• NZD/USD consolidates in a narrow trading band through the early Asian session on Monday.
• The US wage inflation and employment data showed mixed results on Friday.
• The Federal Reserve (Fed) is likely to maintain tightening monetary policy far beyond 2024.
• The US Consumer Price Index (CPI) for July will be the key event to watch this week.

The NZD/USD pair oscillates in a narrow range below the 0.6100 mark during the early Asian session on Monday. Meanwhile, the US Dollar Index (DXY), a measure of the value of USD against six other major currencies, faces some follow-through selling and currently trades near 102.05.

The US Dollar fell following the mixed employment data on Friday. The US Bureau of Labor Statistics (BLS) reported on Friday that the Nonfarm Payrolls in the US rose by 187,000 in July, weaker than the market expectation of 200,000. The June figures were revised lower to 185,000, the lowest reading since December 2020.

Additionally, the unemployment rate fell to 3.5% from 3.6%, while annual wage inflation, as measured by changes in Average Hourly Earnings, came in at 4.4%, higher than the market estimation of 4.2%. Finally, the Labour Force Participation remained unchanged at 62.6%.

Atlanta Federal Reserve Bank President Raphael Bostic told Bloomberg on Friday that the central bank is likely to maintain tightening monetary policy far beyond 2024. According to the CME FedWatch tool, the probability of a 25 basis point (bps) hike in September remains steady, but the odds of a hike in November have increased slightly to approximately 30%.

On the Kiwi front, no top-tier economic data was released on Friday. However, Statistics New Zealand reported on Wednesday that the New Zealand Unemployment Rate for Q2 came in at 3.6%, above the consensus of 3.5% and 3.4% prior. Employment Change QoQ rose 1.0%, better than expected at 0.5% and 0.8% previously.

Looking ahead, market participants will watch the US Consumer Price Index (CPI) for July, which is due on Thursday. Market expectations anticipate a 0.2% monthly increase. Also, the US Produce Price Index (PPI) will be released on Friday. The inflation data could significantly impact the US Dollar's dynamic and give the NZD/USD pair a clear direction.

“We should remain willing to raise the federal funds rate at a future meeting if the incoming data indicate that progress on inflation has stalled,” per Federal Reserve (Fed) Governor Michelle Bowman’s remarks prepared for delivery to the Kansas Bankers Association, released Saturday, per Reuters.

Further, the policymaker praised the latest decline in the core inflation while also defending the hawkish Fed bias by stating that, “inflation remains well above target”.

Fed’s Bowman also cited the need for consistent evidence that inflation is on a meaningful path down toward our 2% goal to determine the strength of rate hikes, as well as the duration for holding rates intact at the higher levels.

Apart from inflation, the softer consumer spending and easing labor market crunch were also cited as welcome catalysts by Fed’s Bowman.

Fed’s Bowman didn’t seem any sharp contraction in the US credit conditions after March’s banking turmoil.

Market reaction

The hawkish comments allowed EUR/USD to begin the week on a back foot around 1.1000, down 0.05% intraday, after falling in the last three consecutive weeks.

• AUD/USD defends the previous day’s corrective bounce despite posting muted start of week’s trading.
• Shift in risk aversion wave, mixed US data and hawkish RBA MPS allowed Aussie to pare recent losses.
• US credit rating downgrade, fears of slowing growth in China joined RBA’s status quo to push AUD/USD toward three-week downtrend.
• US CPI, Australia Consumer Inflation Expectations eyed as Fed, RBA stays ready to lift the rates if needed.

AUD/USD kick-starts the inflation week with no major changes, making rounds to around 0.6570, defending the last two days’ corrective bounce off the key support line during the early Asian session on Monday. In doing so, the Aussie pair justifies the market’s cautious mood ahead of the top-tier inflation clues from Australia and the US, as well as the lack of major data/events during the weekend. It’s worth noting that the Aussie pair marked a three-week downtrend despite recovering in the last two consecutive days.

The Aussie pair’s latest rebound could be linked to the mixed US data and upbeat statements from the Reserve Bank of Australia (RBA). However, fears emanating from the US credit rating downgrade by Fitch Ratings and China’s economic worries, despite announcing multiple stimulus measures, prod the Aussie buyers ahead of the key inflation data.

During the last week, the Reserve Bank of Australia (RBA) defied market forecasts by keeping the benchmark rates intact at 4.1%, marking the second consecutive status quo after challenging the two hawkish surprises in the last monetary policy meeting in July.  However, the Aussie central bank’s rate statement, presented by Governor Phillip Lowe, mentioned, “Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will depend upon the data and the evolving assessment of risks.” Furthermore, the RBA’s quarterly print of the Monetary Policy Statement (MPS) confirmed the Aussie central bank’s hawkish bias by suggesting the need for further tightening. “Trims GDP growth and inflation forecasts for end 2023, most others little changed,” said the RBA statement.

On the other hand, the headline US employment report posted a softer-than-expected Nonfarm Payrolls (NFP) figure of 187K, versus 185K prior (revised) and 200K market forecasts, whereas the Unemployment Rate eased to 3.5% from 3.6% expected and previous readings. Further, the Average Hourly Earnings reprinted 0.4% MoM and 4.4% YoY numbers by defying the expectations of witnessing a slight reduction in wage growth.

Also notable is the fact that the ISM Manufacturing PMI for July improved a bit but the more important Services PMI dropped for the said month. Additionally, US Factory Orders edged higher for June and so did the second-tier employment-linked data like Nonfarm Productivity and JOLT Job Openings. However, the Q2 Unit Labor Cost eased and troubled favoring the Fed’s September rate hike.

Considering these data, the market’s bets on the Fed’s September rate hike eased from 20.0% to 13% on a weekly basis, per the CME’s FedWatch Tool.

With this in mind, Atlanta Federal Reserve Bank President Raphael Bostic said on Friday to Bloomberg, that the central bank is likely to keep monetary policy in a restrictive territory well into 2024. On the contrary, Chicago Fed President Austan Goolsbee stated that they should start thinking about how long to hold rates.

Elsewhere, China’s Caixin Manufacturing PMI improved but the Services PMI eased in July while the policymakers tried to placate bears by announcing several stimulus measures to defend the economy.

To sum up, most of the United States statistics have been mixed and may not be the key reason for the US Dollar Index (DXY) run-up, which in turn highlights the Fitch Ratings’ downward revision to the US credit rating from AAA to AA+. The same joins the US-China tension and mixed earnings from the US corporate giants to spoil the sentiment and weigh on the AUD/USD price.

Moving on, this week’s US inflation numbers, namely the Consumer Price Index (CPI) and Producer Price Index (PPI) for July for clear directions. Also important to watch will be Australia’s Consumer Inflation Expectations for August. Should the inflation numbers from Canberra improve and the US CPI/PPI ease, the AUD/USD may have a reason to extend the latest rebound from the key support.

Technical analysis

AUD/USD recovery could be linked to the inability to break a 10-month-old rising support line, around 0.6540 by the press time and the nearly oversold RSI (14) line. However, a daily closing beyond the lows marked in late June and early July, close to 0.6600, becomes necessary to convince buyers.

• Gold Price bounces off multi-month-old support line as US Dollar ended three-week uptrend on a softer note.
• Downbeat sentiment provides tailwind to US Dollar even as mixed United States data, US credit rating downgrade prod Fed hawks.
• US inflation will be crucial amid easing concerns about Federal Reserve’s September rate hike, downbeat CPI can propel XAU/USD rebound.

Gold Price (XAU/USD) begins the week comprising the key United States inflation without much surprises as it defends the previous day’s corrective bounce off an important support line, mainly backed by mixed US employment report, during early Monday in Asia. In doing so, the XAU/USD seesaws near $1,943, flirting with the 50-DMA hurdle by the press time.

That said, the Gold Price dropped in the last two consecutive weeks, marking the biggest weekly loss since mid-June, as the US Dollar Index (DXY) managed to print a three-week uptrend despite witnessing mixed data and easing concerns about the Federal Reserve’s (Fed) rate hike in September. The reason could be linked to the risk aversion wave, mainly backed by the Fitch Ratings’ US credit rating downgrade. With this, the Gold traders are more excited about this week’s US inflation numbers, namely the Consumer Price Index (CPI) and Producer Price Index (PPI) for July for clear directions.

Gold Price recovery appears elusive as US Dollar ignores indecision about Federal Reserve

US Dollar managed to post a three-week winning streak as the market’s risk-off tone superseded unimpressive United States data, which in turn exerted downside pressure on the Gold Price despite Friday’s corrective bounce.

Talking about the data, the headline employment report posted a softer-than-expected Nonfarm Payrolls (NFP) figure of 187K, versus 185K prior (revised) and 200K market forecasts, whereas the Unemployment Rate eased to 3.5% from 3.6% expected and previous readings. Further, the Average Hourly Earnings reprinted 0.4% MoM and 4.4% YoY numbers by defying the expectations of witnessing a slight reduction in wage growth.

Also notable is the fact that the ISM Manufacturing PMI for July improved a bit but the more important Services PMI dropped for the said month. Additionally, US Factory Orders edged higher for June and so did the second-tier employment-linked data like Nonfarm Productivity and JOLT Job Openings. However, the Q2 Unit Labor Cost eased and troubled favoring the Fed’s September rate hike.

Earlier in July, the Federal Reserve’s (Fed) preferred inflation gauge eased previously but the US Gross Domestic Product (GDP) Annualized for the second quarter (Q2) managed to impress with upbeat growth figures.

Considering these data, the market’s bets on the Fed’s September rate hike eased from 20.0% to 13% on a weekly basis, per the CME’s FedWatch Tool.

With this in mind, Atlanta Federal Reserve Bank President Raphael Bostic said on Friday to Bloomberg, that the central bank is likely to keep monetary policy in a restrictive territory well into 2024. On the contrary, Chicago Fed President Austan Goolsbee stated that they should start thinking about how long to hold rates.

Hence, most of the United States statistics have been mixed and may not be the key reason for the US Dollar Index (DXY) run-up, which in turn highlights the Fitch Ratings’ downward revision to the US credit rating from AAA to AA+. The same joins the US-China tension and mixed earnings from the US corporate giants to spoil the sentiment and the Gold Price.

XAU/USD bulls need validation from United States inflation data

While mixed feelings provided headwinds to the Gold Price, important support and decline in Friday’s US Nonfarm Payrolls (NFP), as well as consolidation of the weekly losses in equities, allowed the metal to recover. Also, a pullback in the US 10-year Treasury bond yields from the yearly high helped the XAU/USD to rebound without impressively downbeat US data. Hence, Gold traders will pay attention to this week’s United States inflation clues for July, via the CPI, PPI and the University of Michigan’s inflation expectations. Should the scheduled data suggest easing price pressure in the world’s largest economy, the Gold Price may rise further toward the key $1,960 hurdle.

Also read: Gold Price Weekly Forecast: Bulls and bears in tug-of-war ahead of US inflation data

Gold Price Technical Analysis

Gold Price recovers from an upward-sloping support line from late November 2022, backed by an upswing in the Relative Strength Index (RSI) line, placed at 14.

Even so, the bearish signals from the Moving Average Convergence and Divergence (MACD) indicator joined the 50-DMA hurdle of near $1,945 to check the XAU/USD bulls.

With this, the Gold Price appears well-set to extend the latest rebound past the $1,945 immediate DMA hurdle. However, a three-month-long downward-sloping resistance line challenges the buyers around $1,960.

That said, a daily closing beyond the $1,960 hurdle will enable the Gold Price to rise toward the previous monthly high of around $1,987 ahead of highlighting the $2,000 psychological magnet on the bull’s radar.

Meanwhile, failure to provide successful trading beyond the 50-DMA hurdle of around $1,945 can drag the XAU/USD back to the aforementioned support line of around $1,933 at the latest.

Following that, the $1,900 threshold may check the Gold sellers before directing them to the key $1,895-93 support confluence comprising the 200-DMA and June’s low.

Overall, the Gold Price is likely to witness further recovery but the upside appears limited.

Gold Price: Daily chart

Trend: Limited recovery expected