- Market sentiment retreated in the night between Wednesday and Thursday, as bearish portion picked up to 62% (55% earlier)
- Future risks for gold will be skewed down, as long as six-month uptrend (currently at 1,287) is untouched
- Daily technical indicators switched to positive on gold
- Economic events to watch over the next 24 hours: Swiss PPI (Feb); Swiss National Bank Interest Rate Decision; Swedish Unemployment Rate (Feb); Norway Central Bank Interest Rate Decision; Euro zone CPI (Feb); US Unemployment Claims (Mar 12), Current Account (Q4), Philadelphia Fed Manufacturing Index (Mar) and JOLTS Job Openings (Jan); Bank of England Interest Rate Decision and Meeting Minutes
Gold declined on Thursday following a 2.5% rally in the previous trading session amid the Fed's decision to decrease the number of planned interest rate lifts this year. Instead of four rate hikes expected earlier, now fresh projections showed policy makers expected two quarter-point lifts by the end of the year. The US economy continues to face headwinds from an uncertain global economy, the US central bank admitted. Fed officials anticipated weaker economic growth and lower inflation this year.
Japan's exports dropped for the fifth consecutive month in February, the longest losing streak since 2012. Merchandise exports plunged 4.0% from a year earlier to 5.703 trillion yen, according to the Ministry of Finance. The decline followed the previous month's 12.9% plunge. Although shipments to China rose 5.1%, the first increase in seven months, worries remain that sluggish overseas demand could push the world's third biggest economy into its fourth recession in five years. Exports to the broader Asian region decreased 6.1%, the sixth consecutive monthly decline, while exports to the US, the largest importer of Japan-made goods, climbed a modest 0.2% after sliding for two months in a row. Export volumes rose 0.2% from a year earlier, a modest increase but the first in eight months. Japanese imports plummeted 14.2% in February to Y5.461 trillion, the 14th consecutive monthly decline. As a result, Japan's trade balance came to a Y242.8 billion surplus compared with a Y426.0 billion shortfall in the same month a year earlier. The Bank of Japan said earlier in the week it would keep its massive asset buying programme at existing levels but offered a bleaker view of Japan's economy, suggesting it may introduce more stimulus as it struggles to reach the inflation target.
Canada's manufacturing sales increased in January, led by robust car shipments, marking the latest data in a series of positive readings on the non-resource side of the domestic economy, which has been derailed by the commodity-price rout. According to Statistics Canada, the value of factory sales jumped 2.3% month-on-month to a record C$53.13 billion, following an upwardly revised gain of 1.4% in the prior month. That was the third consecutive rise in manufacturing sales, and well ahead of the 0.5% increase economists had expected. In volume terms, January factory sales rose 2.4% and hit a level last recorded before the global financial crisis in 2008. Motor-vehicle sales, the main driver of growth, hit their highest level in more than 15 years. Even when auto-sector sales are excluded, manufacturing shipments climbed 1.2%. Measured on an annual basis, factory sales rose 5.6%, or the fastest 12-month gain since December 2014. The data highlighted the buffer a weaker Canadian Dollar is providing to the economy, which struggles with lower commodity prices. Last week, the Bank of Canada left its benchmark rate unchanged at 0.5% and said non-energy exports are gathering steam, particularly in sectors that are sensitive to exchange-rate movements. The central bank noted, though, the economy still faces strong headwinds as business investment remained "very weak" due to a retrenchment in the resource sector.
Upcoming fundamentals: BOE to hold rates steady in the run up to UK-EU referendum
The Bank of England is dovish with respect to its policy at the moment. Given uncertainty over Brexit referendum and slowing domestic economic growth, there are concerns that the BOE can be forced to even cut interest rates in the foreseeable future, rather than holding them unchanged or raising them. However, until June when the EU referendum takes place the BOE is highly unlikely to move in either direction. Today's meeting will result in interest rate and QE decisions, meaning no press conference of Mark Carney will occur in the aftermath. All nine members of the MPC committee are forecasted to vote in favour of maintaining the key rate and asset purchases at 0.50% and 375 billion pounds, respectively. Meanwhile, plenty of US data is going to be released later in the day at 12:30 GMT and 14:00 GMT. It includes jobless claims for the week ended March 12, current account for Q4 2015, manufacturing activity index from the Philadelphia Fed and JOLTS job openings.
Gold rallies beyond 1,260 amid Fed decisions
The bullion commenced a reliable recovery on Wednesday, owing to softer than expected rate projections from the Fed. Backed by the January uptrend line, gold soared through the weekly PP and touched the February high at 1,263. Medium-term risks, however, are skewed to the South, particularly because the metal is fluctuating inside the rising wedge pattern. To erode these concerns, XAU/USD is has to violate the six-month resistance located around 1,287. At the same time, on the basis of next 24 hours gold can become a subject to a bearish correction, even though this scenario is still disagreed by daily technical indicators.Daily chart
The bullion is back above the February-March uptrend and 200-hour SMA. A very formidable bullish impetus was created by the long-term January upward-sloping trend-line. In case the price consolidates above 1,253 for two consecutive days, we are going to change the mid-term outlook back to positive from neutral now.
Hourly chart