Gold Drops Slightly; USDJPY Stabilises Ahead of Japanese CPI Report
2023.11.23 05:18
Gold Corrects Slightly But Remains in the Uptrend
The gold (XAU) price dropped by 0.43% on Wednesday after higher-than-expected Michigan Consumer Sentiment Index figures.
A technical rise of the (DXY) and the proximity of a 2,000 resistance level prompted some traders to close their long positions in . However, expectations that the U.S. Federal Reserve (Fed) won’t be raising interest rates soon limited XAU/USD drop. Moreover, the market is currently pricing in a 57% chance of a rate cut in May 2024. ‘The increase in the market expectations for the Fed cutting cycle to commence earlier in 2024 has been the prime force driving gold prices higher over the last week,’ said Daniel Ghali, a commodity strategist at TD Securities.
XAU/USD was rising during the Asian and early European trading sessions. The U.S. market will be closed today and early on Friday due to Thanksgiving. Thus, volatility will be subsided, but the lack of liquidity may result in sharp moves of the instruments in case of unexpected events or data.
“Spot gold may revisit its 21 November high of $2,007.29 per ounce, as it may have completed a correction from this level,” said Reuters analyst Wang Tao.
USD/JPY Stabilizes Near 149.00 Ahead of the Japanese CPI Report
The (JPY) lost 0.76% on Wednesday as the US Dollar Index (DXY) corrected upwards following a better-than-expected Consumer Sentiment report and a smaller-than-expected increase in Jobless Claims numbers.
USD/JPY has been rising since 21 November after the FOMC minutes revealed the Federal Reserve (Fed) monetary policy would remain ‘cautiously restrictive.’ Conversely, the Bank of Japan’s (BOJ) monetary policy is extremely loose, which is the main reason USD/JPY has been in a major uptrend for the past three years. Still, the market speculates that BOJ may be preparing for a tightening campaign. ‘If next year’s annual wage negotiations heighten prospects of inflation sustainably hitting its 2% target, the bank may end its negative interest rate policy in April,’ the central bank’s former Executive Director Kazuo Momma said. Increasing interest rate expectations will support the Japanese yen, which has been under pressure lately after a truce between Israel and Hamas capped gains potential due to USD/JPY’s status as a safe-haven asset.
USD/JPY fell during the early European trading session. Trading activity will be minimal today across foreign exchange markets due to the Thanksgiving holiday. However, the Japanese inflation data release today at 11:30 p.m. UTC will be vital for short-term directional guidance for currency pairs. The data could also influence current projections for rate hikes, which are anticipated to begin in late 2024. If the inflation data comes out stronger than expected, USD/JPY may drop below 147.00. However, lower-than-expected figures may push the pair towards 150.00 again.
