- SWFX sentiment tanked over the weekend; 61% of traders estimate a drop
- By penetrating the weekly R1 at 1,250, XAU/USD will begin targeting the February peak at 1,263
- Daily trading signals are bearish, but weekly indicators are pointing to a rally
- Economic events to watch over the next 24 hours: Italian Industrial Production (Feb); FOMC Members Dudley and Kaplan Speak; Australian NAB Business Confidence (Mar); Fed Announcement
Gold traded near a three-week high on Monday as the US Dollar weakened to trade at a nine-month low on the Fed's cautious approach toward interest rate decision. New York Fed President William Dudley last week said the US central bank must approach further rate increases cautiously and gradually due to lingering external headwinds, despite some strength of the US economy and welcome hints of inflation. SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, reported its holdings fell 0.22% to 817.81 tonnes on Friday.
China's consumer inflation came in weaker than expected on year in March, while producer prices were better than forecast. The consumer price index rose 2.3% on an annualized basis in March, according to the National Bureau of Statistics, matching February's level and compared with the 2.5% rate expected by economists. The main contributor to growth was food prices, which advanced 7.6%. Producer price declines narrowed to 4.3% from a decline of 4.9% in February, and posted the first month-on-month increase since 2013. Producer prices on a year-on-year basis remained dragged down by falling mining and raw material costs. On month, producer prices climbed 0.5% after more than two years of negative readings. China's inflation averaged 1.4% in 2015, the weakest reading in six years and well below the government's upper-limit target of 3%. An increase in inflation since last year, though mainly driven by food prices, may extend the People's Bank of China's easing pause. While some price gains may be seasonal and therefore temporary, a property recovery and bounce back in commodity prices suggests the worst of the deflation threat may be over. Gross domestic product growth for the March quarter is due Friday, coupled with industrial production, retail sales and fixed asset investment.
Canada's labour market enjoyed a steep increase in new jobs in March that unexpectedly pushed down the unemployment rate and provided another clue that the Canadian economy could be regaining steam. According to Statistics Canada, the job market created 40,600 net new positions in March, driving the jobless rate to 7.1% from a three-year high of 7.3% in the previous month. The gain was much bigger than the 10,000 jobs economists had predicted. Measured on an annual basis, the employment surged by 130,000, mainly driven by full-time gains. The majority of the newly created positions were full-time work in the service-producing sector, which saw an additional 75,000 jobs in March, making it the biggest advance in four years. If compared to the US standards, Canada's unemployment rate was 6.1% in March compared to the American 5%. Employment data comes just a few days before the Bank of Canada interest rate announcement due on April 13. Canada continued to battle the negative effects of lower oil prices, which increased the gap between the commodity and non-resource sector. Economists expect an updated economic forecast from the central bank that includes the recently introduced federal fiscal stimulus.
Upcoming fundamentals: Fed to release unscheduled statement, Dudley speaks in NY
April 11 is not expected to be a busy day in terms of economic calendar's events, but a number of news will likely attract some attention among participants of FX and other markets. Firstly, today throughout the US session the Federal Reserve will make an announcement, which is one of the tools this central bank uses to communicate with experts and investors. Federal Reserve banks' presidents are discussing the discount rates that are charged by the Fed for loans taken through the discount window. These are funds the depositary institutions use to improve liquidity in case they need to do that. Timing of the announcement remains unknown. In the meantime, the New York Fed President William Dudley will talk about community developments to an audience in New York at 13:25 GMT. Expected questions are making this event unpredictable in terms of possible comments about US monetary policy.
Gold breaks out of bearish channel
It seems that the 55-day SMA (1,216.61) is finally starting to have a greater influence on the bullion. Without touching this line, XAU/USD decided to start a confident recovery on Monday morning after the previous week of indecisiveness. Gold is soaring through both the monthly pivot point (1,241.50) and the weekly R1 at 1,250. Consolidation above the latter level, which also is the highest since March 23, will pave the way for a rally towards 1,260 (weekly R2, Bollinger band, February high). Bullish chances are boosted by the fact that the metal has broken out of the two-month channel down pattern.Daily chart
In the one-hour chart, the March 30-April 5 downtrend line has been finally confirmed. The same applies for the March 30 peak of 1,244. Now the focus is on the 1,260 area, similar to the daily situation explained above. However, daily technical indicators argue there should be a correction lower over the upcoming 24 hours.
Hourly chart
Market expectations diminish as traders foresee losses
With completely opposite changes, OANDA clients seem to be betting that gold prices will climb even more. Now 63.35% of them are holding long positions, up from sub-60% we have seen before the weekend. SAXO Bank sentiment is the only one unchanged, as the gap between the longs and shorts is five percentage points today morning.