Gold rose 0.68% on Wednesday on the back of a strong U.S. labor market

31 March 2022, 03:04

Market Focus

US stocks fell on Wednesday, snapping a winning streak for the markets as the concerns over the war in Ukraine have risen again. The Dow Jones Industrial Average dropped 0.19%, the S&P 500 declined 0.63%, and the Nasdaq Composite slid 1.21%. In the meantime, investors are keeping an eye on the US 5-year and 30-year Treasury yields, which inverted for the first time since 2016. The spread between TWI rates came close to being inverted on Tuesday as well. Some investors and economists view this inversion as a recession indicator.

On the economic front, the US added 455,000 jobs in March, slightly more than the expected 450,000. The economic data has shown that the US labour market is robust and better than expected. This gives the Fed more reasons to be more aggressive on the interest rate hikes. According to the Richmond Fed President Thomas Barkin, he is open to the conversation regarding raising interest rates by half a percentage point in May.

Since the protesting disruption of Hong Kong in 2019 and the recent Chinese crackdown, more and more wealthy Chinese are worried about keeping their money in China. Some see Singapore as a safe haven. Over the past year, inquiries about setting up family offices in Singapore have doubled. The major pick up appeared after China’s sudden crackdown on the education industry and the emphasis on common prosperity.

Main Pairs Movement

Gold climbed from a one-month low, up 0.68% on Wednesday, after the US’s robust job data. So far, gold is up more than 5% this quarter on the concerns of inflationary pressure. Gold is also getting some support from the geopolitical worries caused by the Russia-Ukraine conflict.

USDJPY declined 0.86% as the BOJ wrapped up its bond-buying and the US showed its subdued GDP report. In the meantime, the US dollar was weaker and lower in demand recently after the developments between Russia and Ukraine.

WTI advanced gradually back to around $107 as OPEC+’s policies continue to revolve around the elevation of the oil supply and the slippage in oil stockpiles. In the meantime, OPEC+ is now considering whether to disregard oil production estimates provided by the IEA.

Technical Analysis

GBPUSD (4-Hour Chart)

Cable rebounded for the second day amid broad-based selling of the Greenback. With the most recent peace talk between Ukraine and Russia ended on a positive note, market participants have begun to rotate out of safe-haven assets. However, de-escalation by the Russian military does not mean an end to the conflict just yet, and any minor escalation of the conflict could pose a serious threat to Cable’s recent upward momentum.

On the technical side, Cable has risen above our previously estimated resistance level of 1.3163 during the start of the American trading session, but the pair has now returned below that level. RSI for Cable sits at 51.81 as of writing. On the four hour chart, Cable is currently tradind below its 50, 100, and 200-day SMAs.

Resistance:  1.3163

Support: 1.3131, 1.3018

EURUSD (4-Hour Chart)

After a 0.94% gain against the dollar, the euro continued to rebound for the second straight trading day. The Euro took advantage of broad-based Greenback selling and reached a fresh high in early March. With the U.S. announcing a downward revision to its 2021 Q4 GDP, market participants fled from the dollar. On the other hand, Germany posted soaring preliminary consumer price index figures of 7.3%. Extreme price pressure in the EU will be compounded by the Ukraine-Russia war, and market participants should be aware of the long term economic impact that flying inflation could pose on the economic outlook for the EU.

On the technical side, EURUSD broke out of our previously estimated resistance level at 1.1127 and is marching towards 1.1216. RSI for EURUSD sits at 66.47 as of writing. On the four hour chart, EURUSD is trading above its 50, 100, and 200-day SMAs.

Resistance: 1.1216

Support: 1.0985, 1.0845

XAUUSD (4-Hour Chart)

Gold rebounded after mass selling occurred over the previous trading day. Aided by the broad-based selling of the dollar, Gold climbed its way back to above the $1930 per ounce price level. Despite the positive shift in risk sentiment, market participants do not seem to be fully convinced by the results of the most recent peace talks between Ukraine and Russia. With no promise of a cease-fire from either country, tensions in Eastern Europe are still extremely high. Speculators are also continuing to observe what the Kremlin means by “decreased military activity” and how this would lead to the end of the war.

On the technical side, XAUUSD has returned above our previously estimated support level of $1918 per ounce but upward momentum seems to be fading. RSI for XAUUSD sits at 50.54 as of writing. On the four hour chart, XAUUSD is trading below its 50, 100, and 200-day SMAs.

Resistance: 1947

Support: 1918, 1886