4 Global Market Updates- 23 February, 2023

In this article, we have covered the highlights of global market news about the AUD/USD, XAU/USD, EUR/GBP and NZD/USD.

AUD/USD: With the current prudence and weakening USD, the upside is limited below 0.6850.

In Thursday’s Asian trade, AUD/USD started a period of consolidation below 0.6850. The cautious market sentiment is putting pressure on the pair, although the downside is still restrained due to a widespread US Dollar decline and encouraging Australian Capex data. The analysis now focuses on American economic statistics.

AUD/USD is declining for the second day and is trading just over the monthly low. The daily chart recovered from the 200 SMA’s slight bearishness. The pair also deepened its decline under the 20 SMA, which is currently bearish and indicates a downward extension. Technical indicators, still in negative territory and at multi-month lows, also indicate that lower lows are imminent.

The short-term outlook on the 4-hour chart is negative. The 20 SMA holds directionlessly at 0.6870, while the 100 SMA still trades above it with a downward slope. The AUD/USD trades substantially below its moving averages. Technical indicators remain in the red, with the Momentum moving lower and the Relative Strength Index (RSI) settling at 34, indicating no buying activity.

Levels of support: 0.6795 0.6750 0.06710

Levels of resistance: 0.6850, 0.6900, and 6945

Prediction for the price of Gold: XAU/USD recovery elusive amid conflicting Fed and geopolitical worries

According to the 10-year and 5-year breakeven inflation rates from the St. Louis Federal Reserve (FRED), both of which have recently declined from their previous highs, the movements may be explained by the most recent decline in US inflation expectations.

The Federal Open Market Committee’s (FOMC) Monetary Policy Meeting Minutes indicated that the decision-makers contemplated easing the rate rise trajectory if necessary, significantly increasing the focus on inflation expectations. Yet, the widespread debate over the need for further rate increases and the hawkish remarks by Federal Reserve Bank of New York President John Williams and President of the St. Louis Federal Reserve James Bullard contradict the dovish tilt around the Fed.

A corrective rebound in the price of Gold and the most recent moderately optimistic feeling might be attributed to US President Joe Biden’s remarks. According to the most recent remarks made by US President Joe Biden, he believes that his Russian counterpart is unwilling to use nuclear weapons by breaking an international agreement.

Yet, the newest round of escalation between the West and China has raised new concerns about the Ukraine-Russia confrontation that is far from ending. The Wall Street Journal (WSJ) recently reported that the US is considering disclosing information about a possible weaponry transfer from China to Russia. The geopolitical problems previously worsened due to China-Russian relations since the US aggressively opposed such actions and supported the hasty retreat to safety.

S&P 500 Futures, among these bets, rebounded from the monthly low to post modest gains of around 4,020.

The US Core Personal Consumption Expenditures (PCE) Price Index data, the Fed’s preferred inflation indicator, will be released on Friday. Meanwhile, global news and supplemental US data will be crucial for new momentum.

Technical Examination:
The price of Gold rises from a six-week-old horizontal support area, around $1,825-23, while the RSI (14) line rises and the MACD signals become erratic. However, the 50-Simple Moving Average (SMA) barrier at $1,842 protects the XAU/near-term USD’s gains.

Following that, the metal’s recovery moves may be tested at the $1,846 level of the 61.8% Fibonacci retracement of its upward movement from mid-December 2022 to early February 2023 before being directed to the $1,890 level of the February 09 swing high, which also includes a 38.2% Fibonacci retracement.

It’s essential to remember that the swing low of $1,901 on January 31 can serve as the final line of defense for Gold sellers before leading them to the monthly top of $1,960.

Alternately, a breakdown to the downside of the $1,825-23 horizontal support zone might push the price of Gold down to the $1,813 level of the 78.6% Fibonacci retracement and then to a three-week-old declining support line, which is at $1,803.

If the price of Gold declines after reaching $1,803, the round number of $1,800 can serve as another negative barrier.

Notwithstanding the recent recovery, the gold price is still mainly on the bears’ radar.

At 0.8800, EUR/GBP oscillates and seems fragile in the face of hawkish BoE wagers.

Given rising hawkish BoE wagers after an improvement in UK preliminary PMI data, the EUR/GBP seems vulnerable around 0.8800.
UK’s Hunt is hearing requests to reduce taxes and increase compensation for public employees from his own Conservative Party.
ECB Lagarde plans to extend the policy tightening period by 50 basis points till March.

In the Tokyo session, the EUR/GBP pair cannot move in any direction due to the lack of a prospective trigger. The cross fluctuates around 0.8800 and is anticipated to show additional weakening as the Bank of England continues tightening policy in response to the UK economy’s rebound and a labor shortage (BoE).

Given the extraordinarily gloomy economic outlook, investors were split on whether the Bank of England (BoE) should continue raising rates to combat persistent inflation or stop policy tightening. Labor shortages and rising food prices are continually wreaking havoc, and this instability might push inflation at any point to new highs.

The UK Consumer Price Index (CPI) has undoubtedly moderated in recent months, but the headline CPI number is still double-digit and enough to worry families.

However, the preliminary S&P Global PMI (Feb) data, issued this week, showed a resurgence in economic activity, suggesting that labor demand may be further boosted and that BoE Governor Andrew Bailey should continue tightening monetary policy. A preliminary Manufacturing activities number below 50.0 implies contraction. However, the rate of activity decrease has slowed substantially.

The BoE panel expects the interest rate to peak around 4.5%, and they believe the March monetary policy meeting will justify continuing the rate climb.

According to Reuters, UK Financial Minister (FM) Jeremy Hunt is now pressured to lower taxes in his March 15 budget and increase pay for public sector employees from trade unions, which might intensify inflationary pressures.

The European Central Bank (ECB) President Christine Lagarde’s clarification of the size of the rate rise has reduced some ambiguity on the Eurozone front. To maintain the downward pace of inflation in the Eurozone, ECB Lagarde has declared that the rate rise cycle would continue at 50 basis points in March.

NZD/USD Price Analysis: Further gains over 0.6250 are expected as the risk-on urge develops.

After feeling buying demand around 0.6210 in the Asian session, the NZD/USD pair has rebounded substantially. The Kiwi asset has extended its recovery to around 0.6250 following a responsive purchasing activity and is trying to continue its range expansion further as the risk-on impulse has strengthened.

Investors have assimilated that the United States galloping inflation requires prompt treatment; hence, the Federal Reserve (Fed) cannot interrupt the policy tightening spell since it would weaken the efforts already done to bring it down. The US Dollar Index (DXY) resists any declines after correcting to approximately 104.00. Nonetheless, strong market sentiment may continue to put pressure on safe-haven assets.

NZD/USD is trying to break out of the Symmetrical Triangle chart pattern, which suggests a significant decrease in volatility hourly. The chart mentioned above pattern’s downward-sloping trendline is drawn from the February 20 high at 0.6262, while the upward-sloping trendline is drawn from the February 17 low at 0.6204.

The Kiwi asset has effectively lifted its auction above the 50-period Exponential Moving Average (EMA) at 0.6233, indicating that there is still room for additional upward.

Meanwhile, the Relative Strength Index (RSI) (14) is about to break into the bullish zone of 60.00-80.00, triggering upward momentum.

Please click here for the Market News Updates from 22 February, 2023.