XAU/USD Current price: $2,023 Gold still faces bearish pressure despite lower Treasury yields. Market participants await more US labour market data. XAU/USD faces strong resistance at $2,040. Gold spot is moving sideways without a clear direction in the short term, as the upside faces resistance at $2,040 and lower Treasury yields limit the downside. The negative momentum from the retreats from all-time highs near $2,130 still shows signs of life. The sharp drop in XAUD/USD has caused damage, and the wounds are still visible. However, the positive aspect is that the price has so far avoided further losses, suggesting that consolidation could persist. On the fundamental front, the sideways moves reflect the market's conviction that the Federal Reserve (Fed) won't raise interest, and they foresee rate cuts in 2024, but after other central banks start loosening monetary policy. This could be negative for the US Dollar, but the fundamentals remains one of the strongest among G10 currencies considering GDP growth and the outlook. For Gold to resume the upside, some modest weakness in the US Dollar appears to be needed. Additionally, yields should continue to stay away from any significant rebound. This context should bring Gold back near record highs at some point in time. Data from the US on Thursday came in mixed, with the highlight of Continuing Jobless Claims pulling back sharply after last week's surge. The focus now turns to Friday's Nonfarm Payroll, with an expected increase of 180,000. Next week, is the FOMC meeting, and before that, on Tuesday, the US Consumer Price Index is due. XAU/USD short-term technical outlook Gold continues to move around the $2,025 area, still facing some bearish pressure after the sharp reversal from record-high levels. A strong support area emerges at $2,020 and $2,010. On the daily chart, the trend is up, and prices remain above key simple moving averages. Technical indicators are starting to flatten, offering signs of support for gold. On the 4-hour chart, technical indicators are flattening around midlines, offering no clear bias. On the upside, the immediate resistance is at $2,040, and a break higher could lead to a test of the next level at $2,050. On the downside, for gold to resume losses, it would need to slide and stay below $2,020. Support levels: $2,020 $2,010 $1,990 Resistance levels: $2,040 $2,055 $2,072

EUR/USD staged a rebound after testing 1.0760 support on Thursday. The pair could face stiff resistance at 1.0820. Weekly Initial Jobless Claims data from the US will be watched closely ahead of Friday's jobs report. EUR/USD regained its traction and rose toward 1.0800 after falling to the 1.0750 area during the early hours of the European session on Thursday. Technical buyers could show interest in case the pair climbs above 1.0820. Despite the uninspiring employment-related data releases from the US on Wednesday, the US Dollar continued to outperform its rivals as investors opted to stay away from risk-sensitive assets. Employment in the US private sector rose by 103,000 in November and fell short of the market expectation of 130,000. Additionally, Unit Labor Costs declined by 1.2% in the third quarter, compared to the market expectation for a decrease of 0.9%. In the meantime, hawkish comments from Bank of Japan Governor Kazuo Ueda triggered a rally in the Japanese Yen (JPY) early Thursday. The sharp decline seen in the USD/JPY pair suggested that the JPY captured capital outflows out of the USD. Although this development helped EUR/USD edge higher, EUR/JPY also suffered heavy losses and limited EUR/USD's upside. Later in the day, the US Department of Labor will release the weekly Initial Jobless Claims data. This week's employment data from the US provided fresh signs of cooling in the labor market. A significant increase in the number of first time applications for unemployment benefits could hurt the USD ahead of Friday's highly-anticipated Nonfarm Payrolls data. EUR/USD Technical Analysis EUR/USD holds above 1.0760, where the Fibonacci 50% retracement of the latest uptrend and the 200-period Simple Moving Average (SMA) on the four-hour chart are located. On the upside, 1.0800 (psychological level, static level) aligns as interim resistance before 1.0820 (200-day SMA, Fibonacci 38.2% retracement). A daily close above the latter could attract buyers and open the door for another leg higher toward 1.0850 (static level) and 1.0900 (100-period SMA, 50-period SMA, Fibonacci 23.6% retracement). On the downside, an extended slide toward 1.0700 (psychological level, Fibonacci 61.8% retracement) could be witnessed if 1.0760 support fails.

The 10Y UST yield is closing in on the 4% mark as if a weak jobs report tomorrow was a given. But underlying is also a further slide of inflation expectations. The front end is lagging, however, and being already priced aggressively for cuts, it will probably need these to become more imminent to rally further. Rates continue to decline but the front end is lagging Market yields continued to drop with the 10y UST sinking to 4.11% and 10Y Bund to 2.2% yesterday. The driver was a weaker ADP private payrolls report, though some will point out that the correlation with the official payrolls data that is due tomorrow is actually negative. Possibly more relevant for the broader picture was the 5.2% figure for third-quarter productivity growth. It facilitated a 1.2% fall in unit labour costs, which is a positive impulse for a Fed still showing concern on inflation. Another supporting factor was a further decline in oil prices, which saw WTI fall below US$70/bbl. This picture of a reassessment of inflation as a driver does gel with a further slide in inflation swaps, in the US by more than 7bp in 2Y and close to 5bp in 10Y. In EUR the drop today was less pronounced, but the overall drop of the 2y for instance from a range around 2.65% over the summer months to now 1.8% speaks volumes. It is notable in yesterday's session that the already aggressive rate cut discount is struggling to deepen further meaning that curves are inverting more as rates decline. The US saw 2Y UST yields even rising somewhat to 4.6%. Front end EUR rates also moved marginally higher. There was some pushback from the European Central Bank's Kazimir who called expectations of a March rate cut "science fiction". And a little earlier, the ECB's Kazaks, who doesn't see the need for cuts in the first half of next year, did acknowledge that if the situation changes, so might decisions. This is what Executive Board member Schnabel had hinted at as well earlier this week. At the moment the ECB is probably just as smart as the market as it will have to rely on the data. The ECB is right to signal caution and highlight lingering risks, but trying to micro manage now may only add to market volatility. Inflation expectations have been sliding over recent weeks Source: Refinitiv, ING Read the original analysis: Rates Spark: Science fiction?

Gold price is consolidating the previous recovery above $2,020 early Thursday. US Dollar is sitting at three-week highs, as US Treasury bond yields look to stabilize. Gold price looks vulnerable on the 4H chart, focus shifts to US Nonfarm Payrolls. Gold price is holding the previous recovery above $2,020 early Wednesday, as sentiment remains weak and the United States Dollar (USD) takes a breather from a three-day uptrend. The focus shifts to the US weekly Jobless Claims data on Thursday, as Gold traders gear up for Friday's all-important Nonfarm Payrolls release.   All eyes remain on US jobs data for fresh Gold price impetus Gold price is trading with caution even though Asian stocks remain in the red, as the US Treasury bond yields have paused their run of losses in Thursday's trading so far. However, Gold price appears to find some support from a steady US Dollar. The US Dollar has entered a phase of upside consolidation, having hit a new three-month high against its main competitors on Wednesday at 104.23. The Greenback extended its winning streak, despite falling US Treasury bond yields, as traders ramped up interest rate cut bets for other central banks. Markets are pricing around an 85% chance that the ECB will cut interest rates at the March meeting while the odds of the Reserve Bank of Australia (RBA) being done with its hiking cycle also rose after this week's dovish pause. Downbeat US ADP Employment Change data also failed to deter the Dollar bulls. The US  Private payrolls rose by 103,000 jobs last month, the ADP Employment Change data showed on Wednesday, with the previous figure revised lower to show 106,000 jobs added instead of 113,000. The market consensus was for a 130K increase. Markets now await Friday's crucial US Nonfarm Payrolls data for fresh insights on the state of the labor market. The data is set to have a significant impact on the US Federal Reserve (Fed) interest rate outlook, eventually influencing the US Dollar and Gold valuations. Economists are expecting the US economy to have added 185K jobs in November, as against 150K added in October. In the meantime, the US weekly Jobless Claims could offer some fresh trading incentives to Gold traders. Gold price could likely stay supported amid increased expectations of global monetary policy easing next year. Gold price technical analysis: Four-hour chart As observed on the four-hour chart, Gold price is making lower highs while facing a sustained selling pressure near the 50-Simple Moving Average (SMA) at $2,037. The 21 SMA is on track to pierce the 50 SMA from above, which if materializes will confirm a Bear Cross. Adding credence to the downside bias in the near term, the Relative Strength Index (RSI) indicator remains below the midline. Therefore, the immediate support is seen at the ascending 100 SMA at $2,010, below which the $2,000 threshold will be threatened. Gold sellers will target the 200 SMA at $1,992 on additional declines. Alternatively, Gold buyers need to find a strong foothold near the $2,037-$2,040 region, where the 21 and 50 SMAs hang around. A firm break above the latter will challenge the $2,050 psychological barrier, followed by the $2,100 threshold.

Markets Get out the popcorn, it could be an entertaining 48 hours as traders jockey for position into and eventually out of the granddaddy of all economic releases, US Non-Farm Payrolls. U.S. equities closed well off interday highs even as Treasury yields continued to decline. While surprising to some, it's intuitive to others who are sounding the "careful what you wish for" alarm on the back of a softer tier 2 employment data ahead of Friday's Non-Farm Payrolls (NFP) reading. Without stating the obvious, the U.S. labour market is showing signs of contracting much faster than expected. This is not necessarily a "risk-on" panacea, especially if the downward momentum in the jobs markets picks up a good head of steam. While ADP's historical accuracy as a predictor of NFP has been weak post-pandemic*, most traders (Carbo-based) (unlike news reading algorithms) do not place much weight on the ADP miss. Still, on the surface, Wednesday's data can be seen as another piece of the labour market rebalancing puzzle and underscores the dovish message conveyed by Tuesday's JOLTS release.  But investors are likely cautiously awaiting the more comprehensive labour market data from the NFP report scheduled for release on Friday before making any tactical year-end moves.  While the government's jobs report is anticipated to be a decisive factor, the bar for the report to send an unequivocally strong or hawkish message has now been set relatively high. Indeed, the softer read on job openings (JOLTS) might make it more challenging for the NFP to confirm a coherent picture of a hotter labour market than expected. Still, a big number can move the policy needle for no other reason than the 125 bp + of rate cuts that were quickly priced along the curve in the wake of Fed Waller's recent dovish comments, which more or less greenlighted the wave of rate cut bets. After last month's tectonic shift in bond market sentiment and the ensuing meteoric rally in stocks, the follow-through flow dynamics so far this month are showing obvious signs of exhaustion for the lack of a better colloquialism.   While the growth outlook has moderated in recent weeks from the 5%+ pace we saw in 3Q23, the economy does not appear to be heading for a recession in 2024, which -- despite progress on inflation -- might not compel the Fed to cut as aggressively as the current market pricing might suggest. Couple this with concerns that investor optimism is reaching a potentially precarious level thanks to the +125 bp of rate cuts priced into the curve, and you have a recipe for a sell-off in the making on any hawkish Fed pushback or stronger message in the economic data bottle. Putting aside concerns of overstretched technical indicators( If you look hard enough, you can always find a tech level to justify a bad trade), the growing belief that the Federal Reserve may not cut interest rates as swiftly as currently anticipated by the markets is likely the biggest worry for stock market investors at the moment. Oil markets The decline in oil prices to a 5-month low is attributed to a supply overhang and concerns about softening demand.  The recent sell-off intensified during the New York afternoon session following the release of inventory data from the U.S. Energy Information Administration (EIA). The data indicated a substantial increase of 8 million barrels in total refined product stockpiles last week. Still, the critical factor in this week's sell-off is attributed to Saudi Arabia's announcement of a reduction in official selling prices for its flagship Arab Light crude in January.  This decision to cut prices across key markets reflects weak demand fundamentals globally. Saudi Aramco implemented a price cut of $0.50 per barrel for Arab Light crude for January loadings to Asia, bringing it to $3.50 per barrel over the Platts Dubai/Oman average.  Similar reductions were made for other regions, including Northwest Europe and the U.S. Gulf Coast, highlighting the broader impact of diminished demand on oil prices. What is driving this "everthing rally"? A significant portion of last week's discussions focused on the flow drivers behind the historic market movements in November. Notably, CTAs (Commodity Trading Advisors) and vol control strategies were highlighted as playing prominent roles in the market dynamics. In the managed futures space, there was a reflection of the broader macro-policy reversal, with existing positions in hawkish rate bets and bond shorts experiencing a substantial "one-way buy-to-cover" trend. Additionally, a notable reduction in realized equity volatility triggered mechanical buying of stocks from the vol control universe. The combination of these factors contributed to the exceptional market movements witnessed in November. According to Goldman's Scott Rubner (whom Bloomberg amusingly described this week as a "tactical specialist"), those dynamics may be largely exhausted.  "The flow-of-funds dynamics that caused the everything rally in November...

After encouraging inflation data in early summer, progress stalled in August and September amid robust consumer activity. But with tighter financial and credit conditions set to weigh further on corporate pricing power, supplemented by slowing rents and falling gasoline and used car prices, we expect to see inflation move close to 2% in 2Q. Progress being made, but the Fed wants much more At the recent FOMC press conference, Federal Reserve Chair Jerome Powell said that the economy has "been able to achieve pretty significant progress on inflation without seeing the kind of increase in unemployment that has been very typical of rate hiking cycles like this one". Nonetheless, there was the acknowledgement that "the process of getting inflation sustainably down to 2% has a long way to go". Headline US consumer price inflation has indeed fallen sharply from a peak of 9.1% year-on-year in June 2022, hitting a low of 3% in June 2023. However, this stalled in August and September with the annual rate rebounding to 3.7% as higher energy costs and resilience in some of the core (ex-food and energy) components re-emerged amid a strong summer for consumer spending. The annual rate of core inflation has continued to soften from a peak of 6.6% in September 2022 to 4.1% currently, but it is still running at more than double the 2% target. In an environment where the economy has just posted 4.9% annualised GDP growth in the third quarter and unemployment is only 3.9%, there are several hawks on the FOMC who continue to make the case for additional interest rate rises, arguing that they cannot take chances and allow any opportunity for inflation pressures to reignite. Contributions to US annual consumer price inflation (YoY%) Source: Macrobond, ING But the Fed's work is most probably done The Fed is still officially forecasting one further 25bp interest rate rise this year, but we doubt it will follow through. The Fed last hiked rates in July and since then financial and credit conditions have tightened, with residential mortgages and car loans now having 8%+ interest rates while credit card borrowing costs are at all-time highs and corporate lending rates are moving higher. It isn't just the rise in borrowing costs that will act as a brake on economic activity and constrain inflation pressures. The Federal Reserve's Senior Loan Officer Opinion survey shows that banks are increasingly reluctant to lend. This combination of sharply higher borrowing costs and reduced credit availability tends to be toxic for growth. The Fed itself has reported significant weakness in loan demand while commercial bank lending data shows a clear topping out in the amount of borrowing conducted by households and businesses. With real household disposable incomes falling for the past four months amid evidence of increasing numbers of households having exhausted pandemic-era savings, we expect to see GDP contract in at least two quarters in 2024. In this environment, we see the slowdown in inflation regaining momentum in early 2024. Corporate pricing power is waning With business attitudes becoming more cautious on the economic outlook we are seeing a reduction in price intention surveys. The chart below shows the relationship between the National Federation of Independent Businesses' (NFIB) survey on the proportion of members expecting to raise prices in coming months and the annual rate of core inflation. It suggests that conditions are normalising, with core inflation set to return to historical trends. NFIB price intentions surveys suggest corporate pricing power is normalising Source: Macrobond, ING While concerns about the outlook for demand are a key factor limiting the desire for companies to raise prices further, a more benign cost backdrop has also helped the situation. The annual rate of producer price inflation has slowed from 11.7% to 2.2%, having dropped to just 0.3% year-on-year in June while import prices are falling outright in year-on-year terms. There are also signs of labour market slack emerging, with unemployment starting to tick higher and average hourly earnings growth slowing to 4.1% from near 6% just 18 months ago. Perhaps more importantly, non-farm productivity surged in the third quarter with unit labour costs falling at a 0.8% annualised rate. With cost pressures seemingly abating from all angles, this should argue for core services ex-housing, a component that the Fed has been keeping a careful eye on, to soften quite substantially over coming months. Fed's "supercore" inflation should slow more rapidly Source: Macrobond, ING Energy and vehicle price falls to depress inflation Another area of recent encouragement is energy prices. The fear had been that the conflict in the Middle East would have consequences for energy markets but, so far, we have seen energy prices soften. Gasoline prices in the US have fallen 50 cents/gallon between mid-September and early November, leaving it at its lowest level since early March. Gasoline has a 3.6% weighting...