AUD/USD drops to new yearly lows near 0.6450. The US CPI-led bounce in the greenback weighed on spot. Consumer Confidence in Australia improved in February. The Australian dollar encountered renewed selling pressure amidst the sudden and strong rebound in the US Dollar (USD), which was particularly exacerbated after US inflation figures rose more than expected in January. On the latter, the intense buying pressure lifted the USD Index (DXY) to fresh tops near the 105.00 barrier for the first time since mid-November, along with an equally robust bounce in US yields, all in response to investors' repricing of a potential rate cut by the Federal Reserve (Fed) later than anticipated (maybe June?). Back to the domestic front, Tuesday's strong retracement now leaves the door open to extra weakness in the Aussie dollar, which appears so far underpinned by USD dynamics, the yearly downtrend in prices of copper and iron ore, and the omnipresent uncertainty surrounding the Chinese economy. On the positive side, the latest hawkish hold by the RBA in combination with the tight labour market and solid fundamentals should somehow maintain the downside pressure in the Australian currency. Regarding the Reserve Bank of Australia (RBA), market participants continued to evaluate the recent interest rate decision after the central bank matched consensus and kept rates at 4.35% while suggesting a potential future rate hike. In its Statement on Monetary Policy (SoMP), the RBA slightly revised downward its inflation forecasts, projecting both indicators to stay below 3% by the fourth quarter of 2025. Additionally, the RBA lowered its GDP growth projections, reflecting a less optimistic outlook for short-term consumer spending and housing investments. AUD/USD daily chart AUD/USD short-term technical outlook The revival of the selling tendency may cause AUD/USD to initially challenge its 2024 bottom of 0.6452. (February 13). The loss of the latter might bring a probable test of the 2023 bottom of 0.6270 (October 26) back on the radar, ahead of the round level of 0.6200 and the 2022 low of 0.6169 (October 13). On the upswing, the key 200-day SMA at 0.6567 looms as the next objective to watch before the intermediate 55-day SMA at 0.6638. The breakout of this zone may lead the pair to attempt the December 2023 top of 0.6871 (December 28), seconded by the July 2023 peak of 0.6894 (July 14) and the June 2023 high of 0.6899 (June 16), all just before the key 0.7000 threshold. It is worth reiterating that AUD/USD needs to clear the key 200-day SMA on quite a convincing fashion to allow for extra gain in the short-term horizon. The 4-hour chart suggests extra retracements in the near term. Meanwhile, clearing 0.6452 will result in a dip to 0.6347 ahead of 0.6338. On the bullish side, 0.6610 is an immediate hurdle ahead of the 200-SMA at 0.6624. The surpass of this zone indicates a possible progress to 0.6728. The MACD is approaching the positive zone, while the RSI approached the 30 yardstick.

XAU/USD Current price: 1,993.79 United States inflation rose by more than anticipated in January, spurring risk-off. US CPI figures backed the Federal Reserve's wait-and-see stance. XAU/USD trades at fresh two-month lows and has room to extend its slump. Spot gold collapsed on Wednesday following the release of United States (US) inflation figures. XAU/USD  traded as low as $1,989.97, its lowest in two months, and currently changes hands at around $1,993 a troy ounce. The US Dollar traded with a weak tone throughout the first half of the day but drastically changed course following the release of the US Consumer Price Index (CPI). The US Bureau of Labor Statistics (BLS) reported that the CPI rose 0.3% MoM in January, while the core reading in the same period printed  0.4%, surpassing the market's expectations. Compared to a year earlier, inflation rose 3.1%, better than the previous 3.4% but above the 2.9% expected. Finally, the core annual CPI rose 3.9%, matching December's reading but surpassing the market's forecast of 3.7%. Stronger than anticipated inflation figures confirmed the Federal Reserve´s (Fed) stance of extending the waiting period before shifting to tighten the monetary policy through rate cuts. As a result, financial markets turned risk-averse, with stocks plummeting, government bond yields soaring and the US Dollar making the most out of it, strengthening against all major rivals. XAU/USD short-term technical outlook From a technical perspective, the case for an XAU/USD continued decline has become stronger. The pair met sellers around a bearish 20 Simple Moving Average (SMA) in the daily chart, bottoming at around a bullish 100 SMA, with the latter providing dynamic support at $1,990. 0. Technical indicators, in the meantime, offer firmly bearish slopes within negative levels, reflecting the strong selling interest. The 4-hour chart shows technical indicators keep heading south despite developing in oversold territory, warning of potential downward exhaustion. Still, it could mean some consolidation before the next directional move as there are no other signs of a possible recovery. Finally, XAU/USD develops far below all its moving averages, with the 20 SMA accelerating its slide below the longer ones, at around $2,022. Support levels: 1,989.90 1,976.50 1,962.70 Resistance levels: 2,005.90 2,018.50 2,032.10

EUR/USD struggles to find direction and continues to trade below 1.0800. Annual inflation in the US is forecast to soften to 2.9% in January. The USD could come under selling pressure on a weaker-than-expected CPI print. EUR/USD continues to move up and down in a tight channel below 1.0800 early Tuesday after closing the first day of the week marginally lower. January Consumer Price Index (CPI) data from the US could help the pair break out of its range in the second half of the day. Inflation in the US, as measured by the changed in the CPI, is forecast to soften to 2.9% in January from 3.4% in December. The Core CPI is seen rising 3.7% in the same period, down from the 3.9% increase recorded in December. On a monthly basis, the CPI and the Core CPI are expected to increase 0.2% and 0.3%, respectively. Inflation figures are unlikely to alter the market view about the Federal Reserve's (Fed) policy decisions in March. The CME Group FedWatch Tool shows that markets are pricing in a nearly 90% probability of the Fed staying on hold at the next meeting. However, investors are still undecided about whether there will be a policy pivot in May. Although investors could opt to wait and see more employment and inflation data before positioning themselves for a Fed rate cut in May, a softer-than-expected monthly Core CPI print, close to 0%, could trigger a short-term selloff in the US Dollar (USD) and help EUR/USD push higher. On the other hand, an upside surprise could have the opposite impact on the USD's valuation and force the pair to stay on the back foot. EUR/USD Technical Analysis The Relative Strength Index (RSI) indicator on the 4-hour chart stays below 50 and EUR/USD closed the last 5 4-hour candles below the 20-period and the 50-period Simple Moving Averages (SMA), highlighting the lack of buyer interest. On the downside, 1.0730 (end-point of the latest downtrend) aligns as first support before 1.0700 (psychological level). Looking north, first resistance is located at 1.0800 (psychological level, static level) ahead of 1.0820-1.0830 (100-period SMA, Fibonacci 23.6% retracement) and 1.0900 (Fibonacci 38.2% retracement, 200-period SMA).

GBP/USD rose toward 1.2650 in the European session on Tuesday. The pair could face stiff resistance at 1.2670. US January inflation data will be watched closely by market participants. GBP/USD gained traction and touched its highest level in more than 10 days above 1.2650 in the European session on Tuesday. Although the pair's near-term technical outlook points to a bullish tilt, buyers could refrain from betting on a steady advance unless 1.2670 resistance is cleared. The UK's Office for National Statistics reported early Tuesday that the ILO Unemployment Rate declined to 3.8% in the three months to December from 4.2%. This reading came in below analysts' estimate of 4%. Other details of the report showed that wage inflation, as measured by the change in the Average Earnings Excluding Bonus, softened to 6.7% from 6.2%. Although both of these prints could be welcoming news for the Bank of England (BoE), wage inflation is arguably still strong enough for policymakers to avoid cutting rates prematurely.

The S&P 500 saw a modest decline on Monday after achieving record highs last week, culminating in a historic close above 5000 for the first time on Friday. Investors appeared to exercise caution by reducing some risk ahead of the release of potentially market-moving US inflation data scheduled for Tuesday. It's a common market phenomenon for the dominant trend to revert ahead of significant risk events. Considering the remarkable rally in the S&P 500 (SPX) this year, it's reasonable to anticipate a pullback in the SPX as investors adjust their portfolios accordingly to mitigate potential risks associated with the upcoming event. However, there could be more than just meets the eye. Both markets and investors are clearly well caffeinated, pushing the S&P 500 benchmark to record heights in 2024, driven by a robust U.S. economy and the possibility of rate relief later this year. The S&P 500 has crossed the 5000 mark for the first time, up by 5% this year and a remarkable 21% above the recent dip in late October (just three months ago) Not all are in demand on the Fed dovish pivot; however, the bond market is feeling the weight of ongoing supply, with 10-year yields holding close to a 2-month high of 4.17-18, up 30 basis points in the past seven sessions. Meanwhile, the US CPI release should confirm that the disinflation trend continues. But with absentee foreign bond buyers shunning US bonds, that's probably not enough for bond markets, as a consensus month-on-month core outcome would still be too hot for comfort at the Fed. Indeed, the year-on-year inflation rates are expected to decline with a high degree of certainty. This phenomenon is primarily due to the base effect. In January 2023, there was a 0.5% increase compared to the previous month. Therefore, any figure lower than this will naturally decrease the year-on-year inflation rate for both headline and core metrics. While a 0.2% reading for the headline figure is anticipated and should be absorbed favourably, the core inflation figure at 0.3% is somewhat ambiguous. The concern is that this figure could potentially lead to a higher annualized rate, which may not be favourable. Hence, in a highly overcaffeinated market, a downside miss on the core is likely needed for doves to take flight, bond yields to rally, and probably stocks too. So if we get the anticipated 0.3%, which is well baked into market sentiment, we will unlikely get anything close to an ebullient cross-market reaction. A 0.4% outcome would be a huge negative surprise in the worst-case scenario. Unfortunately, then all bets are off — figuratively and in this context quite literally, as there is a lot of money backing the disinflation trend. The dreaded top side beat would throw ice water on the easing inflation story, send May cut probability tumbling south of 50% and upend a stock market rally looking for more boost juice from a dovish Fed. The US isn't out of the woods yet on the inflation front, even if markets are keen to pretend otherwise.

US CPI, the biggest market mover, may spark another rally.  A deep dive into American consumption and inflation in the UK serve as additional major market movers.  The absence of Chinese traders from markets will likely have a positive impact on markets. More fireworks than usual – that was the conclusion after the blockbuster US Nonfarm Payrolls report. The release of the Consumer Price Index (CPI) report could be even bigger, as all eyes remain on inflation.  While China is on holiday (the Lunar New Year also impacts markets) the release of consumer data from the US and UK inflation data add spice to an intense week.  1) Chinese holiday may boost markets The world's second-largest economy has a week off – but even a non-event can move markets. The lack of any big news coming out of Beijing is positive, as recent figures from China have been worrying. A break from concerns about demand would benefit Oil and also stocks. The only risk is a report suggesting fewer people are traveling and consuming around the Lunar New Year, but that is unlikely to be the case. The bad news will likely wait for next week.  2) US CPI inflation – Core CPI MoM and headline YoY are eyed Tuesday, 13:30 GMT: After Nonfarm Payrolls surprised with bigger fireworks than expected, the release of US Consumer Price Index (CPI) data could be even greater. There are fewer nuances here: inflation is falling faster or slower than expected. Softer inflation would boost Gold and Oil, while hurting the US Dollar. Ongoing stubborn inflation would hurt equities and the precious metal, sending the Greenback higher.  The most important figure to watch is Core CPI MoM – as it represents the latest development in the figure the Federal Reserve cares about. The Fed has a limited impact on energy and food prices set in global markets and more on everything else, such as housing and investment. With higher interest rates, people are encouraged to save more and take fewer loans. It is expected to rise by 0.3%, a relatively high level. A 0.2% would be meaningful.  The second figure to watch is the headline CPI YoY. That is the figure most watched by the media. A slide from 3.4% to 3.0% is expected, and it would be good news for stocks and Gold, hurting the US Dollar. However, a small rise to 3.1%, or higher would somewhat ruin the party. Seeing a 2% handle would also boost consumer confidence while seeing it stubbornly above 3% would be disappointing. As Nonfarm Payrolls showed, when all figures go in the same direction, the impact on markets is much stronger than when the data is mixed. Nevertheless, I expect a mixed report to boost stocks, as that is the trend eventually. The picture would be choppy and eventually sideways for Gold and the US Dollar.  3) UK inflation set to build a global narrative Wednesday, 7:00 GMT. Contrary to the US and the eurozone, price rises in the UK are still elevated at 4%. Is the UK unique, or just lagging behind? A small rise is on the cards, and that would boost the Pound. A surprising drop below 3.9% would send it down. A bigger shock in either direction would also impact the Euro, as the economies are well-correlated. To impact the US Dollar, the surprise in UK inflation would have to be aligned with the one in American inflation trends. If both fall more than expected, Britain's report will strengthen the notion that global inflation is coming down, sending the Greenback down while boosting Gold and stocks. Another disappointing report shows inflation is stubborn, which would hurt markets.  4) US Retail Sales – will shoppers take a break? Thursday, 13:30 GMT. Never underestimate the relentless US consumer – non-stop shopping. However, the economic calendar points to a small drop in headline sales following months of gains. Another month of gains would boost the US Dollar and hurt Gold, while a bigger slide would do the opposite. What would happen with stocks? Here, there is room for a more mixed reaction. While better sales imply higher interest rates, they also indicate healthy consumption and robust company profits. As consumption is roughly two-thirds of the US economy, the release has a large impact – but relatively short-lived, as big surprises are often accompanied by significant revisions to the other direction. Overall, this report could be an opportunity to go against the initial reaction.  5) US Consumer Sentiment Friday, 15:00 GMT, The last word of the week belongs to the forward-looking survey from the University of Michigan. Shoppers seemed depressed due to higher gasoline prices and inflation in general, but the recent report for January showed a big leap in confidence. A similar outcome is on the cards...