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Daily market analysis

Gold moves higher as US stocks falling

December 8, 2022

U.S. equities kept falling as Gold seemed as a hedge currency, S&P 500 is starting to turn more decisively lower and the gold price raised 0.86%. The Dow Jones Industrial Average has little raise to close at 33597.92. The S&P 500 dropped 0.19% to close at 3933.92. The tech-heavy Nasdaq Composite dropped 0.51% to close at 10958.55. After a result, the risk-off factor came from Moscow, mid-US session. Russian President Vladimir Putin warned that the threat of a nuclear war is rising, coming with the news, yields finished the day in the red, as demand for government bonds resurged. U.S. 10-year treasury yield sits at around 3.438%.  The policy-sensitive 2-year treasury yield sits at 4.26%.

The dollar index slipped on Wednesday, reversing the bounce of the past two days after it repeatedly failed to clear strong resistance at $105.57.Although fundamentals are getting mixed for the dollar, deflated since October by speculations that the Fed would slow the pace of its aggressive policy tightening, as the latest economic data signal that the US economy remains quite robust and less harmed by a strong rise in interest rates than initially anticipated.

Besides, earlier in the day, China announced a series of measures relaxing coronavirus restrictions, moving away from the zero-Covid policy and the US Dollar finished Wednesday with losses against most of its major rivals, despite a dismal market mood. The decline was contained, but it’s clear that the tie has changed for the American currency and more declines are now on the docket.

Main Pairs Movement

The US dollar finished with losses on Wednesday, after a consecutive rise since the beginning of the week. Earlier in the day, China announced a series of measures relaxing coronavirus restrictions, moving away from the zero-Covid policy, and another risk-off factor came from Moscow, mid-US session. Russian President Vladimir Putin warned that the threat of a nuclear war is rising, adding that nuclear weapons could be used to defend itself and its allies.

EUR/USD was up for the day but off high on Wednesday, the pair had fallen to below  1.05 following the warns by Russian President Putin about the increasing nuclear war risks, however, after two consecutive daily losses, recovering from the three-day lows, the primary trend remains bullish and is aiming the resistance at 1.0600.

The gold price rose and broke the $1780, thanks to the optimism surrounding China and the risk from  Russia’s nuclear threat, also with the United States Treasury bond prices rallied, together with the Gold price, which in turn drowned the bond yields and the US Dollar, the benchmark 10-year Treasury bond yields dropped to the lowest levels since early September by losing 3.30% in a day to 3.42% level at the latest. Further, the politic-sensitive two-year counterpart dropped 2.54% to the 4.26% mark.

Technical Analysis

EURUSD (4-Hour Chart)

EURUSD traded 0.41% higher throughout yesterday’s trading. The Euro found ample bidding at the start of the European trading session; however, as soon as the American trading session began, the Euro came under immense selling pressure as market participants bid up the Greenback. Market participants will now turn their attention to ECB president Lagarde’s speech, which is scheduled during the late European trading session. The U.S. will be releasing weekly initial jobless claims figures at the start of the American trading session. The falling U.S. treasury yield has acted as a tailwind for the Euro during recent months. As U.S. interest rate expectations fall short-term yields are expected to continue to fall; however, a definitive pivot from the Fed should not be expected at the December FOMC interest rate decision.

On the technical side, EURUSD has failed to break above our previously estimated resistance level of 1.0595. The short-term support level for the pair remains at around the 1.031 price region. The 61.8% Fibonacci retracement level of 1.0265 presents itself as a secondary support level for the pair. RSI for EURUSD sits at 52.08, as of writing. On the four-hour chart, EURUSD currently trades above its 50, 100, and 200-day SMA.

Resistance: 1.06

Support: 1.031, 1.0265

GBPUSD (4-Hour Chart)

GBPUSD snapped its two-day losing streak and headed higher throughout Wednesday’s trading. Risk-averse market sentiment sent the U.S. Greenback higher on Tuesday, but the Dollar retreated over Wednesday as U.S. treasury yields also fell lower. The most recent speech by Fed Chair Jerome Powell has convinced a majority of market participants that a pivot on the Fed’s stance on monetary policy is just around the corner; however, what these market participants fail to consider is the fact that inflation has been running at more than 9% since early 2021. The Fed’s ultimate goal of price stability and bringing inflation back down to normal levels will continue to require higher interest rates and slower growth of the economy. On the economic dockets, the U.S. will release initial jobless claims figures on Thursday and PPI data on Friday.

On the technical side, GBPUSD has failed to break above our previously estimated resistance level of 1.2349. The short-term support level for Cable exists at around the 1.177 price region. RSI for the pair sits at 55.82, as of writing. On the four-hour chart, GBPUSD currently trades above its 50, 100, and 200-day SMA.

Resistance: 1.2400, 1.2600

Support: 1.2154, 1.1927, 1.1765

XAUUSD (4-Hour Chart)

After suffering a 1.61% drop on the first trading day of the week, Gold rebounded strongly throughout Wednesday’s trading. The precious metal found relief as the U.S. Greenback retreated over falling treasury yields. Several factors could undermine the recent rally of the yellow metal, however, including China finally easing Covid-19 restrictions and the all-important FOMC meeting scheduled for December 13th to the 14th. Geopolitical tensions worldwide continue to be the central pillar supporting Dollar-denominated Gold. The prolonged war between Russia and Ukraine continues to plague the world economy and provides optimism for Gold bulls.

On the technical side, XAUUSD has consolidated around the $1770 per ounce price region and is on its way to our previously estimated resistance level of $1800 per ounce. The short-term support level for the yellow metal sits at around the $1766 per ounce price region. RSI for Gold sits at 56.04, as of writing. On the four-hour chart, XAUUSD currently trades above its 50, 100, and 200-day SMA.

Resistance: $1800

Support: $1766, $1735

Economic Data

CurrencyDataTime (GMT + 8)Forecast
JPYGDP (Q3)07:50-0.3%
EURECB President Lagarde Speaks20:00
USDInitial Jobless Claims21:30230K