Market analysis

Week six, 2024 data: oil and gold

By Antreas Themistokleous

05 February 2024

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This preview of weekly data looks at USOIL and XAUUSD, where economic data coming up later this week are the main drivers in the markets for the short-term outlook. The most important economic data for this week are:

Monday: US Services PMI at 15:00 GMT for the month of January. The consensus is for an increase from 50.6 points to 52. This could be bullish news for the Dollar since it would mean that the services sector in the States is still expanding, given that the actual figure will also be above the 50-point mark.

Tuesday: RBA interest rate decision at 03:30 GMT, where the market is expecting that the interest rates will remain stable at 4.35%. In the event, however, that there is a surprise hike or cut by the Reserve Bank, it might create minor gains or losses for the Aussie Dollar, respectively.

Wednesday: Canadian Balance of Trade at 13:30 GMT, where the expectations are for a decrease, reaching C$1.1 Billion in trade surplus. This might not have a significant effect on the Canadian Dollar since the data is for the month of December and might already have been priced in.

Thursday: Chinese inflation rate at 01:30 GMT. The market consensus is for a further decline on the already negative figure, going from -0.3% to -0.5% for the month of January. The Chinese economy is officially in a deflation state since, for the last three consecutive months, the inflation figure is negative, going into the fourth month if consensus is confirmed.

Friday: German inflation rate at 13:00 GMT. The market consensus for the final figure for the month of January is 2.9%, against the previous 3.7%. If this is broadly accurate, then it could most probably influence the final European inflation figure since the German economy is the largest in the European Union. Canadian unemployment rate at 13:30 GMT. The market is expecting a slight increase in the figure of around 0.1% for the month of January. This might have a minor negative effect on the loonie if the expectations are confirmed.

USOIL, daily 

Following the recent strong US job report data where the actual figures came out to be exceptionally better than expected, the price of oil declined mainly on a strengthening US dollar. More specifically, the non-farm payrolls came out at 353,000 against the expectations of 180,000 jobs, and the unemployment rate came out to be 3.7% against the expected 3.8%.

This showed to market participants that the labor market in the United States still holds strong and keeps adding jobs to the market and resulted in an uptick in the dollar index (DXY), putting pressure on the instruments and currencies traded against the dollar, including crude oil. On the other hand, tensions in the Middle East are still in heat after the US vowed more strikes for trade disturbances in the Red Sea, which could boost the price of crude oil if the situation escalates. 

On the technical side, the price has resumed the overall bearish momentum after finding sufficient resistance on the upper band of the Bollinger Bands and is now testing the support area near the $72 price level, which is the previous area of price reaction in early 2024. This correction to the downside has pushed the Stochastic oscillator into the extreme oversold level, which could potentially indicate that a correction to the upside might be visible in the following sessions while at the same time the faster moving average (50 days) is trading well below the slower moving average (100 days), validating the bearish trend.

Gold-dollar, daily 

The price of gold fell as the U.S. dollar and Treasury yields surged after a strong jobs report reduced expectations of near-term interest rate cuts by the Federal Reserve. Speculators trimmed their exposure to gold futures for the fourth consecutive week, and there is uncertainty about whether gold can rally further.

The odds of Fed rate cuts for 2024 have decreased, and the dollar index hit an eight-week high, making gold more expensive for holders of other currencies. Non-farm payrolls in January exceeded economists' forecasts, leading to speculation about potential rate cuts. Despite the challenges, there is no immediate pressure to drive gold below $2,000.

From a technical perspective, the gold price is currently trading in an interesting area on the chart, which consists of the 38.2% of the daily Fibonacci retracement level as well as the bullish trendline, which is valid since mid-November of 2023. The price level of $2,020 has proven to be a strong support area, with the price not being able to break below it since mid-December of last year.

Given that the Stochastic oscillator is at neutral levels and also that the 50-day moving average is still trading above the 100-day moving average, indicating that the bullish momentum is still in place, then it is possible to see a continuation to the upside in the near short term. If this holds true, then the first area of possible resistance might be found around the $2,050, which is the previous high and also the psychological resistance of the round number.


This is not investment advice. Past performance is not an indication of future results. Your capital is at risk, please trade responsibly.


Author:

Antreas Themistokleous
Antreas Themistokleous

Antreas Themistokleous is a trading specialist in Exness. He is a Certified Financial Technician since 2018. As a member of the Society of Technical Analysts, Antreas is implementing advanced use of indicators and patterns to conclude in an action plan for different trading strategies.