DAILY MARKET OVERVIEW-3.4.2024 |

DAILY MARKET OVERVIEW-3.4.2024

2024-04-03

RECORD HIGH ON GOLD USD2276.90. What an incredible run. Literally on a linear acclivity trend. From a technical perspective, the Relative Strength Index (RSI) on the daily chart is flashing overbought conditions, which makes it prudent to wait for some near-term consolidation or a modest pullback before the next leg up. That said, any meaningful corrective decline is more likely to find decent support and attract fresh buyers near the $2,223 region, or the previous record high. This should help limit the downside near the $2,200 mark, which should now act as a key pivotal point for the Gold price. A convincing break below the latter might prompt some technical selling and pave the way for deeper losses.

On the flip side, the $2,265-2,266 region, or a fresh record peak touched on Monday, now seems to act as an immediate hurdle for the Gold price. A sustained strength beyond should allow the XAU/USD to prolong its appreciating move further towards conquering the $2,300 round-figure mark.

Fundamental Overview

Gold price (XAU/USD) attracts some buyers for the sixth straight day on Tuesday and remains well within the striking distance of the all-time peak, around the $2,265-$2,266 area touched the previous day. The upbeat US manufacturing data released on Monday raised doubts over whether the Federal Reserve (Fed) will cut interest rates three times this year. This, along with the risk of a further escalation of geopolitical tensions in the Middle East, tempers investors’ appetite for riskier assets and acts as a tailwind for the safe-haven precious metal.

Meanwhile, the markets are now pricing in a total of 69 basis points (bps) rate cut for 2024, lower than the Fed’s projected 75 bps. This remains supportive of elevated US Treasury bond yields and lifts the US Dollar (USD) to its highest level since February 14, which, in turn, might cap gains for the non-yielding Gold price. Bulls might also prefer to wait for some near-term consolidation amid overstretched conditions on the daily chart, ahead of the US macro data and speeches by influential FOMC members later during the North American session.

The ADP Employment Change and the ISM Services PMI data will be featured in the US docket on Wednesday. A disappointing ADP data could cause markets to anticipate a weak jobs report on Friday and make it difficult for the USD to find demand. Later in the day, the market reaction to the Prices Paid Index of the Services PMI survey could resemble the reaction to Monday’s PMI report.

Finally, the BLS will release the highly-anticipated labor market report on Friday. Nonfarm Payrolls (NFP) are forecast to rise 200,000 in March following the 275,000 increase recorded in February. The Unemployment Rate is seen holding steady at 3.9%, while the monthly wage inflation, as measured by the change in the Average Hourly Earnings, is anticipated to rise to 0.3% on month from 0.1%.

Although the February NFP increase beat the market expectation by a wide margin, the USD came under selling pressure because January and December prints got revised lower. In case March NFP data comes in stronger than forecast and there are no noticeable revisions to the past readings, the USD could outperform its rivals and weigh on XAU/USD with the knee-jerk reaction. On the other hand, a weak NFP growth could hurt the USD. An upbeat NFP accompanied by downward revisions could not allow the USD to capitalize on the data.

The CME FedWatch Tool shows that markets are currently pricing in a nearly 40% probability that the Fed will leave the policy rate unchanged in June. If the jobs report highlights tightening conditions in the labor market, investors could refrain from betting on a rate cut in June and could even doubt that the Fed will lower the policy rate by a total 75 basis points this year even though that’s what the last Summary of Economic Projections suggested. In this scenario, XAU/USD could make a deep correction. In case the report keeps the expectations for a rate reduction in June by delivering a weak NFP, Gold could gather bullish momentum.

GBPUSD

The 200-day Simple Moving Average (SMA) aligns as stiff resistance at 1.2590. In case GBP/USD fails to clear that level, technical sellers could remain interested. On the downside, static support seems to have formed at 1.2540 before 1.2520 (beginning point of the latest uptrend) and 1.2500 (psychological level).

Above 1.2590, the 50-period SMA on the 4-hour chart could act as interim resistance at 1.2620 ahead of 1.2650 (100-day SMA) and 1.2670-1.2680 (Fibonacci 61.8% retracement, 200-period SMA).

GBP/USD broke below 1.2600 in the American session on Monday and touched its weakest level in seven weeks below 1.2550. The pair stages a rebound in the European trading hours on Tuesday but it could find it difficult to clear the strong 1.2590 resistance.

Renewed US Dollar (USD) strength after the ISM Manufacturing PMI arrived at its highest level since September 2022 at 50.3 on Monday weighed heavily on GBP/USD. Moreover, the Prices Paid Index, the inflation component of the PMI survey, rose to 55.8 in March from 52.5 in February, highlighting a strengthening input inflation and further supporting the USD.

Early Tuesday, the data from the UK showed that S&P Global/CIPS Manufacturing PMI got revised higher to 50.3 in March from 49.9 in the flash estimate and helped Pound Sterling find a foothold.

Later in the day, JOLTS Job Openings data for February will be featured in the US economic docket. A reading above 9 million could help the USD preserve its strength, while a print at or below 8.5 million could have the opposite effect on the currency’s performance.

Investors will also pay close attention to comments from Federal Reserve (Fed) officials. The CME FedWatch Tool shows that markets are pricing in a nearly 60% probability of a 25 basis points Fed rate cut in June, suggesting that the USD faces a two-way risk depending on policymakers’ tone. If market participants refrain from pricing in a policy pivot in June, the USD could continue to outperform its rivals.

I prefer to SELL GOLD on RALLIES.

STRATEGY

SELL GOLD 2277 exit 2230

BUY GOLD 2225 exit 2260

BUY GBPUSD 12510 exit 12610

SELL GBPUSD 12610 exit 12522

Prepared by: Mr.SAM KIMA, Senior Vice President

Disclaimer:

Goldwell Capital Co., Ltd. endeavours to ensure the accuracy and completeness of this research report. However, as the market is subject to change, the Company and our subsidiaries do not guarantee its completeness and accuracy, and the information is for reference only. Any person shall not regard such information as Goldwell Capital Co., Ltd. on leveraged foreign exchange, precious metals, stocks, and other financial products to provide real quotes, suggestions, solicitation and inducement of investment. Guests should be aware of the risks involved in the investment, the volatility of the investment market and the risk of loss can be very big, guests must carefully consider their own financial situation and investment purposes, to decide the direction of investment and the kind of investment products that are suitable for their owns.

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