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Gold hits multi-week high amid a USD decline

 

Wednesday, October 05, 2022, 8.45am GMT

The news shaping the markets today

Ukraine’s troops regained a key village in the southern part of Kherson, although Russia continues to control Kherson city. The ongoing geopolitical tensions provided some support to the US dollar this morning.


Thailand’s annual inflation rate declined to 6.41% in September, from 7.86% in the previous month. Despite this being the lowest rate since April, the THB/USD forex pair remained under pressure.


The Reserve Bank of New Zealand raised its official cash rate by 50bps to 3.5%, a level not seen since April 2015. The NZD/USD pair rose in forex trading this morning.


Japan’s services PMI was revised higher to a three-month high of 52.2 in September, versus a preliminary reading of 51.9. However, the JPY/USD forex pair remained under pressure after the news.


Australia’s retail sales grew by 0.6% to a new record high of A$34.88 billion in August, following a 1.3% growth in July. Despite this, the AUD/USD pair fell slightly in forex trading this morning.

 

What’s happening: Gold recorded sharp gains on Tuesday, as investors added more safe-haven assets to their portfolios.

What happened: Traders widely expect the US Federal Reserve to ease the magnitude of rate hikes at its upcoming meetings amid weak economic reports.

The US dollar retreating on Tuesday also played a role in sending gold prices to the highest level in several weeks.

Why it matters: Gold breached the $1,700 resistance level on Tuesday, with markets expecting the Federal Reserve to adopt a less aggressive stance due to the deteriorating growth outlook of the US economy.

Data released on Tuesday showed a decline in the number of open jobs in the US at the highest rate in around 2-1/2 years in August. With an increase in layoffs and signs of cooling in the US labour market, investors turned to safe-haven assets.

The recent report came a day after US manufacturing fell to its weakest level since May 2020. The ISM manufacturing PMI declined to 50.9 in September, from 52.8 in August, missing the consensus estimate of 52.2.

Yields on the benchmark US 10-year Treasury declined to a two-week low, while the greenback extended its downtrend, making gold cheaper for foreign currency holders.

The US dollar index, which measures the greenback’s performance versus a basket of major rivals, fell around 1.5% to 110.07 on Tuesday.

Gold recorded its biggest daily percentage rise since March on Monday and continued its uptrend on Tuesday.

Gold futures jumped $28.50, or 1.7%, to settle at $1,730.50 per ounce on Tuesday, while December silver added 51 cents to close at $21.10 an ounce, reaching its highest level since June.

December copper gained 8 cents to reach $3.49 a pound, while platinum rose around 3.5% to $933.7 and palladium surged around 5% to a five-month high of $2,330.20.

What to watch: Investors await the release of US non-farm payrolls, due on Friday, which is expected to provide more direction to the Fed’s policy tightening plans.

The markets today

European stocks will be in focus today ahead of a couple of major economic reports

Context: European stocks closed higher on Tuesday, extending gains in the previous session.

Details: On Tuesday, the European stocks mirrored the sharp rebound on Wall Street in the previous day’s session. The Dow Jones index delivered its best day since June 24, while the S&P 500 climbed the most since July 27.

Traders maintained their positive sentiment despite downbeat economic data released by the Eurozone. The bloc’s producer price inflation accelerated to a new record high of 43.3% from a year ago in August, from 38.0% a month ago, amid surging energy prices.

The pan-European Stoxx 600 gained 3.12% to close at 403.03 on Tuesday, with travel and leisure stocks leading the gains. All major sectors closed in the positive territory, with technology stocks also recording sharp gains in the session.

Shares of TUI Group climbed around 7% on Tuesday, amid a wider surge in travel and leisure stocks. Credit Suisse Group’s stock spiked around 9%, after declining more than 10% on Monday amid concerns around the lender’s financial health.

Stock markets in London gained for a third straight session, with the benchmark FTSE 100 index rising 2.57% to settle at 7,086.46. Germany’s DAX 40 gained 3.78%, while France’s CAC 40 added 4.24%.

What to watch: Traders await the release of data on services PMI and composite PMI from the Eurozone today. The S&P Global Flash Eurozone services PMI is expected to decline to 48.9 in September, from 49.8 in August, while the composite PMI is projected to decline to 48.2 in September, from 48.9 in the previous month. Markets will also keep an eye on the ECB’s non-monetary policy meeting.

Other Markets: US indices closed higher on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 2.80%, 3.06% and 3.14%, respectively.

Support & resistances for today

Technical Levels News Sentiment
EUR/USD  – 0.9961 and 0.9971 Negative
USD/CAD – 1.3528 and 1.3538 Positive
NZD/USD – 0.5736 and 0.5751 Positive
WTI Crude Oil  – 85.95 and 86.31 Negative
Nasdaq 100 – 11548.45 and 11599.61 Negative

Market snapshot

Futures at 0400 (GMT)
EUR/USD (0.9970, -0.17%) Dow ($30,229, -0.45%) Brent ($91.50, -0.3%)
GBP/USD (1.1437, -0.33%) S&P500 ($3,786, -0.46%) WTI ($86.17, -0.4%)
USD/JPY (144.11, -0.02%) Nasdaq ($11,585, -0.48%) Gold ($1,728, -0.1%)

What else to watch today

Germany’s balance of trade, services PMI and composite PMI, Russia’s services PMI and composite PMI, France’s industrial production, services PMI and composite PMI, South Africa’s S&P Global PMI, Spain’s services PMI, composite PMI and consumer confidence indicator Italy’s services PMI and composite PMI, UK’s new car registrations, services PMI and composite PMI, Mexico’s consumer confidence, US MBA mortgage applications, ADP employment change, the balance of trade, services PMI, composite PMI, ISM services PMI, gasoline stocks, crude oil inventories, distillate stockpiles, and total vehicle sales, Brazil’s industrial production, services PMI and composite PMI, as well as Canada’s balance of trade, the total value of building permits.

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