Gold hits 6-month top as USD and yields slide

Headlines

* Gaza truce extended by two days, Qatar and Hamas say

* Cyber Monday forecast boosted after record online holiday sales

* US dollar extends losses on quiet Monday to kick off last week of November

* Gold climbs to six-month high on softer USD, lower Treasury yields

FX: USD settled marginally lower after closing last week on the defensive. The index is now trading below the 200-day SMA at 103.61 and the 50% retrace support of the July/October rally. Last week’s low was 103.17. Treasury yields dipped again after the 10-year yield popped above 4.50% before falling.

EUR closed near its intraday high, a few ticks away from last week’s top at 1.0965. The data highlight this week will the inflation release on Thursday. Further disinflation is expected which should support the 70bps of ECB rate cuts currently priced by money markets. The 61.8% Fib level of the summer drop is at 1.0959.  

GBP pushed higher to a new top at 1.2644 before finishing just below. Last week’s pro-inflation, pro-growth Autumn Statement of tax cuts is helping sterling, plus the better PMI data. Around 45bps of easing are currently expected by futures from the BoE in 2024. There are several MPC speakers scheduled this week, but data releases are light.

USD/JPY dipped below the 50-day SMA at 149.63. Small yen gains come on the back of US Treasury yields edging lower. Last week’s low was 147.15, but a bullish candlestick pattern ultimately printed.

AUD advanced past the 200-day SMA at 0.6581. The 50% point of the summer decline sits at 0.6584 to reinforce this zone. Eyes are on retail sales and CPI data this week.

Stocks: US equities closed lower as investors digested weak US housing data and waited inflation data later this week. The S&P 500 lost 0.2% to settle at 4550. The tech-heavy Nasdaq 100 finished 0.13% lower at 15,961. The Dow edged 0.16% down to close at 35,333. Retailers gained on Cyber Monday amid reports the shopping season kicked into gear with record $12 billion of sales. The resilience of the consumer and labour market tightness amid signs of softer data have seen markets digest the real chance of a Fed pivot.

Asian futures are mixed. APAC stocks declined on Monday heading into month end. Geopolitical headlines around the Israel-Hamas truce hung over risk sentiment. The ASX 200 closed lower as tech gains were overshadowed by softness in mining and defensives.

Gold hit a fresh six-month high at $2018 before closing near the October tops. The sinking dollar helped initially while yields seen falling next year underpin support. Thursday’s PCE report could be key for more upside in bullion with bullish momentum currently strong.

Day Ahead – Australia Retail Sales

October retail sales in Australia are seen printing lower than the prior 0.9% at 0.2%. Economists says that some of the September bump seems to have been temporary after product releases and special events. This came after 0.3% and 0.6% gains in July and August.

The aussie has enjoyed a strong rally over the past week as the RBA’s new chief, Michele Bullock, has continued to strike a hawkish tone amid renewed concerns about inflation. That means this data and Wednesday’s monthly CPI prints will undoubtedly grab some attention. More positive global risk sentiment has also acted as a tailwind in recent weeks.

Chart of the Day – AUD continues higher

We wrote less than two weeks ago about AUD/USD breaking higher. The zone just above 0.65 now becomes decent support. This includes the August, September and November highs, plus a major Fib level (38.2%) of the July decline. Prices are now trading around the halfway point of the summer drop at 0.6592 and the 200-day SMA just below at 0.6581. The next retracement level (61.8%) to the upside is 0.6659.

AUTHOR

Jamie Dutta >

Jamie Dutta is a Market Analyst for Vantage. He comes with extensive experience as a full-time trader and financial market commentator, having worked as a trader in top tier investment banks and trading houses.