AUD/USD keeps hovering in the sub-0.6600 zone. Retail Sales in Australia disappointed expectations. Investors' attention now shifts to inflation figures. Once again, AUD/USD exhibited an erratic performance on Tuesday, remaining ensnared in a rangebound pattern that has persisted since the middle of this month. That said, spot faded the promising start to the week, with the Australian dollar weakening on a daily basis in tandem with the decent gains in the greenback. In the meantime, the resilience of the Australian currency is notable, particularly in light of recent reports suggesting additional stimulus measures by the PBoC to support China's stock market and promote economic recovery in the post-pandemic era. However, these efforts, aimed at boosting the economy, have been slower to materialize than expected. On another front, the expected decision of the Reserve Bank of Australia (RBA) to maintain its current policy stance at its February 6 meeting is viewed as a factor limiting the potential upward movement of the pair in the near term, which should morph into extra-subdued trading in the short-term future. Back to the RBA, the recorded decrease in inflation metrics in December, alongside the perceived tightness in the labour market, has strengthened the consensus among market participants that the central bank will keep its current interest rates unchanged at next week's event. Looking at central banks more broadly, the possibility of the Federal Reserve extending its ongoing restrictive stance for a longer duration than anticipated is expected to support additional gains in the US Dollar, thus acting as a drag for the AUD/USD for the time being. Moving forward, the Inflation Rate is due on Wednesday and is expected to see a marked continuation of the disinflationary path in the domestic economy during the October–December period. In fact, consensus sees consumer prices rising 0.8% QoQ (from 1.2%) and 4.3% YoY (from 5.4%), all lending further legs to the perception that the RBA should maintain its monetary policy unchanged at its imminent gathering. AUD/USD daily chart AUD/USD short-term technical outlook Further losses might push the AUD/USD to revisit its 2024 low of 0.6524 (January 17). The loss of this region may result in a decline to the provisional 100-day SMA of 0.6526, which coincides with the December 2023 bottom (December 7). Down from here follows the 2023 low of 0.6270 (October 26) and the round level of 0.6200, all of which are preceding the 2022 low of 0.6169 (October 13). On the contrary, there is a brief stumbling block at the 55-day SMA at 0.6642. The breakout of this zone might inspire the pair to set sails for the December 2023 top of 0.6871 (December 28), ahead of the July 2023 peak of 0.6894 (July 14) and the June 2023 high of 0.6899 (June 16), all just ahead of the key 0.7000 threshold. Further consolidation seems the name of the game for the pair on the 4-hour chart. On the upside, the 100-SMA is now at 0.6623, while the 200-SMA is at 0.6683. The breach of this region signals a possible move to 0.6728. On the downside, there is early dispute around 0.6551 before 0.6525. If this zone is broken, there is no major disagreement until 0.6452. The MACD remains flat around the positive border, while the RSI grinds lower to the 45 region. View Live Chart for the AUD/USD

XAU/USD Current price: 2,032.51 United States data fueled demand for the US Dollar ahead of the Federal Reserve's announcement. The US Treasury reduced its federal borrowing estimate for 1Q 2024  to $760 billion. XAU/USD keeps grinding higher, with buyers slowly recovering their confidence. The US Dollar is once again appreciating during the American session, resulting in XAU/USD retreating from a fresh weekly high of $2,048.64 achieved following the release of United States (US) data. The country reported that the number of job openings on the last business day of December stood at 9.02 million, according to the US Bureau of Labor Statistics (BLS)  Job Openings and Labor Turnover Survey (JOLTS), higher than the  8.92 million openings reported in November. Additionally, CB announced Consumer Sentiment rose to 114.8 in January, its highest in over two years. The USD is firmer despite a sharp slide in government bond yields. Markets welcomed news from the US Treasury, as the organism reduced its federal borrowing estimate for 1Q 2024  to $760 billion, down from a previous $816 billion estimate. However, Wall Street trimmed previous gains, with major indexes trading mixed around their opening levels. Finally, caution prevails as speculative interest awaits the US Federal Reserve (Fed) monetary policy decision. The central bank will likely keep interest rates on hold, although market players will be looking for clues on upcoming rate cuts. In the latest dot plot, Fed officials anticipated three rate cuts this year, with money markets looking at March for the first trim. Policymakers have been conservative on the date issue, refusing to confirm when they could pull the trigger. XAU/USD short-term technical outlook The daily chart shows XAU/USD trades in the green for a second consecutive day as buyers gain confidence. The bright metal stands above a mildly bearish 20 Simple Moving Average (SMA) for the first time in over two weeks, while the longer moving averages remain far below the current level, with the 100 SMA advancing above a flat 200 SMA. Technical indicators, in the meantime, crossed their midlines into positive territory but lacks strength enough to confirm a bullish extension. The 4-hour chart shows that XAU/USD was quite volatile around the release of US data but trades pretty much unchanged from pre-release levels. The 20 SMA gains upward traction below the current level and below a flat 100 SMA, while the price currently battles with the 200 SMA. Finally, technical indicators hold within positive levels, although without directional strength, failing to provide fresh clues. Support levels: 2,019.20 2,010.00 2,001.60 Resistance levels: 2,040.30 2,052.60 2,064.15

EUR/USD Current price: 1.0843 European data was mixed, as the German economy contracted in Q4. Attention shifts to United States employment-related figures ahead of Fed, NFP. EUR/USD recovered some ground, but bears hold the grip. The EUR/USD pair hovers around 1.0840, recovering some of the ground lost on Monday amid a better market mood weighing on the US Dollar. Wall Street closed the day in the green after its overseas counterparts hesitated for direction, with US indexes benefiting from earnings reports and a positive surprise from the United States (US) Treasury, which cut its quarterly borrowing estimate. As a result, government bond yields fell sharply, putting additional pressure on the USD demand. European data was mixed, as Germany confirmed the economy contracted in Q4. The Gross Domestic Product (GDP) declined 0.3% in the three months to December, while the annualized reading came in at -0.2%, as expected. However, the Eurozone GDP in the same period was up 0.1% from a year earlier, better than the 0% expected. Additionally, the January Economic Sentiment Indicator posted 96.2 as expected, while Consumer Confidence in the same month contracted to -16.1. Market players will now turn their eyes to US data, as the country will release January Consumer Confidence and the JOLTS Job Openings report, relevant ahead of the Nonfarm Payrolls (NFP) report scheduled for next Friday. In the meantime, the Federal Reserve (Fed) will announce its monetary policy decision on Wednesday. EUR/USD short-term technical outlook The daily chart for the EUR/USD pair shows it is battling with a directionless 200 Simple Moving Average (SMA) providing dynamic resistance in the current price zone. The 20 SMA, in the meantime, maintains its bearish slope well above the current level, suggesting limited buying interest. Finally, technical indicators remain within negative levels, with neutral-to-bearish slopes, supporting another leg south. In the near term, the ongoing advance seems a mere correction. The upside is being capped by a bearish 20 SMA, which accelerates its decline below the longer ones. At the same time, technical indicators tick north, but with limited strength and still below their midlines. Bears could lose interest if the pair accelerates through 1.0890, although price action will likely remain limited ahead of the Fed's decision. Support levels: 1.0800 1.0760 1.0720 Resistance levels: 1.0845 1.0890 1.0945  

EUR/USD trades slightly above 1.0800 following Monday's decline. Near-term technical outlook suggests that the bearish bias remains intact. Disappointing growth figures from Germany and Euro area could further weigh on the Euro. EUR/USD started the week on the back foot and touched its lowest level since mid-December below 1.0800 in the early American session on Monday. Although the pair manages to hold above this level in the European morning on Tuesday, it risks losing it in case European data disappoint. Mixed comments from European Central Bank (ECB) officials weighed on the Euro on Monday. ECB Vice President Luis de Guindos said inflation risks were tilted to the downside and ECB policymaker Mario Centeno argued that the central bank should start cutting rate sooner than later, while avoiding abrupt moves. On a hawkish note, Governing Council member Peter Kazimir said that a rate cut in June is more probable than April but the exact timing is secondary to the decision's impact.

We saw a cautious start to the week for European markets yesterday with the CAC 40 and DAX both treading water close to last week's record closing highs, and today's economic numbers expected to show further evidence of weak economic activity in Europe. US markets were slightly more upbeat with the S&P500 setting fresh record highs ahead of tomorrow's Fed rate meeting and today's earnings numbers from Microsoft, Alphabet and AMD all of which will be reporting after the closing bell, while the other three from this week's big cap earnings releases from Amazon, Apple and Meta are all due to report Thursday. The strong finish in the US could see European markets open at, or close to recent record highs themselves later this morning. In view of the gains that we've seen in these big cap stocks over recent weeks the bar has been set very high. How high can be shown in the current value of just these 5 companies of Apple, Amazon, Alphabet, Meta Platforms and Microsoft which add up to a total market cap of just over $10trn, putting the total value of all 5 companies at over 50% of the total market cap of the Nasdaq 100. Let's hope the market likes what this week's earnings numbers tell them.   Today's economic numbers from Europe could also serve to bring forward market expectations of when to expect the first rate cut from the European Central Bank. At the end of last year, the ECB was at pains to push back on the idea that we might see a rate cut much before the summer of this year, citing a sharp uptick in December CPI and concerns about elevated wage growth. A few weeks further forward and one month into 2024 and cracks are starting to emerge in that consensus, after comments yesterday from Portuguese ECB governing council member Mario Centeno who said that rate cuts should start sooner rather than later so that the process is gradual, without any need to wait for wages data. Additional comments from Slovakia member Peter Kazimir served to reinforce the dovish shift, arguing the case for rate cuts although his confidence over timing was less fixed, and very much data dependant, although he admitted that June was more likely than April.  Today's Q4 GDP numbers from Europe's 4 biggest economies could well serve to bring that June timeline forward into April, with markets now pricing the first rate cut at the April meeting, sending EUR/USD below 1.0800 for the first time in 6-weeks, The French economy is predicted to improve modestly to 0% in Q4 from -0.1% in Q3, however there is considerable downside risk to this estimate if recent PMI numbers are any guide.  In Italy the picture looks little better with a stagnation also expected, and a modest slowdown from 0.1% in Q3, while in Germany the economy is expected to be in recession with a -0.1% contraction in Q3 followed by a bigger -0.3% contraction in Q4. The only silver lining is Spain where the economy is expected to grow by 0.2%, however that is unlikely to be enough to prevent the bloc sliding into a technical recession with another quarterly contraction of -0.1% following a similar contraction in Q3. This would be a blow to the ECB which has consistently insisted that Europe isn't in a recession, however based on how poor recent PMI and other related economic numbers have been, it is difficult to see how it can't be. We've also got some important economic numbers from the UK with the latest lending numbers for December, and which could point to a weak end of the year, given the sharp slide in retail sales we've seen in some of the recent economic numbers. The recent decline in mortgage rates has seen a pickup in mortgage approvals from the lows of 43.7k in September, and could well see a further pickup to the highest levels since June last year with 53k. Net consumer credit is expected to slow from £2bn to £1.5bn. Markets will also be focussed on the conclusion of the Federal Reserve rate meeting, which starts today, and concludes tomorrow, with today's JOLTS data expected to show vacancies in the US to slow modestly to 8.72m in December, from 8.79m in November, which would be close to a 3-year low, but still well above the levels we saw pre-pandemic, when they were around 7.2m. EUR/USD – Slipped below the 1.0800 area yesterday, opening up the prospect that we could see a move towards the 1.0720 area. Resistance at the highs last week at 1.0930 and behind that at 1.1000.  GBP/USD – The failure to move back towards the recent highs could see a return to the 1.2590 area on a move below the 50-day SMA. We need to...

Federal Reserve preview There are also two major central bank meetings and a raft of economic data that is worth watching. The Fed will announce interest rates on Wednesday. No change is expected, and there will be a press conference afterwards, so the focus will be on the accompanying statement and what Jerome Powell is willing to tell the press. Analysts will be watching to see if the Fed suggests that the market is getting too excited about the prospect of multiple rate cuts this year. The market is pricing in just over 6 rate cuts for 2024, with the first rate cut now expected to come in May, and for rates to end the year at 3.95%. The Fed's last 'dot plot' only had 3 rate cuts expected by the FOMC, who actually make the rate decisions. Why stocks could stymie Fed rate cuts The recent stock market acceleration in the US could be a fly in the ointment for Fed rate cuts. The rally in US stocks added $8 trillion to share holder value, the S&P 500 set fresh records in 5 straight sessions in the last week, and financial conditions are at their loosest since 2022, as you can see in the chart below. This is one of the many metrics that feed into the FOMC models that help the Fed to make rate decisions. This input is flashing a warning sign about cutting rates too quickly. Chart: Goldman Sachs US financial conditions index  Source: Bloomberg  The Fed could struggle to stick to their dovish rhetoric A market rally on the assumption of rate cuts, rather than rate cuts themselves could be counter-productive since this is a form of easing, and it may make the Fed less willing to cut rates. For the Fed's meeting this week, this means that the Fed could struggle to lean into their recent dovish rhetoric. In its simplest terms, the recent stock market rally gives the Fed a reason to delay rate cuts, but if the bull run in stocks comes to an end, then rate hikes could become more likely. Looking forward, the Fed may go from having an inflation problem, to having an asset price problem, which may prove to be just as tricky to disinflate. The market may find out this week that it can't have it both ways. Overall, there is a risk that US stock indices could come under pressure on the back of this FOMC meeting, especially if the dovish tone from the December Fed meeting is shelved. As mentioned, if the Fed continues to push back on recent dovish rhetoric and say that they remain data dependent, then the market may struggle to digest this. The lack of clear communicaiton could be filled with market panic and speculation if the Fed pushes back too hard on rate cut expectations. The dollar was mixed last week, and started to make gains vs, the EUR, GBP and JPY. If the Fed is considered less dovish than it was in December, then we could see a broad-based dollar rally and a selloff in risky assets. BOE faces different set of challenges from the Fed The Bank of England also meet this week, and we will send out a preview ahead of time. However, we expect a dovish shift from the BOE and even though UK stocks outperformed US stocks last week, there has been no bull market for the FTSE. The FTSE 100 is lower by more than 1.2% so far this year, and by 1.4% in the last 12 months. The BOE does not have to worry about a stock market bull run stoking inflation pressures in the UK.