Gold, gold, gold! It’s been quite the rollercoaster ride for Gold. and it looks like the ride isn’t over yet. For the second day in a row, the XAU/USD is struggling to gain any momentum, despite a modest uptick in the US dollar. What’s going on, you ask? Well, it seems that the Federal Reserve’s hawkishness is making investors confident that interest rates will continue to rise, causing the dollar to rally and putting a damper on gold’s shine.
But wait, there’s more! The looming risk of a recession and a softer risk tone are helping to keep gold afloat, even as it struggles to make gains. The safe-haven asset is holding steady as investors hedge against potential economic headwinds caused by rising borrowing costs.
Technically speaking, bearish traders are looking for a break below $1,969 before positioning themselves for a further slide in gold’s value. But if the Gold prices can rally and break above the $2,000 psychological barrier, it could signal a reversal in the downtrend and a surge towards the YTD peak.
So what does this all mean for traders? It’s time to grab a cup of coffee, sit back, and watch the gold market with bated breath. As always, the path of least resistance is uncertain, but with the right strategy and a bit of luck, there’s always a chance for profit.
The US Dollar Index might be dropping, but the commodity currencies are feeling the pressure today. There’s some key data coming up, so buckle up! The US S&P Global PMI report is on the horizon and all eyes are on the economic outlook.
Now let’s talk about our Aussie friend. The AUD/USD pair may have hit a low during the European session at 0.6678 (ouch!), but it quickly bounced back up above 0.6680. Recently, it even managed to climb back above 0.6700, and it’s still trimming losses ahead of the important US economic data release.
At 13:45 GMT, we’ll get our hands on the preliminary April US S&P Global PMI numbers. These figures will be highly relevant to market participants who are looking for clues about the future economic landscape.
The US Dollar Index is currently down 0.10%, trading at 106.80. The slide is driven by a resurgence in EUR/USD and an extension of the decline in USD/JPY. Meanwhile, the commodity currencies block is taking a hit on Friday.
Earlier today, the April PMI from Australia showed the Manufacturing Index at 48.1, which is lower than March’s 49.1. But there’s some good news too – the Service Index is up from 48.6 in March to 52.6, the highest reading since June 2022.
So what’s the short-term outlook for the AUD/USD pair? Well, it’s currently holding above the 0.6680 support area. If it falls below this level, the outlook would weaken for the Aussie. However, while it remains above, AUD/USD is expected to move sideways.
If the Aussie wants to strengthen its outlook, it needs to rise and hold above 0.6750. Above that level, the next resistance area is at 0.6775, and the last line of defense is at 0.6800.
We hope you found this article informative and fun! Don’t forget to check out our other blogs on Forex trading and stay tuned for more updates.
The US Dollar is on fire! It surged across the board following the release of the S&P Global PMI survey data, leaving the EUR/USD pair retreating but still holding above daily lows. The pair fell faster than a skydiver without a parachute from nearly 1.1000 to daily lows.
What Boosted the US Dollar?
The PMI data signaled solid growth in private sector output, with the headline figure registering an 11-month high of 53.5 in April (Mar: 52.3). Companies noted that improved demand conditions supported growth, sending the Composite PMI soaring from 49.2 in March to 50.4. The S&P Global Manufacturing PMI and Service PMI also rose, exceeding expectations and coming in at 50.4 and 53.7, respectively.
The report sent US yields skyrocketing to daily highs, and the DXY turned positive, soaring towards 102.00. Meanwhile, the EUR/USD pair plummeted from its week-long high of 1.0993 to 1.0941, although it remained above the daily lows.
Earlier on Friday, the preliminary April PMI for the Euro Zone was a mixed bag, with the Manufacturing Index dropping from 47.3 to 45.5 while the Service rose unexpectedly from 55 to 56.6. Manufacturing hit the lowest level since May 200, while the Service rose to its highest level since April 2022.
Short-Term Outlook:
Although the EUR/USD pair weakened during the last hour, it still stays above the 1.0920/30 area. Traders can take advantage of the latest market analysis and make savvy decisions by exploring other blogs on Forex trading, currency pairs, technical analysis, fundamental analysis, and economic indicators on Edge-Forex‘s website.
Don’t miss out on valuable insights that can help you become a successful trader! Check out our other blogs today.
Hold on to your hats, Kiwi watchers! The quarterly consumer inflation figures from New Zealand are due during the Asian session on Thursday, and the team at TD Securities (TDS) has some spicy predictions. They’re expecting Q1’23 CPI inflation to heat up to 1.7% q/q (that’s up from 1.4% in Q4’22), and they’re predicting an annual forecast of 7.1% y/y. That’s higher than market consensus, but slightly below the Reserve Bank of New Zealand’s (RBNZ) own forecast.
What’s driving this spicy inflation? Housing costs and food are the major culprits, but the annual increase in tobacco excise is also contributing to the heat. And while lower fuel prices should help to cool things down a bit, that relief might be short-lived given recent OPEC production cuts.
All in all, TDS thinks inflation is too hot for the RBNZ’s liking and they’re predicting another 25bps hike at the May meeting. So hold onto your wallets, New Zealanders, things are about to get spicy!
Don’t forget to check out our other blogs for more insights into the latest market trends and news. From the US Dollar to New Zealand’s CPI inflation figures, we’ve got you covered. Click here to read more and stay up to date with the latest developments in the world of finance.
A trading performance measure known as the “profit factor” is the ratio of gross earnings to gross losses. A lucrative system has a profit factor of more than 1.0; one of 2.0 or more is deemed excellent, and one of more than 3.0 is exceptional. The Profit Factor should be used with other indicators to provide a complete picture.
What does the Profit Factor mean?
These days, market analysis programs let traders swiftly examine trading methods. Also, you may make strategy performance reports and use them to evaluate your actual trading outcomes. Backtesting analyzes a system’s performance over a predetermined period by applying trading rules to past data.
Relevant performance indicators are more than just data; they also serve a variety of essential purposes, including:
Control and direct the creation of a trading strategy.
Compare trading results to the desired benchmarks.
Identify possible issues.
Since the approach needs to consider the volatility of returns or maximum drawdown, we cannot conclude that it is appropriate based only on the return. As processes must be quantified to be evaluated for performance, the profit factor is the most popular approach.
The profit factor is the gross profit ratio to the gross loss (including fees) throughout the trading period. This performance indicator enables us to comprehend the benefit obtained per unit of risk. A lucrative, non-risk-adjusted system is one with a profit factor larger than one.
Hedge Funds employ Profit Factor, an effective risk management measure, to assess traders. The key benefit of the profit factor is that, in addition to being straightforward to calculate, it shows us how much we make for every dollar we lose. Suppose, for instance, that your profit factor is 1.5. You can make $1.50 on an investment of $1.
How is the profit factor calculated?
This week, we are developing a brand-new trading system with four entry indications. With slippage and transaction costs, there are two winners worth $500 and $300 and two losers worth $200 and $150.
The results of the profit factor formula are as follows:
($500+$300)/($250+$150)= 2.28
As a result, the winning transactions outnumber the losing ones by a factor of 2.28. It also shows we can make $2.28 for every $1 spent with this technique. The profit factor indicates that our tactic is lucrative. Four transactions are insufficient to evaluate a trading system’s effectiveness.
Use this as another illustration:
Let’s assume we made five deals this time, three of which were profitable, and the other two were unsuccessful. The winners are $250, $150, and $200; $300 and $500 are the losers. By using the algorithm, we get the following Profit factor:
($250+$150+$200) / ($300+$500)= 0.75.
As a result, we may claim that our wins are less frequent than our losses or that we only make $0.84 for every $1 invested. This trading approach requires development.
We may examine several situations using a few variations of the Profit Factor calculation. One such example is:
The average win is determined by dividing the total number of winning transactions by the total number of deals. It represents the estimated value of a typical successful deal.
The average loss is determined by dividing the total number of losing transactions by the total number of winning deals. It represents the estimated loss on a typical deal.
Let’s use a scenario with five entrance signals in a week to grasp this better. One person wins 5000, and four lose (1500+ $1000+ 500+ 200). The profit component is thus:
$5000/ ($1500+$1000+$500+$200) = 1.56
The system is lucrative, as shown by the outcome. However, the measure must demonstrate a high Drawdown and low Win rates. Several losses in succession will be difficult to withstand, and one particular transaction does not guarantee that the overall trading strategy will be successful.
A Good Profit Factor: What Is It?
We may make more money than we lose if the ratio is bigger than one. In such cases:
A factor greater than 1 indicates a successful system.
A losing system has a factor that is less than 1.
Therefore, trading is not recommended for trading methods with a profit factor of little over 1. Since even a little shift in the market might make a trading strategy useless, you should trade these trading techniques first. This is because a low-Profit factor indicates a narrow margin, which is not ideal for trading. Moreover, we’re talking about unadjusted returns, which means that if we’re barely profitable, we should invest in a secure, guaranteed return vehicle like at-bills rather than taking on risk.
We would always want to use a trading strategy with a large safety margin. Any value between 1.25 and 1.75 indicates a tiny safety margin.
Also, you will be responsible for paying certain out-of-pocket expenditures such as taxes, market data costs, broker commissions, bank commissions, and fees for trading platforms. These costs are necessary for the trading industry and must be covered out of your trading income.
Gain-to-Pain Ratio (GtPR)
A close relative of the profit factor is the gain-to-pain ratio (GtPR). The Gain-to-Pain Ratio (GtPR) and profit factor calculations are identical, except that the GtPR divides the absolute amount of the net trading loss for the period by the net profit of all the weekly or monthly deals.
To put it simply, the Gain-to-Pain ratio shows how much suffering is necessary to get a certain degree of benefit. The GtPR will always be positive, much like the Profit Factor.
Whereas a one-year data set is an effective performance measure, GtPR should preferably be maintained over three and five years. A GtPR of at least 1.0 and at least 2.0 is considered great.
What are the drawbacks of the profit factor?
The Profit Factor does not disclose the allocation of the transactions in the trading system. A profit factor over one only sometimes indicates a persistent trader. Even if all other transactions have ended in losses, one successful trade might have a favorable effect.
As a consequence, even while the profit component aids in evaluating the effectiveness of the trading system, it is crucial to evaluate the whole picture and compare the outcome with a few other essential factors. Among these ideas are the following:
The number of transactions processed by the trading system.
If the maximum drawdown exceeds the trader’s risk limit.
The amount of dispersion in a trading system’s outcome.
The number of successful trades.
The average per-trade profit.
The trader must identify the important ratios to analyze a trading strategy objectively. There are better courses of action than considering the profit aspect alone. The numerous measures enable us to view the broader picture and provide a more accurate analysis since they complement one another.
The Summary
A mathematical ratio, the profit factor, is created by dividing total earnings by gross losses. The most suitable values are between 1.75 and 4. However, we are dubious about values that fall and are outside of this range. A low-profit factor indicates a worse trading strategy, while a ratio of greater than 4.0 may appear unrealistic in real life.
Automated or algorithmic trading is one approach to addressing these scatterings and volatility in the actual world. This enables you to choose a variety of tactics that may smooth out your returns.
If you had a portfolio of quantifiable strategies, you could do this. Due to its variety, using many procedures might result in a larger profit factor.
You need to engage in several markets throughout a variety of time periods if you want to strive for a larger Profit factor. Combining tactics with automatic trading will only increase its likelihood.
In this article, we have covered the highlights of global market news about the AUD/USD, USD/CHF, USD/JPY and USD/CAD.
The AUD/USD encounters resistance around 0.6660 amid varied reactions to the US financial system.
After a steady rebound to close to 0.6660 in the early European session, the AUD/USD has come under intense assault. The Australian asset has seen significant bids amid the US Dollar Index’s rebound movement (DXY). Before Wednesday’s anticipated publication of the monthly Consumer Price Index (CPI), the Australian Dollar is expected to stay active.
On Monday morning, S&P500 futures soared higher on expectations that liquidity support for tiny US banks will increase. The 500-US stocks futures basket has maintained its positive leaning from Friday, reflecting a considerable increase in market participants’ risk appetite.
The US Dollar Index (DXY) is defending the 103.00 support on the belief that positive preliminary S&P Global PMI data may dim prospects of the Federal Reserve completing its rate-hiking cycle (Fed). Manufacturing PMI increased to 49.3 from the previous reading of 47.3 and the consensus of 47.0. At the same time, Services PMI increased to 53.8 from forecasts of 50.5 and 50.6 in the previous report.
USD/CHF is tracking bearish options market indications below 0.9200.
As markets become lethargic ahead of Monday’s European session, the USD/CHF pares its losses to about 0.9185 but remains under pressure. So, the Swiss currency pair (CHF) reflects the traders’ apprehension in the lead-up to the important Swiss National Bank’s (SNB) quarterly Bulletin and the Fed’s favored inflation indicator, the Core Personal Consumption Expenditure (PCE) Price Index.
But, by the close of Friday’s North American session, the USD/CHF pair’s one-month risk reversal (RR), a measure of the spread between call and put options had posted a three-day losing streak. It’s important to note that the daily RR decreased as recently as -0.010.
The weekly RR, which printed 0.000 numbers the week before, plummeted to -0.040, which pleased the pair sellers daily.
Because of this, the USD/CHF pair’s present weakness is still legitimate even if the markets continue to be unsteady before important data or events.
USD/JPY is in a four-day slump at 130.50, with all eyes on Japan/US inflation data.
Even if markets are quiet early on Monday, USD/JPY appeases bears for the fourth straight day.
The recent weakening in the Yen pair may be attributed to traders’ rush to the Japanese Yen (JPY) in pursuit of risk protection and impending concerns about the US and European banking sectors. The recent divergence between the market’s perception of the Federal Reserve’s (Fed) and the Bank of Japan’s (BoJ) upcoming actions seems to be impacting the quotation lately.
IMF Head Kristalina Georgieva cautioned that “risks to financial stability have escalated,” despite Bloomberg’s inspirational headlines indicating that US and European governments are up for managing the bank fallouts. The report that suggested that Russia was moving its nuclear weapons close to Belarus further increased market apprehension.
Neel Kashkari, the president of the Minneapolis Fed, signaled worries about a US recession and restrained demands for the US central bank to raise interest rates, which put downward pressure on the USD/Yen exchange rate.
USD/CAD declines to close to 1.3710 as expectations of a BoC policy tightening restart grow.
In the Asian session, the USD/CAD pair set a new day low of 1.3725. After the publication of Canadian solid Retail Sales data, the US Dollar Index’s (DXY) muted performance and growing expectations for a return to policy tightening by the Bank of Canada (BoC) support the downward movement in the Loonie asset.
S&P500 futures have made significant gains throughout the Asian session as market players have become more confident as US officials explore increasing the emergency lending program. The US Dollar Index (DXY) needs to gain momentum as the market anticipates the Federal Reserve’s policy-tightening cycle to end (Fed). The Dollar Index is holding onto the 103.00 support, although a fall seems more likely.
Predictions for pausing the Fed’s rate-hiking cycle are intensifying as American banks’ loan standards tighten due to the unrest. Banks are taking greater security measures while distributing advances. Financial institutions have suffered dramatically due to a bloody battle against persistent inflation.
Positive Retail Sales (Feb) numbers have increased the likelihood that the Bank of Canada will resume its policy-tightening drive, which is good news for the Canadian Dollar (BoC). The BoC stopped raising rates at the beginning of the year because it believed the present monetary policy was restrictive enough to keep inflation under control.
Please click here for the Forex News Updates from 24 March, 2023.
Understanding the bigger picture, how different aspects relate, and how specific procedures work may be difficult in any profession. This is often made worse by a particular language and many terminologies that are only sometimes utilized consistently and uniformly. A trader may take a long warrant position, betting on increasing prices, or a short warrant position, betting on a decrease in the underlying value, depending on the outcome they anticipate for the underlying.
The leverage is excessive if the warrant is a knockout or turbo warrant and may significantly increase the profit. But, the underlying price could go against expectations and beyond the so-called knockout barrier, in which case the value of the knockout warrant would expire with zero value.
The financial markets haven’t changed much for a long time, but recently there has been some movement. The average retail investor has gone a long way, even though there are now more asset classes, instruments, and strategies than ever. Understanding the variables that impact markets has become more challenging.
In Europe, a rising tendency towards self-directed financial investing and increased expertise among individual investors result from a confluence of factors. On the one hand, a generation of people was born into the digital age and have yet to overcome obstacles to utilizing digital apps. Because of this, there is now more autonomy in every area thanks to digital information collecting and sharing. On the other hand, due to technological advancement, even older generations have given up their qualms about access to trading and investment.
Technology advancements have always been crucial in providing access to previously only open regions to a few participants by simplifying and decreasing the cost of such access. Yet, the reason why individuals choose to participate is a sometimes disregarded aspect. Although there are sometimes transient trends or hypes, significant pattern shifts are longer-term occurrences that are often economically motivated, whether the current interest rate environment or longer-term factors like the hazy future of national pension systems.
While certificates had been there for a while, it wasn’t until the dot.com bubble burst that ordinary investors started looking for alternatives to the buy-and-hold equities strategy and ways to safeguard their portfolios or benefit from declining stock prices. Twenty years later, as we have become used to one major crisis being followed by another and as volatility has become a continuous companion, ordinary investors are now expected to look for methods to maximize their trading revenue. One such option is certificates, especially ones with leverage.
The History and Classification
Securitized derivatives are the most popular generic name for goods of such kind that are structured for sale. The first covered warrants were issued in Germany and Switzerland in the 1980s. They afterward spread to France, Italy, and the UK (today, covered warrants represent just a tiny part of traded securitized derivatives). Securitized derivatives in the European market may be separated into investment products (which have 100% participation) and leverage products. The exposure to the performance of an underlying asset is developed via leverage instruments, such as warrants, with a greater degree of exposure than putting the same amount of money directly into the underlying financial instrument or asset.
Investment goods include credit-related notes, participation products that increase yield, and capital protection products. Leverage products are further broken down into continual leverage, knockout products, and products without a knockout.
The European countries of Germany, France, Italy, Sweden, Spain, Switzerland, The Netherlands, Austria, Belgium, and the United Kingdom are the most important markets for securitized derivatives.
How do goods with leverage operate?
The price development of the underlying asset affects how much a leveraged product costs. Although the remaining maturity, the strike price, and the amount of the underlying’s variation (implied volatility) all affect the price of an option certificate, leverage instruments like warrants participate virtually linearly in the underlying asset’s performance. Warrants themselves may be purchased as knockout- or knock-out-free items.
According to how the value of the underlying asset fluctuates with the leverage and has a corresponding impact on the value of the warrant, the leverage of the warrant shows by how much its value increases or decreases.
Knowing the underlying, the subscription ratio, and the knockout barrier are necessary to determine the value of a turbo warrant. The difference between the price of the underlying and the knockout barrier determines the turbo warrant’s value. The subscription ratio is then multiplied by the result. The leverage will then be determined by multiplying this result by the subscription ratio after dividing the underlying price by the turbo warrant price.
Risks and Chances
Compared to a direct investment in the underlying, one of the most noticeable benefits of turbo warrants is that you only have to pay a small portion of the entire value of your transaction to create a position. The possibility of achieving a considerable profit is another possibility. Moreover, investors can access all major financial markets via leveraged products, including commodities, indices, currencies, FX, and stock markets. Trading leverage goods is the only option for retail investors to profit from increasing and falling prices, making it the only opportunity for a retail investor to join into a hedge that is not conceivable without a derivative. Their appeal is increased by the ease with which leverage products may now be traded.
Turbo warrants, on the other hand, are only appropriate for investors who are conscious of and capable of accepting the associated risks. Although it is possible to gain disproportionately from price changes, losing all the money invested is also conceivable. Even if you have invested less than you would have had you purchased the underlying item directly, and the loss is limited to the amount spent by reaching the knockout level, it is still a loss.
What should traders of turbo warrants watch out for?
Consumer behavior has changed significantly as a result of technological advancement. People should also want this in the trade, as they demand high standards of service, prompt replies, flexibility, transparency, and competitive costs in most cases. This is not done to be demanding but rather because there are significant disparities across providers, and on-venue trading is the first thing investors should be cautious of.
Their transactions will be completed on a regulated trading platform, which guarantees non-discretionary handling of orders, a high degree of transparency, and the security of a setting closely supervised by regulatory authorities. The limitlessness of trading—the longer the trading hours, the better—is another crucial factor, particularly for those who trade securitized derivatives with knockouts. High liquidity is also crucial when dealing with turbo warrants since you want to locate the relevant bid and offer quotations for any purchasing or selling interest.
In this article, we have covered the highlights of global market news about the AUD/USD, GBP/USD, USD/CAD and NZD/USD.
AUD/USD: Weak near-term forecast continues, according to UOB
According to UOB Group economists Lee Sue Ann and Quek Ser Leang, the short-term outlook for AUD/USD indicate that the slide might continue to the 0.6680 zone.
24-hour perspective: “We emphasized last Friday that despite the sluggish downward pace, we continue to see an opportunity for AUD to hit 0.6775 before a more prolonged comeback is expected.” While our prediction that the Australian dollar would decline was accurate, instead of challenging the level of 0.6775, the Australian dollar plunged to a low of 0.6719 and closed at 0.6726 (-1.20%). While more AUD weakening is possible, any fall today is unlikely to jeopardize the primary support around 0.6680 because of the highly oversold circumstances. A breakthrough of 0.6785 (minor resistance is at 0.6760) on the upside would suggest that the AUD’s weakness has steadied.
For the next three weeks: “Our most recent commentary was from last Thursday (February 23, spot at 0.6810), in which we said that the Australian dollar “is expected to decline further to 0.6775, potentially 0.6730.” Our prediction came true when the Australian dollar plunged to a low of 0.6719 on Friday. The following levels to monitor in AUD are 0.6680 and 0.6630, as the outlook in that currency remains poor. Overall, a break of 0.6820 (a strong resistance level formerly at 0.6890) would signal the conclusion of the AUD downturn that began more than a week ago.
GBP/USD: UOB expects more declines below 1.1870
According to UOB Group economists Lee Sue Ann and Quek Ser Leang, a break below the 1.1870 barrier are predicted to cause the GBP/USD to continue losing ground.
“We warned last Friday that GBP “is expected to push lower,” but we maintained the belief that “the support around 1.1950 is unlikely to come under assault.” 24-hour view The expected decrease came sooner than we anticipated, with the pound breaking through 1.1945 and falling to 1.1928. While there has been a drop, the downward momentum has hardly changed. Yet, the pound is expected to lose ground even if a persistent slide below 1.1915 seems improbable (the next support is at 1.1870). Resistance is found at 1.1975, then 1.2000.
For the next three weeks: “On Friday (February 24, spot at 1.2020), we said that ‘downward momentum is showing signs of growth, but GBP needs to breach the main support around 1.1950 before a protracted slide is possible. The fact that the GBP broke through 1.1950 in NY trading and fell as low as 1.1928 surprised us somewhat. While the price actions indicate the danger for the pound is to the downside, it has to break through further significant support around 1.1870 before it can continue to fall. The downside risk remains as long as 1.2050 (a “strong resistance” level that was at 1.2105 last Friday) is not crossed.
USD/CAD maintains small advances over the 1.3600 level and is headed for more appreciation.
After a Monday intraday slump to levels below 1.3600, the USD/CAD pair draws some buying and reaches a new daily high in the early European session. The pair’s current price is about 1.3625, although it is still below the high point reached on Friday, which was the highest level since January 6.
On the opening day of a new week, Crude Oil prices encounter additional supply, which is expected to weaken the commodity-linked Loonie and strengthen the USD/CAD pair. The likelihood of weaker Russian exports is overshadowed by concerns that the economy would develop more slowly and gasoline consumption would decline due to fast-increasing borrowing costs. This, in turn, makes it difficult for oil prices to continue their two-day-old upward trend after their previous Thursday’s almost three-week low.
Aside from this, speculations that the Bank of Canada (BoC) would halt the cycle of tightening monetary policy weighing on the home currency are supported by weaker Canadian consumer inflation data reported last week. In contrast, in the midst of persistently rising inflation, the Federal Reserve is anticipated to maintain its hawkish posture. This maintains the safe-haven US Dollar stuck at a multi-week high, giving the USD/CAD pair a boost and a milder risk tone.
NZD/USD falls near 0.6100 on concerns about weak New Zealand consumption and increasing Fed rates.
With depressed New Zealand (NZ) fundamentals conflicting with the US Dollar demand, NZD/USD bears maintain control at the lowest levels since November 2022, down 0.5 percent at 0.6130 early Monday.
Despite this, NZ Retail Sales for the fourth quarter (Q4) came in at -0.6% QoQ, lower than the 1.5% forecast and 0.4% previous.
On the other side, Paul Conway, chief economist of the Reserve Bank of New Zealand (RBNZ), stated: “As interest rates increase, I anticipate consumption to slow.”
Strong US inflation-related statistics and Fed officials’ support for higher rates combined to push the Fed fund futures over 5.30%, compared to the 5.10% the US central bank had anticipated in December. These factors combine with the most recent Western sanctions against Russia to heighten market concerns about rising geopolitical conflict, supporting demand for haven assets like the US Dollar.
Please click here for the Market News Updates from 24 February, 2023.
Silver rises a little on Friday but doesn’t continue over $24.00. Bullish traders are favored by the technical setup, which also provides opportunities for further gains. The optimistic picture will be destroyed with a strong breach under trend-channel support.
In the Asian session on Friday, silver makes gains on the previous day’s decent recovery from the $23.15 region or a two-week low. However, silver finds it difficult to acquire traction or maintain it above the $24.00 level, and it has already partially given up some of its small intraday gains.
Technically speaking, the bottom end of an ascending channel that has been in place for more than a month served as support for the XAG/USD on Thursday. The following uptick indicates that this week’s decline from the $24.50 resistance area has reached its conclusion. Additionally, oscillators on the hourly charts have resumed their upward trend and barely manage to stay in the bullish zone on the daily chart.
The aforementioned technical situation favours the possibility of a continued upward movement, but aggressive bullish traders should exercise care given the absence of follow-through purchasing. The XAG/USD still seems prepared to retest the multi-month top, at $24.50, before attempting to overcome the trend-channel resistance. The latter is now valued slightly over the psychological $25.00 threshold.
On the 4-hour chart, the 200-period SMA at $23.55 guards against the near-term downside on the other hand. The overnight swing low, at $23.15, and the trend-channel support, in the $23.40-$23.35 region, are closely behind this. The XAG/USD pair will be more susceptible to weakness below the $23.00 level if there is a clear breach below the aforementioned support levels, which will be considered a new trigger for bearish traders.
Before the XAG/USD finally dips to the $22.10-$22.00 area, the following pertinent support is set around the $22.60-$22.55 region. The latter indicates a static resistance breakpoint and could, at least temporarily, serve to prevent any additional losses.
Gold’s price drops from a five-month high as the US Dollar somewhat recovers intraday. US Treasury bond rates are increasing, putting pressure on the XAU/USD and reviving USD demand.
Risks associated with the price of gold should be limited by bets on the Federal Reserve hiking rates less firmly. Gold’s price falls from the $1,810 area, or the five-month high hit earlier this Monday, failing to benefit from the intraday gain. The XAU/USD slips below $1,800 during the early part of the European session and is now perched on a potentially dangerous 200-day Simple Moving Average (SMA).
The slight US Dollar resurgence is putting pressure on the price of gold. Following an early dip, the US Dollar has only partially recovered from its lowest position since late June, which is anticipated to impact the price of gold denominated in US dollars. The US’s Friday release of solid monthly employment figures and a pleasant surprise in pay growth raised the possibility that inflationary pressures will increase further. This improves the position of the dollar and fuels speculation that the Federal Reserve will continue to tighten monetary policy.
The price of the XAU/USD pair is further hampered by rising US Treasury bond rates. The Federal Reserve’s chairman, Jerome Powell, also predicted that the peak interest rate would be higher than expected this week. Consequently, the price of US Treasury bonds rises throughout the day, which is seen as another factor supporting the US Dollar and pulling money away from the non-yielding Gold price. Further weighing on the XAU/USD is the recent optimism about easing COVID-19 restrictions in several Chinese cities, which has dampened demand for traditional safe-haven assets.
To limit losses, the Federal Reserve wagers on slower rate hikes. At its next meeting on December 13–14, the Federal Reserve is anticipated to increase interest rates by a relatively small 50 basis points, but the downside is anticipated to remain cushioned—at least briefly. In the event of any big corrective slump, this should continue to support the price of gold, requiring careful positioning. The US ISM Services PMI, announced later during the early North American session, is now being anticipated by traders for short-term possibilities.
Technical Gold Price Outlook
Technically, last week’s extended surge past the significant 200-day SMA was seen as a brand-new trigger for bullish traders. Thus, buyers are more likely to be drawn to the $1,783–$1,782 range in the case of a future slump. The price of gold should thus be limited in its upward movement to the support level that served as the horizontal resistance breakpoint between $1,761 and $1,760.
On the other hand, unless some follow-through buying happens beyond the $1,810 zone, bulls may want to delay placing further bets. The price of gold may then continue to increase, perhaps reaching the next significant obstacle on the road to the supply zone between $1,843 and $1,845 near the $1,830 region.
