AUD/USD gives away part of the recent recovery. Dollar dynamics continue to weigh on the Aussie dollar. No changes to expectations around an interest rate hold by the RBA. The noticeable resumption of the selling bias around the Aussie dollar prompted AUS/USD to leave behind a two-day recovery and remain under pressure in the sub-0.6600 zone at the beginning of a new trading week. So far, dollar dynamics coupled with still-absent signs of a convincing economic bounce in the post-pandemic era in China are expected to keep dictating the mood around spot and maintain its price action subdued, all in combination with a predicted steady hand by the RBA at its gathering in February. Also contributing to the negative kickstart of the new trading week emerged an equally discouraging session of both copper prices and iron ore. Back to the RBA, the central bank is largely anticipated to leave its OCR unchanged at 4.35% next month. The downtick in inflation figures recorded in December, coupled with further cooling of the (still tight) labour market, have underpinned that consensus among market participants for the time being. That said, the near-term prospect for the AUD remains tilted to the dovish side, a view that could gather extra traction in case the Federal Reserve continues to push back bets for an interest rate cut in the next few months. Moving forward, the domestic calendar only shows preliminary January Manufacturing and Services PMIs due on Tuesday, along with Westpac's Leading Index on Wednesday. AUD/USD daily chart AUD/USD short-term technical outlook Further declines in the AUD/USD could dispute the 2024 low of 0.6524 (January 17), ahead of the interim 100-day SMA at 0.6515. The loss of this region should find the next support not before the 2023 bottom of 0.6270 (October 26). If bulls regain control, there is an initial hurdle at the provisional 55-day SMA at 0.6623 prior to the December 2023 peak of 0.6871 (December 28), which comes before the July 2023 high of 0.6894 (July 14) and the June 2023 op of 0.6899 (June 16), both of which precede the critical 0.7000 threshold. According to the 4-hour chart, there is a decent contention area around 0.6525. If this zone is breached, there is no significant disagreement until 0.6452. The MACD continues bearish, while the RSI remains around 50. The bullish trend, on the other hand, may face first resistance around the 55-SMA at 0.6631, which aligns ahead of the 200-SMA at 0.66982 and precedes 0.6728. View Live Chart for the AUD/USD

XAU/USD Current price: 2,023.93 This week, a busy United States calendar and central banks' announcements stand out. Wall Street extends gains on the back of solid earnings reports. XAU/USD is technically neutral in the near term, bears dominate the wider view. Spot Gold changed course after falling to $2,016.42 early in the American session and trades around $2,024, posting modest intraday losses. The US Dollar sees limited demand amid strength in global indexes, with Wall Street extending gains on the back of solid earnings reports and decreasing odds for a rate hike in March. At the same time, there is a certain quote of caution among market participants as investors await critical first-tier data spread throughout the week. The United States (US) has quite a busy calendar, as the country will release the preliminary estimate of the Q4 Gross Domestic Product (GDP), with the annualized figure expected at 2%, down from 4.9% in Q3. Later in the week, the US will offer the December Core Personal Consumption Expenditures  (PCE) Price Index, the Federal Reserve's (Fed) favorite inflation gauge. The PCE Price Index is foreseen to be up 0.2% MoM and 3.0% YoY, slightly below November figures. In the middle, several central banks will report their monetary policy decisions, while the Federal Reserve (Fed) is scheduled for the next week. XAU/USD short-term technical outlook XAU/USD trimmed Friday's gains, and the daily chart supports a continued decline. The pair develops below a mildly bearish 20 Simple Moving Average (SMA), while the longer moving averages lack directional strength well below the current level. Technical indicators, in the meantime, resumed their declines within negative levels, although their strength is limited. The 4-hour chart for XAU/USD offers a neutral stance. The pair briefly pierced a flat 20 SMA but quickly recovered above it, suggesting unconvinced sellers. The longer moving averages head marginally lower above the current level, limiting advances. Finally, technical indicators head nowhere around their midlines, failing to provide clear directional clues. Support levels: 2,016.40 2,001.60 1,988.60   Resistance levels: 2,033.10 2,047.20 2,056.80

EUR/USD Current price: 1.0891 The optimistic tone of global equities put a cap on US Dollar gains. Investors await central banks' decisions and critical US data. EUR/USD trades within familiar levels, bears maintain the lead. The EUR/USD pair trades uneventfully just below the 1.0900 mark on Monday, confined to a limited range. The absence of relevant macroeconomic news and first-tier events scheduled for later in the week keeps market participants cautious. Meanwhile, the positive tone of global equities limits demand for the US Dollar. Wall Street's strength backs the modest optimism amid earnings beating expectations. The focus these days will be on central banks, as the Bank of Japan (BoJ), the Bank of Canada (BoC), and the European Central Bank (ECB) will announce their monetary policy decisions. Additionally, the United States (US) will unveil the preliminary estimate of the Q4 Gross Domestic Product (GDP) and the December Core Personal Consumption Expenditures  (PCE) Price Index, the Federal Reserve's (Fed) favorite inflation gauge. By the end of the week, the US Dollar could be on a much clearer trend after weeks of range trading. The upcoming American session will bring the preliminary estimate of the Eurozone Consumer Price Index, foreseen in January at -14, improving modestly from the previous -15. The US will release the Richmond Fed Manufacturing Index for the same month, previously at -11. EUR/USD short-term technical outlook The EUR/USD pair is posting modest intraday gains and even reached a fresh four-day high of 1.0909. Still, technical readings in the daily chart fail to provide clear directional clues while suggesting the risk skews to the downside. The Momentum indicator advances but remains below its 100 level, while the Relative Strength Index (RSI) indicator consolidates around 45, reflecting limited buying interest. At the same time, the 20 Simple Moving Average (SMA) heads south well above the current level. Finally, a flat 200 SMA provides strong support at around 1.0845. The 4-hour chart shows EUR/USD is neutral-to-bearish. The pair develops below the 100 and 200 SMAs, while a flat 20 SMA provides near-term support at 1.0880. Technical indicators, in the meantime, turned lower but are stuck around their midlines without enough strength to support another leg south. Selling pressure would increase on a break below the aforementioned 1.0845 level, where the pair met buyers multiple times in the previous week. Support levels: 1.0880 1.0845 1.0800   Resistance levels: 1.0935 1.0980 1.1010

Summary We share the near-universally held view that the FOMC will leave the fed funds rate and pace of quantitative tightening (QT) unchanged at the conclusion of its upcoming meeting on January 31. The FOMC's decision last month to leave the fed funds rate unchanged for a third consecutive meeting made it increasingly clear that the most aggressive tightening cycle since the 1980s has come to an end. Consequentially, overall financial conditions have eased considerably since the last policy meeting. We also look for the FOMC to remain in a holding pattern in terms of its policy guidance, and we expect only minor changes to the post-meeting statement relative to December. A change to the statement we would not be surprised to see at this meeting is the removal of the paragraph on the U.S. banking system and financial conditions. Overall, we view this meeting as one where the Committee will buy time to discern if inflation is indeed on a sustainable path back to 2% and serve as an opportunity to build consensus around the conditions for eventual policy easing. Market chatter about changes to the existing pace of QT has picked up recently, and we expect the meeting will include a discussion about the path forward for the Federal Reserve's balance sheet. Our base case is that the FOMC will announce a plan to slow the pace of QT at its June meeting, although we would not be shocked if the Committee decided to do so one meeting earlier in May. Specifically, we expect the runoff caps for Treasury securities to be reduced to $30 billion while MBS caps are dropped to $20 billion starting on July 1. We anticipate this slower pace of QT running until year-end 2024. Under this scenario, the Fed's balance sheet would reach a trough of $6.8 trillion or so at year-end 2024 and begin growing gradually again thereafter. The less said the better? We share the near-universally held view that the FOMC will leave the fed funds rate and pace of quantitative tightening (QT) unchanged at the conclusion of its upcoming meeting on January 31. The FOMC's decision last month to leave the fed funds rate unchanged for a third consecutive meeting made it increasingly clear that the most aggressive tightening cycle since the 1980s has come to an end. The December post-meeting statement continued to signal that, in the near term, any adjustment to the policy rate is still more likely to be up than down. However, a small tweak sent a big signal that the Committee believes additional tightening is increasingly less likely. Specifically, the insertion of "any" to the sentence "In determining the extent of any additional policy firming that may be appropriate..." indicated that the Committee is more confident that the current policy setting is sufficient to return inflation to 2% on a sustained basis. Moreover, in the post-meeting press conference, Chair Powell underscored the Committee's shifting focus away from potential further hikes and toward eventual policy easing. Not only did the FOMC continue to discuss how long the fed funds rate may need to remain restrictive, but the Committee discussed when it may be appropriate to remove current policy restraint—a discussion that is the first step on the road to eventually easing, With Powell sharing that the topic of rate cuts had been broached, financial conditions loosened further over the inter-meeting period. At present, indices of financial conditions are sitting near the most accommodative levels since the FOMC began its current tightening cycle (Figure 1). That easing in financial conditions has caused some consternation about premature policy easing given that they are the channel through which the Fed's policy settings impact the real economy. Inflation has fallen sharply in recent months (Figure 2), with the rise in the core PCE deflator slowing to a six-month annualized rate of 2.0% through December by our estimates. However, Chair Powell and other FOMC members have indicated they need to see progress continue in the coming months to be convinced inflation can return to 2% for the long-haul. Meanwhile, economic growth continues to hold up well. Employment increased more than expected in December, the unemployment rate remained unchanged at 3.7% and layoffs remain near record lows. GDP in the final quarter of the year looks to have risen close to a trend-like 2% annualized rate. Download The Full Special Commentary

EUR/USD fluctuates in a tight range near 1.0900 early Monday. Euro could stretch higher in case risk mood continues to improve. Key support seems to have formed in the 1.0850-1.0860 area. EUR/USD managed to edge higher during the Asian trading hours on Monday and stabilized near 1.0900 after closing the previous week in negative territory. In the absence of fundamental drivers, the risk perception could drive the pair's action in the short term.

Gold price edges lower and stalls a two-day-old recovery trend from over a one-month low. Reduced bets for an early rate cut by the Fed turn out to be a key factor weighing on the metal. Geopolitical risks could lend support to the safe-haven XAU/USD and help limit deeper losses. Gold price (XAU/USD) kicks off the new week on a weaker note and erodes a part of its recovery gains registered over the past two trading days, from the vicinity of the $2,000 psychological mark, or over a one-month low touched last Wednesday. That said, the mixed fundamental backdrop warrants some caution before placing aggressive directional bets ahead of this week's important macro data from the United States (US). The Advance fourth-quarter economic growth figures are due for release on Thursday, followed by the Federal Reserve's (Fed) preferred inflation gauge on Friday, which should provide some meaningful impetus heading into the FOMC meeting on January 30-31. In the meantime, investors continue to scale back their expectations for a more aggressive policy easing by the Fed in 2024 amid a still-resilient US economy. In fact, the University of Michigan's preliminary survey showed on Friday that the Consumer Sentiment Index shot to its highest level since July 2021 and rose 9.1 points to 78.8 in January from 69.7 in the previous month. Over the last two months, the index has climbed a cumulative 29% – the largest two-month increase since 1991 – amid confidence that inflation has turned a corner and strengthening income expectations. This comes on top of the upbeat US Retail Sales and labor market report released last week, suggesting that the economy is in good shape. Adding to this, the recent hawkish comments by Fed officials forced investors to further scale back their expectations for a more aggressive policy easing in 2024 and turn out to be a key factor driving flows away from the non-yielding Gold price. That said, the risk of a further escalation of geopolitical tensions in the Middle East might hold back bearish traders from placing fresh bets around the safe-haven precious metal and help limit deeper losses. In the latest development, US Central Command forces continued preemptive strikes and launched an attack on a Houthi anti-ship missile over the weekend – its seventh round of strikes since the Iran-backed rebel group began targeting merchant vessels in the Red Sea. In the absence of any relevant market-moving economic data, geopolitical risks make it prudent to wait for strong follow-through selling before positioning for the resumption of the recent downtrend from the December monthly swing high. Technical Outlook From a technical perspective, weakness below the $2,022-2,020 area could extend further and drag the Gold price back towards the $2,000 psychological mark, or over a one-month low touched last week. The latter should act as a key pivotal point, which if broken decisively could make the XAU/USD vulnerable. The next relevant support is pegged near the $1,988 area ahead of the 100-day Simple Moving Average (SMA), currently around the $1,972 area and the 200-day SMA, near the $1,964-1,963 region. On the flip side, Friday's swing high, around the $2,040-2,042 supply zone, might continue to act as an immediate strong barrier. A sustained strength beyond could trigger a short-covering rally and lift the XAU/USD towards the $2,077 area. The upward trajectory could extend further and allow bulls to reclaim the $2,100 round-figure mark. Gold daily chart