ONLINE FOREX BROKER
2021-10-15 • Updated
The rally of the US dollar has stopped for a while. That allowed risk-on assets (GBP, NZS, AUD, stocks) and also gold to recover some losses. Gold and the US dollar have a negative correlation. When the USD weakens, gold tends to rise, and vice versa. Traders are interested in the further movement of the US dollar as almost the entire market sentiment will depend on it.
Let’s understand why the market sentiment has improved. There is no clear catalyst for this turnaround in investors’ mood. We may assume that one of the reasons is the ongoing earnings season. Investors are concerned about global economic growth because of the high energy prices, supply chain problems, and inflation pressure. That worries were outweighed by the better-than-expected earnings results of companies.
Is the current weakness in the USD short-lived? Could be! The Federal Reserve is going to start tapering already in November and raise rates in 2022. According to Crédit Agricole, the higher interest rates in the US can push the USD up as 1) it will reduce the USD liquidity and 2) increase demand for the dollar as its yields will increase.
*Earnings season is the period when companies uncover their financial results for the previous quarter.
If the forecast of Crédit Agricole is correct, we might expect USD/JPY to rally up to 115.00 and then higher and higher.
What about EUR/USD? The pair is likely to keep trending down. If it breaks the low of late September at 1.1570, it may fall to October trough at 1.1525 and then to the psychological mark of 1.1500.
What does it mean for gold? The continuation of the downtrend as well. If it manages to break below the support zone of $1740-1750 at October lows and the 23.6% Fibonacci level, the doors to the September low at $1725 will be open.
Western countries are trying to find other options for oil and gas supplies after a 10th package of sanctions, which will put more pressure on Russian oil and decrease global oil supply. Italy, for example, is in talks with Libya.
Today, at 5:00 pm (GMT +2), the Bank of Canada will publish the Overnight Rate, which represents short-term interest rates, and is pivotal to the overall pricing of the Canadian Dollar in the global markets. Let's look at how the markets are faring ahead of the BoC rates release.
As you must already know, the direction of Gold is mainly dependent on the Price action of DXY (US Dollar index). So first, we take a look at the US Dollar index.
This week, there are a few high-probability trade ideas I'd like to recommend to you. Trading these setups, be sure to implement a proper risk management approach.
On Thursday, the 2nd of February, the Bank of England will publish its report concerning interest rates and inflation data for the Eurozone. Professionals and investors anticipate that Andrew Bailey’s lead team of policy makers will likely raise interest rates to 4%; the highest in over a decade, for the tenth time in a row.
The first FOMC meeting comes after a buildup of anticipation from traders and investors alike, as the markets await what posture the Fed will take regarding the interest rates; would there be a hike or a cut in interest rates?
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