Gold price is treading water near three-week lows of $1,976 early Wednesday. US CPI data fuelled the recovery in the US Dollar alongside the US Treasury bond yields.    Gold price remains exposed to downside risks amid a bearish technical setup on the 4h chart. The Federal Reserve policy decision holds the key to a fresh Gold price directional impetus. Gold price is challenging bullish commitments early Wednesday, sitting near the lowest level in three weeks of $1,976. Gold price is taking it easy following a good two-way business seen on the United States (US) Consumer Price Index (CPI) data release, as the focus now shifts toward the US Federal Reserve (Fed) policy announcements for a fresh trading impetus.   Federal Reserve decision to rock Gold price Despite a pause in the recent sell-off, Gold price appears vulnerable in Wednesday's trading so far. Investors refrain from placing any fresh bets on the bright metal ahead of key event risk of this week, the Fed interest rate decision and policy outlook, especially after the US CPI inflation report revived bets for the Fed maintaining interest rates higher for longer. The CPI edged up 0.1% last month after being unchanged in October, the Labor Department's Bureau of Labor Statistics (BLS) showed on Tuesday. Annually, the CPI increased 3.1% in November after rising 3.2% in October. Although the US CPI numbers came in line with the market expectations, the details of the report showed an uptick in the shelter index and used car and trucks index, which helped push back against the market's pricing of Fed rate cuts next year. In an initial reaction to the US CPI data release, the US Dollar extended its intraday decline but quickly regained footing alongside the US Treasury bond yields after investors digested the data and its potential implications ahead of Wednesday's Fed decision. Gold price dropped below $1,980, having briefly spiked to $1,997 in a knee-jerk reaction to the US CPI report. Looking ahead, all eyes stay focused on the upcoming Fed decision, with the US central bank widely expected to hold rates at 5.25%-5.50%. However, comments from Fed Chair Jerome Powell and the so-called Dot Plot chart are likely to hold the key, as they could shed more light on the Fed's monetary policy outlook amid expectations of rate cuts in the first half of 2024. Markets are currently pricing about 43% odds of a March Fed rate cut while for May, the probability stands at about 75%. Should Powell and his colleagues dismiss expectations of a Fed rate cut in the first quarter of 2024, acknowledging elevated inflation level and still tight labor market conditions, the non-interest-bearing Gold price is likely to see a renewed sell-off, as the US Dollar demand returns. In contrast, Gold price could stage a solid recovery if the Fed's projections affirm aggressive rate-cut expectations and smash the Greenback across the board. In the meantime, the risk-averse market environment in the lead-up to the Fed event will keep the US Dollar underpinned, checking the upside attempts in Gold price. Gold price technical analysis: Daily chart As observed on the daily chart, Gold price remains on track to test the 50-day Simple Moving Average (SMA) at $1,970 after finding a strong foothold below the multi-week troughs of $1,976. The 14-day Relative Strength Index (RSI) indicator inches lower while below the 50 level, backing the case for further downside. Should the bearish momentum regain traction, the flattish 200-day SMA at $1,953 will be threatened, below which a test of the 100-day SMA at $1,941 cannot be ruled out. On the other hand, a sustained recovery will need acceptance above the 21-day SMA at $2,006 on a daily candlestick closing basis. Gold buyers will then target the November 27 high of $2,018 en route to the $2,040 supply zone.

Markets Stocks extended gains for a fourth consecutive session on Tuesday, with the S&P 500 touching the highest level Since January 2022 as Wall Street carefully examined another set of inflation data, seeking clues on when the Federal Reserve might initiate monetary policy easing. Despite the mixed US CPI inflation print, perhaps at the heart of the matter is a keen set of investors who are encouraged by the disinflationary trend and may have found contentment in some of the details of Tuesday's report, suggesting that the Federal Reserve's preferred measure of inflation will remain subdued from here on out. Hence, some anticipation may be getting baked into the S&P 500 rally extension of a less vigilant inflationary pushback from Chair Powell, but still pushing back against excessive market front-end rate cut pricing. The market would then intuitively return to the Waller Pivot narrative, where the Fed would then mechanically ease tangentially with the decline in inflation. Which in itself is not a bad outcome for stocks. Oil prices Oil prices experienced a significant decline of more than 3% on Tuesday. This drop followed the U.S. Consumer Price Index (CPI) report, which indicated that inflation remained persistent in November despite a widespread decrease in gasoline and energy prices. This development diminishes the outlook for the Federal Reserve to initiate interest rate cuts as aggressively as market pricing, which raises the odds of a Fed-induced recession.

EUR/USD gained traction and rose toward 1.0800 early Tuesday.  The US Dollar struggles to find demand amid retreating US yields. Annual core inflation in the US is forecast to hold steady at 4% in November. Following a bearish start to the week, EUR/USD managed to find a foothold in the American trading hours and closed the day virtually unchanged on Monday. The pair gained traction and advanced toward 1.0800 early Tuesday amid retreating US yields but investors could refrain from betting on further US Dollar (USD) weakness ahead of the highly-anticipated November inflation report. In the absence of high-tier data releases, the relatively upbeat market mood made it difficult for the USD to continue to gather strength late Monday. Meanwhile, the high-yield at the latest 10-year US Treasury note auction came in at 4.29%, down from 4.51% in the previous auction, and caused US T-bond yields to edge lower, putting additional weight on the USD's shoulders. Later in the day, the US Bureau of Labor Statistics will release the Consumer Price Index (CPI) data for November. On a yearly basis, the CPI is forecast to rise 3.1%, at a slightly softer pace than the 3.2% increase recorded in October. The Core CPI, which excludes volatile food and energy prices, is expected to match the previous print by rising 4%. On a monthly basis, the CPI and the Core CPI are seen increasing by 0.1% and 0.3%, respectively. In case the monthly Core CPI print comes in below the market expectation, the initial reaction could cause the USD to weaken further. On the other hand, a stronger-than-forecast increase in this data could have the opposite impact on the currency's valuation. On Wednesday, the Federal Reserve (Fed) will announce monetary policy decisions and release the revised Summary of Economic Projections (SEP). A soft inflation report could attract dovish Fed bets. EUR/USD Technical Analysis The Relative Strength Index edged higher to 50 on the 4-hour chart, reflecting a loss of bearish momentum. On the upside, the pair faces stiff resistance at 1.0820 (200-day Simple Moving Average (SMA), Fibonacci 38.2% retracement of the latest uptrend). A daily close above this level could open the door for additional gains toward 1.0870 (100-period SMA on the 4-hour chart) and 1.0900 (psychological level, Fibonacci 23.6% retracement). 1.0750 (100-day SMA) aligns as critical support. A hot US inflation in November could trigger another leg lower in EUR/USD. If sellers flip this level into resistance, 1.0700 (Fibonacci 61.8% retracement, psychological level) could be seen as the next bearish target before 1.0660 (static level).

AUD/USD Current Price: 0.6567 A quiet start to a busy week that includes US CPI, FOMC, and Australian jobs. The AUD/USD is consolidating near the 20-DMA. Technical indicators offer no clear signs in the short term. The AUD/USD remains steady around 0.6560 as the week begins, which includes an FOMC meeting and the Australian jobs report. Price action is expected to pick up. In the short-term, the bias is mixed, with the US Dollar Index up but below the recent high of 104.30. Reserve Bank of Australia (RBA) Governor Michele Bullock will speak at the Australian Payment Network Summit in Sydney on Tuesday. In terms of economic data, the Westpac Consumer Confidence report is due, along with the National Australia Bank's Business Confidence survey. On Thursday, the Australian employment report will be released. The US Dollar Index rose on Monday but remained below last week's highs. A modest increase in US yields supported the Greenback. However, gains were limited as equity prices on Wall Street were posting gains. On Tuesday, the US Consumer Price Index (CPI) will be released, with a slowdown in the annual rate expected from 3.2% in October to 3.1% in November. These figures are unlikely to change the outcome of the FOMC meeting starting on Tuesday. The Fed is expected to keep rates unchanged. AUD/USD short-term technical outlook The AUD/USD is hovering around the 20-day Simple Moving Average (SMA) and the 200-day SMA. Technical indicators on the daily chart are not providing clear signals. Momentum is flat as it approaches the midpoint, while the Relative Strength Index (RSI) is moving south but also flattening. A daily close above 0.6600 would strengthen the short-term outlook for the Aussie, while a decline below 0.6540 could lead to a slide towards 0.6510 initially. On the 4-hour chart, the price is below the 20-period SMA, but technical indicators are flat. There is no clear bias in the short-term, and the price is likely to continue to consolidate around the current level until the next catalyst. Ahead of the Asian session, if the AUD/USD rises above 0.6575, it could test 0.6600, while a drop below 0.6550 may lead to further weakness. Support levels: 0.6550 0.6525 0.6485 Resistance levels: 0.6595 0.6625 0.6655 (This story was corrected on December 11 at 19:12 GMT to say that the US Dollar Index rose on Monday. A previous version of the story said that the USD declined.)

A lackluster start to the week but there's so much to come over the next few days which could determine how markets end the year and start 2024. The US will be front and center this week even as events also unfold elsewhere. The Fed decision on Wednesday is unlikely to be controversial but the forecasts, dot plot and press conference that accompany it may well be. Markets are very bullish in pricing in four interest rate cuts next year, the first likely coming in May, something the FOMC is unlikely to line up behind. The question is how much of a change we'll see from the September projections and to what extent the committee will push back against the markets. That may well depend on what the CPI report tells us tomorrow. The November inflation reading is expected to fall to 3.1% at the headline level but remain at 4% on a core basis. A setback here following the stronger jobs report on Friday could encourage the FOMC to dig their heels in a little, warning of upside risks and even, the door still being open to further hikes. That would be a very late and sharp pivot or markets being too optimistic with the first cut. And it's not just the Fed meeting this week. The ECB and BoE both announce their final interest rate decisions of the year on Thursday, with the former also releasing new forecasts and holding a press conference. Markets are currently pricing in a March rate cut for the ECB, one of five next year, so again we're looking at very bullish expectations and the question is whether the central bank will be more accommodating given the progress on inflation and the fact that the economy may already be in recession.

XAU/USD Current price: 1,982.29 US Dollar extends its positive momentum, with XAU/USD trading at fresh December lows. Looming central banks' decision and the US Consumer Price Index to set the market tone. XAU/USD bearish case became stronger after the pair pierced the $2,000 threshold. Spot Gold extends its slide on Monday, after losing the $2,000 threshold following the release of the United States (US) Nonfarm Payrolls (NFP) report last week. The US dollar surged after a stronger-than-anticipated report, although for the wrong reasons. Market participants did not buy the USD on the back of confidence in the Greenback's strength but as a safe due to fresh concerns about the future of the monetary policy and how it could affect the economy. The US Federal Reserve (Fed) has left interest rates on hold in its last two meetings, claiming previous actions need time to take effect. But there is a non-spoken reason: higher rates come with an increased risk of an economic setback. Growth in the country has proved resilient, yet policymakers are well aware a soft-landing is around the corner. Inflation has eased sharply from the records achieved in mid-2022, but it is still above the central bank's 2% goal. Finally, for inflationary pressures to remain subdued, the labor market needs to be more loose. That's precisely the opposite of what the NFP report showed, as the Unemployment Rate shrank to 3.7% in November. The US Unemployment rate stood between 3.4% and 3.9% throughout 2023. Such a decline keeps the door open for another rate hike, which increases the odds of a recession. Answers may come this week as the US will release the November Consumer Price Index (CPI) on Tuesday, while the Fed will announce its monetary policy decision on Wednesday, alongside fresh economic projections. XAU/USD short-term technical outlook XAU/USD is sharply down for a second consecutive day and seems poised to extend its slump. Technical readings in the daily chart reflect the strong selling interest after the pair broke below a bearish 20 Simple Moving Average (SMA), which anyway maintains its bullish slope. The longer moving averages lack directional strength far below the current level, establishing a target zone between $1,930 and $1,950. Finally, technical indicators gain downward traction and crossing their midlines into negative territory, in line with lower lows. In the near term, and according to the 4-hour chart, the risk also skews to the downside. XAU/USD accelerated its slump after breaking below a flat 200 SMA, while the 20 SMA crosses below the 100 SMA above the larger one, another sign of increased selling interest. Technical indicators, in the meantime, head firmly south around oversold readings without signs of downward exhaustion. Gold bottomed at $1,976.26 on November 20, the level to break to confirm a bearish continuation in the upcoming sessions. Support levels: 1,976.26 1,959.40 1,946.00 Resistance levels: 1,994.40 2,001.70 2,014.20