AUD/USD advanced modestly on Wednesday. Australian CPI lent support to a pause by the RBA. Next risk event will be the release of US CPI. In line with the broad-based positive sentiment in the risk-associated space, AUD/USD clocked a decent advance on Wednesday, this time managing to reclaim, albeit briefly, the area north of 0.6700 the figure. The small pullback in the greenback prompted the USD Index (DXY) to keep orbiting around the low-102.00s amidst the continuation of the downward bias in US yields, at a time when market participants kept their focus on the imminent release of US inflation figures gauged by the CPI and their implication on the Fed's plans to start trimming its interest rates. Speaking about inflation, consumer prices in Australia rose less than initially estimated by 4.3% in the year to November, the slowest rate since January 2022 when tracked by the RBA's Monthly CPI Indicator. Indeed, further signs of disinflationary pressures in the economy could prompt the central bank to stay on the sidelines at its upcoming meeting in February, despite inflation continuing to run well above the bank's target. In addition, the mixed performance of the commodity complex saw copper prices regain some composure following their decline since late December, while iron ore traded slightly on the defensive, although keeping the $140.00 barrier per tonne intact. Looking at Friday's docket in Oz, Trade Balance figures are expected to show a A$7.5B trade surplus in November (vs. October's A$7.129B). AUD/USD short-term technical outlook The resumption of the selling pressure could drag AUD/USD to the 2024 low of 0.6640 (January 5) before reaching the 200-day SMA at 0.6581. The December 2023 low of 0.6525 comes next ahead of the intermediate 100-day SMA of 0.6502. If bulls regain control, the attention will shift to the December 2023 top of 0.6871 (December 28), which will emerge before the July 2023 peak of 0.6894 (July 14) and the June high of 0.6899 (June 16). If the pair breaks out of this range, the psychological level of 0.7000 will be the next to be watched. The significant conflict zone, according to the 4-hour chart, is approximately 0.6650. There are no notable disagreement levels until 0.6525 and 0.6452 if this zone is exceeded. The MACD remains in the negative zone, and the RSI approaches 40, both of which appear to signal additional losses in the near future. The bullish trend, on the other hand, may face first resistance around the 55-SMA at 0.6752, which is seen as the last line of defense before the previous top at 0.6870. View Live Chart for the AUD/USD

Further progress in terms of disinflation and the room this creates for central bank easing seem to be the only economic 'certainties' for 2024. What is left is a list of important questions that should be answered as the year progresses. What will be the pace and extent of rate cuts? Is there a risk of underestimating the impact of past rate hikes that still must manifest itself? What about the timing and strength of the pickup in growth in reaction to lower inflation and the start of policy easing? Is there a downside to the scenario of a soft landing in the US? The answers to these questions matter for the real economy but are especially important for financial markets and the policy rate expectations. From a macroeconomic perspective, one of the defining characteristics of 2023 was the ongoing tightening of monetary policy, with the Federal Reserve and the ECB raising rates more than expected. These decisions, in combination with accumulating evidence in the latter part of the year of a clear downward trend in core inflation, changed the outlook for interest rates for 2024. 2022 was the year of the start of a tightening cycle, 2023 saw the terminal rate being reached and 2024 should be the year of cuts in official interest rates. In the US, the FOMC members' December projections pencil in three 25 basis points cuts in 2024. The message from the ECB is more opaque although recent comments of several governing council members suggest that the debate has clearly shifted from whether further hikes are warranted to how long rates should be kept at present levels. The consensus expects the ECB to start reducing rates in July, bringing the deposit rate back to 3.25% by the end of the year, compared with the current level of 4.00% (chart 1).[1] A similar survey in the US expects the first rate cut by the Fed in June and a cumulative reduction of the federal funds rate this year of 125 basis points.[2] It is safe to conclude that there is hardly any or even no debate on the question whether policy rates will go down this year. Further progress in terms of disinflation should warrant a reduction in official interest rates, if only to avoid that otherwise, real interest rates would increase thereby causing an unwanted further tightening in the monetary environment. Download the Full Report!

XAU/USD Current price: 2,029.15 Wall Street trades with a positive tone, shrugs off the sour tone of its overseas counterparts. The United States Consumer Price Index will likely take markets out of their lethargy. XAU/USD holds within familiar levels, risk skews to the downside. Gold trades within familiar levels on Wednesday, with a scarce macroeconomic calendar and upcoming first-tier events maintaining investors in cautious mode. Wall Street opened with a positive tone and holds on to modest gains, partially reverting its latest losses but also trading uneventfully. XAU/USD bottomed at $2,016.61 on Monday, falling from an early high of $2,046.55 and holding within such an area ever since. The lethargy is set to end on Thursday, when the United States (US) will release the December Consumer Price Index (CPI). The index is expected to post an annualized increase of 3.2%, slightly above the previous 3.1%. The core reading, however, is seen shrinking to 3.8% from 4% in November. Market participants are betting the US Federal Reserve (Fed) could start cutting rates as soon as next March. Indeed, easing inflationary pressures will confirm such an idea, regardless of the latest data showing the tight labour market. The CPI readings will likely impact sentiment, with the US Dollar then trading accordingly. XAU/USD short-term technical outlook The daily chart for XAU/USD reflects the lack of directional strength. The bright metal develops below a mildly bullish 20 Simple Moving Average  (SMA), which provides dynamic resistance at around $2,040.30. Meanwhile, a modestly bullish 100 SMA crosses a flat 200 SMA, both in the $1,960 price zone. Finally, technical indicators edge marginally lower within neutral levels, not enough to confirm another leg south. The near-term picture skews the risk to the downside as the XAU/USD pair develops below all its moving averages. Furthermore, a bearish 20 SMA is crossing below the 200 SMA, while the 100 SMA remains directionless above them. At the same time, the Momentum indicator hovers around its 100 line, while the Relative Strength Index (RSI) indicator gains downward traction within negative levels, supporting another leg south towards the weekly low at $2,016.61. Support levels: 2,016.60 1,998.65 1,987.20 Resistance levels: 2,040.30 2,052.30 2,065.45

EUR/USD Current price: 1.0948 Easing government bond yields put a cap on the US Dollar's advance. Stock markets trade mixed as market participants await fresh clues on US economic developments. EUR/USD remains confined to familiar levels, a directional breakout unlikely in the near term. The EUR/USD pair trades at the upper end of its latest range, still lacking directional momentum. Market participants stand cautious ahead of a United States (US) inflation update on Thursday, with no other relevant figures released so far in the US or the Eurozone (EU). Markets trade on sentiment, as reflected by stocks' behavior, which trade mixed. Most Asian indexes edged lower, although the Nikkei 225 soared to a fresh multi-year high on speculation the Bank of Japan (BoJ) will not be able to drop the ultra-loose monetary policy anytime soon. In the meantime, European stocks trade mostly in the red, although not far from their opening levels. Meanwhile, softening US Treasury yields weigh on the US Dollar. The 10-year note currently offers 4%, while the 2-year note offers 4.34%, down 3 basis points (bps) ahead of Wall Street's opening. On a positive note, the US published MBA Mortgage Applications for the week ending January 5. According to the report, applications to refinance a home loan jumped 19% from the previous week and were 30% higher than the same week one year ago, despite an uptick in the fixed interest rate. Later in the day, the country will publish November Wholesale Inventories. EUR/USD short-term technical outlook The daily chart for the EUR/USD pair shows it holds on to modest intraday gains but also that it retains the neutral stance. The pair develops below a still bullish 20 Simple Moving Average (SMA), which provides dynamic resistance in the 1.0970 area. The 100 and 200 SMAs continue to lack directional strength well below the current level. Finally, technical indicators remain stuck to their midlines, reflecting the absence of speculative interest. The near-term picture is quite alike. In the 4-hour chart, the pair seesaws around a flat 20 SMA, while the 200 SMA provides support around 1.0920 and the 100 SMA lies flat just ahead of the 1.1000 figure. To top it all, technical indicators head nowhere, stuck around their midlines since Jan 5. A directional breakout seems unlikely in the near term, with the pair set to remain within familiar levels until the release of the US Consumer Price Index (CPI). Support levels: 1.0920 1.0885 1.0840   Resistance levels: 1.0970 1.1015 1.1060

EUR/USD stays below 1.0950 after closing in the red on Tuesday. Technical sellers could take action if the pair breaks below 1.0900. Markets will keep a close eye on the 10-year US Treasury note auction later in the day. EUR/USD edged lower on Tuesday as the risk-averse market atmosphere helped the US Dollar (USD) gather strength against its rivals. The pair struggles to stage a rebound early Wednesday and trades below 1.0950.

Good Morning! Dollar Index could continue to trade within 102-103 while Euro is headed towards 1.09 and should bounce back to head higher towards 1.10 as we have been expecting over the last few days. EURJPY and USDJPY have bounced back well yesterday and if the rise continues, we may soon see 159-160 and 145-146 soon in the next few sessions. This has been contrary to our earlier expected fall. USDCNY has been rising slowly and could test 7.20/22 on a break above 7.18. Aussie could be trading within 0.6650-0.6750 for the next few sessions while Pound has fallen and needs to remain above 1.26 to move back to higher level within the 1.26-1.28 range. USDRUB has broken below 90 and could now test 89-88.50 before again bouncing back to higher levels. USDINR can rise towards 83.20/30 again while above 83-82.90. EURINR can be ranged for a while. The US Treasury yields sustain higher but stable. There is room to rise further from here before the broader downtrend resumes. The US CPI data release tomorrow is important to watch. The German yields are moving up in line with our expectation. More rise is on the cards before a reversal is seen. The 10Yr GoI is coming down as expected and keeps intact our bearish view. The 5Yr GoI is coming close to the lower end of its range. Bias is bearish to see a downside breakout of this range eventually. Dow Jones and Nifty are stuck in a narrow range. DAX has dipped and failure to sustain above 16600 will be vulnerable to fall further. Nikkei has broken above its upper end of the range and can head towards its immediate resistance. Shanghai has scope to rise as long as it holds above 2865. Crude prices are likely to remain ranged for the near term. Gold and Silver look vulnerable while below the resistance at 2060 and 23.50 respectively. Copper can rise towards its immediate resistance while above 3.75. Natural Gas can come down towards 3.0. Visit KSHITIJ official site to download the full analysis