and control protocols at key institutions such as elderly care institutions will be strengthened.

China will also further increase the vaccination rate among the elderly, and promote second doses among people at high risk of severe illness.

Market reaction

The news should have helped AUD/USD to remain firmer above 0.6700, up 0.23% intraday near 0.6725 by the press time.

European Central Bank (ECB) Governing Council member, as well as Dutch Governor, Klaas Knot believes, per the Financial Times (FT), that the ECB has only just passed the halfway point of its tightening cycle and needs to be “in there for the long game” to tame high inflation.

Key quotes

Market implications

The news should have helped the EUR/USD pair to remain firmer, last seen grinding higher around 1.0615.

“Moscow is ready to resume gas supplies to Europe through the Yamal-Europe pipeline, Russian Deputy Prime Minister Alexander Novak told state TASS news agency,” reported Reuters.

“Novak, in remarks published by the agency on Sunday, also said that Moscow expects it will have shipped 21 billion cubic metres of liquefied natural gas (LNG) to Europe in 2022,” adds Reuters.

The policymaker was previously quoted saying that Russia will be able to produce at least 490-500 million tonnes of oil in 2023. “Russia will produce such volumes of oil even under the new EU oil embargo imposed on December 5, and after a similar measure on oil products starts working on February 5,” adds Reuters to the news.

Despite signaling an increase in oil, Russia’s Novak suggested a slump in gas output and exports during 2022. “Russia will reduce natural gas production and exports in 2022 due to the shutdown of export infrastructure, TASS news agency cited Russian Deputy Prime Minister Alexander Novak as saying on Monday,” per Reuters.

"Gas production by the end of the year will be 12% less than in 2021, and exports will drop by about a quarter. This is primarily due to the shutdown of export infrastructure," Novak said an interview with TASS, the Reuters news added.

Market implications

The news should have probed the WTI crude oil buyers around the three-week high near $80.00.

After the rejection of monetary policy tightening by Bank of Japan (BOJ) Governor Haruhiko Kuroda, Japanese Prime Minister Fumio Kishida also crossed wires on Monday, via Reuters. The policymaker said that it was premature to state now whether the government and the central bank could revise a decade-old joint statement that commits the Bank of Japan (BOJ) to achieve its 2% inflation target at the earliest date possible.

"It's something for after the new Bank of Japan governor is decided," Kishida added during a speech in a seminar on whether the government could initiate a revision of the statement.

Also read: BOJ Kuroda: Widening of yield band not step towards easy policy exit

Market reaction

USDJPY benefits from the news, together with yields on the Japanese Government Bonds (JGB). The Yen pair is last seen trading around 132.80 while consolidating the previous week’s slump, the biggest in 14 years.

“The central bank's decision last week to widen the allowance band around its yield target was ‘absolutely not a first step’ towards an exit from ultra-loose monetary policy,” said Bank of Japan (BOJ) Governor Haruhiko Kuroda on Monday.

Additional comments

Market reaction

Following the news, yields on the Japanese Government Bonds (JGB) rose by 5.5 basis points (bps) to 0.447% by the end of Monday.