Outlook: This week the star of the show will be the PCE price index on Thursday. Bloomberg reports a consensus forecast of 2.8% y/y from 2.9% in January. Even though the m/may go up, with headline up 0.3% and core a bigger 0.4%. Today we get new home sales and the Dallas Fed manufacturing survey for Feb, neither a noteworthy market-mover. Before then (tomorrow), we get consumer confidence and on Friday, the ISM manufacturing PMI, generally considered a bit better than the other one (from S&P). The Reserve Bank of New Zealand is imagined by some to be in hiking mode—both TD and ANZ call for a hike this time (Wednesday) and another one at the May meeting. Two other banks are calling for a hold. A recent survey by the central banks showed consumers are not anchored to falling inflation and the 2-year outlook is for a rise to 3.2% from 3.0%. Let's note once again that "expectations" are feelings, almost certainly not well informed, and feelings can be manipulated by strong words. It's possible the RBNZ just shouts hawkishly. We get CPI from Australia on Wednesday, possibly a tiny rise that would justify a seemingly hawkish RBA tone. We also get the eurozone flash CPI on Friday, and it may well come in nicely at 2.5% from 2.8% in Jan, with core down to 3% from 3.3%. It's not clear this will accelerate any rate cut bets, though. Every financial report today notes that the expectation of Fed rates cuts has gone from 6-7 a few months ago to barely 2-3 today and May having morphed into June—at best. One analysis from the well-regarded Bianco says if it's September or November, it will look "political" no matter what. We see three things in the pullback: first, the market went overboard in the first place and is now going overboard in the other direction. The no-cut crowd is still talking about the too-strong labor market, when the Fed has hinted or said out loud that it no longer sees employment data as determinative. For example, the drop in commercial bank lending is a clue that high rates are taking a toll. This is Lag at work. Second, the gloomy no-cut narrative seems to forget the power of rhetoric. Whatever the data, if enough Feds say they are satisfied the direction looks sustainable and they are backing away from cautiousness, the market knows how to read that. Third, there in nothing in the rule book that says the Fed (or any central bank) can't move between meetings. This is a remote possibility, but not out of the question. Bottom line—the rate cut mania went too far and now has gone too far in the other direction. A balance is due. Then there is one more thing—aside from Australia and New Zealand, the major central banks have all pretty much admitted the next move is rate cuts. We have to believe they are all talking to one another behind the scenes. They don't want to be seen to be cutting prematurely, but we would guess they still have June in mind and will try to herd the markets to that universal consensus—if only to avoid currency volatility. The BoJ is not the only one that dislikes FX volatility. This is a smell more than anything and hardly reliable, Forecast: The market is still correcting or "consolidating" with sentiment all over the place and any single big player capable of setting off a move or counter-move. Longer run, the US has the economic growth, the ostensibly sensible central bank, and the overall moxie to drive the dollar higher. Some forecast the dollar higher all year, although that seems to be going a bit too far. Again, logic is not the only or even the key factor in sentiment so we may be twiddling our thumbs for a while. Tidbit: If you are looking for economists to follow, we have two we like—John Authers, formerly at the FT and now at Bloomberg. And Goldman chief economist Jan Hatzius, who called the subprime 2008 crash and recession. Hatzius sees the soft landing this time working just fine. The Fed's 2% target for core PCE inflation will be approached very closely. The Goldman team created a financial conditions index that combines interest rates, bond yields, stock prices and the dollar. How we wish we could see it! You can get some briefings online but not the Big Papers. The WSJ ran a profile of Hatzius over the weekend, including the Goldman forecasts vs. the consensus. We like what little we can find about the Goldman forecasts because they tend to agree with our own (!). The most recent forecast holds that the latest jump in rents /housing costs from the BLS is an anomaly. This is...

XAU/USD Current price: $2,027.49 US Treasury yields are on the rise, giving near-term support to the USD. Investors are waiting for the US Core Personal Consumption Expenditures Price Index. XAU/USD gains bearish traction in the near term, but not everything is lost for bulls. Spot gold trades with a soft tone in the American session, extending its early decline to fresh intraday lows. The bright metal opened the week with a mild bearish gap but quickly filled it to stabilize around $2,035. XAU/USD currently trades below the $2,030 mark, as the US Dollar benefits from an increased caution. Stock markets trade mixed, reflecting the wait-and-see mood. US indexes consolidate near record highs but fail to extend gains ahead of critical macroeconomic releases scheduled throughout the week. Attention centers around the US Core Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve's (Fed) favorite inflation gauge, after the unexpected uptick in the  January Consumer Price Index (CPI). Meanwhile, the USD is finding additional support in raising US Treasury bond yields, up following auctions. The 10-year note currently offers 4.299% after falling to 4.217% earlier in the day. XAU/USD short-term technical outlook The daily chart for XAU/USD  shows decreasing buying interest. The bright metal seesaws around a flat 20 Simple Moving Average (SMA) as technical indicators turn lower around their midlines. The bright metal is still developing well above a bullish 100 SMA, while the 200 SMA lacks directional strength well below the latter, suggesting bulls still have the chance to resize control. In the near term, and according to the 4-hour chart, however, the risk of a bearish extension increased. Technical indicators gain downward momentum below their midlines, while the pair is currently developing below its 20 SMA while struggling to retain ground above a directionless 200 SMA. The bearish case will be firmer if XAU/USD extends its slide through 2,019.60, the immediate support level.  Support levels: 2,019.60 2,011.40 1,995.35   Resistance levels: 2,032.50 2,045.20 2,064.90

EUR/USD Current price: 1.0853 Market participants await critical inflation figures for the United States and the Eurozone. European Central Bank President Christine Lagarde speaks about the ECB Annual Report. EUR/USD trades just below a Fibonacci resistance level with an increased upward momentum. The EUR/USD pair is marginally higher on Monday, trading in the 1.0850 price zone ahead of the United States (US) opening. The US Dollar is under selling pressure after struggling for direction on Friday, although major pairs remain within familiar levels. The market mood tumbled during Asian trading hours following news from late last week that Moody's Investors Services removed credit rantings from several Chinese companies, spurring concerns about the country's economic health. The sentiment improved partially in Europe, as most local indexes trade with gains, but investors remain cautious ahead of stellar inflation-related figures scheduled throughout the week. Next Thursday, the US will release the Core Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve's (Fed) favorite inflation gauge. Also these days, Europe and Germany will unveil the preliminary estimates of the February Harmonized Index of Consumer Prices (HICP), while China will publish the official NBS Producer Manager Indexes (PMIs). In the near term, the focus is on the European Central Bank (ECB) President Christine Lagarde, who is due to speak about the ECB Annual Report in Strasbourg and US Treasury auctions in the American afternoon. EUR/USD short-term technical outlook The EUR/USD pair trades just below the 38.2% Fibonacci retracement of the 1.1139-1.0694 daily slump at 1.0865, and technical readings in the daily chart favor an upward extension. The pair met buyers around a mildly bullish 100 Simple Moving Average (SMA) while extending its gains beyond a directionless 200 SMA, the latter at 1.0825. At the same time, technical indicators aim north within positive levels, suggesting buyers retain control. For the near term, technical readings in the 4-hour chart also indicate that the risk skews to the upside. EUR/USD trades above all its moving averages, while the 20 SMA aims to cross above a mildly bearish 200 SMA. Technical indicators, in the meantime, turned sharply higher within positive levels, in line with another leg north. Support levels: 1.0825 1.0770 1.0720 Resistance levels: 1.0865 1.0910 1.0950

Core PCE, the Federal Reserve's preferred inflation gauge is the main event of the week. An update to US GDP in Q4 and January's Durable Goods Orders provides hard data. The forward-looking ISM Manufacturing PMI has the last word of the week. The calendar shows February 29 only once every four years – and this one also features the Fed's favorite inflation measure, the Core Personal Consumption Expenditures (PCE) Price Index. That is the week's highlight, but there are several other market-moving events.   1) US Durable Goods Orders Tuesday, 13:30 GMT: How has investment kicked off in 2024? This report for January will shed some light. Various factors skew the headline figure, but the non-defense ex-aircraft one is "core of the core" and feeds into GDP calculations. Better data would boost the US Dollar and hurt Gold, but not necessarily hurt stocks. While rate hikes are adverse for shares, investment generally implies ongoing sales later on.   2) US GDP (second estimate) Wednesday, 13:30 GMT: The first release of growth data for the fourth quarter of 2023 showed a strong increase of 3.3% annualized. Any downgrade would provide some hope that the economy is not as hot as previously estimated, while an upgrade would increase fears of higher interest rates. Any reaction to the data will likely be short-lived, as it refers to the quarter that ended two months ago. The publication could serve as an opportunity to go contrarian.  3) German CPI Thursday, 13:00 GMT: The early release for February will provide an insight of inflation developments in Europe's largest economy. A re-acceleration is on the cards, and may boost the Euro. However, inflation has materially cooled in the old continent, and downside surprises cannot be ruled out. The release is set to have an impact beyond the Euro, as markets will be nervous toward the release of Core PCE in the US, and could shape up positions.  4) Core PCE Thursday, 13:30 GMT: This is what the Federal Reserve talks about when it talks about inflation. The Personal Consumption Expenditure (PCE) is considered a more accurate inflation gauge than the Consumer Price Index (CPI). Markets usually focus on CPI, as it is released earlier in the month, and also due to the strong correlation between CPI and PCE.  However, this time is different. After the hot CPI report, it is unclear if signs of re-accelerating inflation would also be reflected in the PCE report. Investors have come closer to the Fed's projection of cutting rates only three times in 2024, but not fully so. Core PCE, which excludes volatile energy and food items, is expected to have risen by 0.4% in February against the 0.2% increase seen in January. Any 0.1% deviation would make a significant difference for markets. Contrary to growth, orders and sales data, inflation figures are binary for all assets. Hotter data is adverse for stocks and Gold while boosting the US Dollar. On weaker data, the US Dollar would be the only loser while all others rise. 5) US ISM Manufacturing PMI Friday, 15:00 GMT: The first Friday of the month does not feature Nonfarm Payrolls for a change – but does provide a first insight ahead of the jobs report. The forward-looking ISM survey for the industrial sector is set to show a minor contraction on the headline. Markets will look at the employment component for a hint toward the NFP, and the Prices Paid component for insights on inflation. If the surprise in the Prices Paid component goes in the same direction as the Core PCE on the previous day, the impact would be greater than a figure in the other direction. 

EUR/USD holds comfortably above 1.0800 to start the new week. The pair could face next resistance at 1.0860 once it stabilizes above 1.0830. New Home Sales for January will be the only data featured in the US economic docket on Monday. Despite Friday's indecisive action, EUR/USD closed the previous week in positive territory. The pair continues to inch higher early Monday and the technical outlook suggests that the bullish bias remains intact. The US Dollar (USD) struggles to find demand in the European morning as US Treasury bond yields stretch lower. After losing nearly 2% on Friday, the benchmark 10-year US Treasury bond yield is already down another 1% on Monday, retreating toward 4.2%. Later in the day, the US Treasury will hold 5-year and 2-year note auctions. A pullback in high-yields in these auctions could put additional weight on the USD's shoulders. In the meantime, US stock index futures are down between 0.2% and 0.3% in the European session. Following the previous week's risk rally, a negative shift in market mood could help the USD stay resilient against its rivals. January New Home Sales will be the only data featured in the US economic docket, which is forecast to rise to 680,000 from 664,000. An unexpected decline in this data could highlight the negative impact of high interest rates on the real estate market and make it difficult for the USD to find demand with the immediate reaction. EUR/USD Technical Analysis EUR/USD started to edge higher after touching the ascending trend line support, currently located at around 1.0820. Additionally, the Relative Strength Index (RSI) indicator on the 4-hour chart rose to 60 after retreating toward 50 late Friday. Both of these developments suggest that buyers remain interested. The 200-period Simple Moving Average (SMA) at 1.0830 aligns as a pivot level for EUR/USD. Once the pair stabilizes above that level and confirms it as support, 1.0860 (Fibonacci 38.2% retracement of the latest downtrend) could be seen as the next resistance before 1.0900-1.0910 (psychological level, Fibonacci 50% retracement). If EUR/USD fails to clear 1.0830 and makes a 4-hour close below 1.0820, technical sellers could take action. In this scenario, 1.0800 (psychological level, Fibonacci 23.6% retracement) and 1.0780 (100-period SMA), could be seen as next support levels.

Gold price corrects further from two-week highs of $2,041 early Monday. US Dollar rebounds amid risk-aversion, despite falling US Treasury bond yields. Gold price could see a pullback after closing the week above the key 50-day SMA at $2,033. Gold price is reversing a part of the previous week's advance to two-week highs of $2,041 in Asian trading on Monday. Resurgent US Dollar demand and tepid risk sentiment are aiding the correction in Gold price. The downside in Gold price, however, could remain cushioned by the extended fall in the US US Treasury bond yields. Gold price stays defensive amid a quiet start to the week The US Dollar is drawing fresh haven demand, courtesy of fresh weakness in the Chinese stock markets, as geopolitical tensions resurface between China and Taiwan, as well as between Washington and Beijing. China's Commerce Ministry said on Monday, "the US falsely claims that China has created 'overcapacity', which fully reflects the US side's unilateralism and hegemonic behavior." Separately, China's authorities said that the Fujian Coast Guard is boosting patrols in waters near Taiwan's Kinmen islands "to strengthen law enforcement inspections in key areas." Investors also trade with caution ahead of a data-packed US calendar, with the Durable Good Orders data and the PCE inflation report to hog the limelight amid delayed Federal Reserve (Fed) interest rate cut bets. Markets are currently pricing in just about a 20% chance that the Fed could begin easing rates in May, much lower than an over 90% chance a month ago, according to the CME FedWatch Tool. For the June meeting, the probability for a rate cut now stands at about 70%, down from 77% seen a few days ago. The recent conflicting messages from Fed policymakers combined with mixed US economic data prompt traders to take profits on their US Dollar positions before the release of a fresh bunch of key statistics from the US this week. Last week, S&P US Global Manufacturing PMI rose to 51.5 from 50.7 in February while S&P Global Services PMI edged lower to 51.3 from 52.5. Further, risk-aversion has fuelled a fresh surge in demand for the US government bond, contributing to the extended weakness in the US Treasury bond yields across the curve. Softer US Treasury bond yields help limit the Gold price correction. In the day ahead, the dynamics of the US Dollar and the US Treasury bond yields alongside risk trends will influence the Gold price action, as traders look to the US New Home Sales data for some trading incentives. Gold price technical analysis: Daily chart The short-term technical outlook for Gold price remains constructive but a brief pullback cannot be ruled out in the upcoming sessions. The bright metal yielded a weekly closing above the crucial 50-day Simple Moving Average (SMA) hurdle at $2,033, keeping the bullish potential intact, backed by a falling wedge breakout seen last week. The 14-day Relative Strength Index (RSI), however, is inching lower to challenge the midline, justifying the latest leg down in Gold price. The immediate support is now seen at the 21-day SMA at $2,025, A failure to defend the latter could fuel a fresh downswing toward $2,007, the upwsrd-pointing 100-day SMA. Ahead of that, Friday's low of $2,016 could come to the rescue of Gold optimists. On the flip side, if Gold buyers fight back control, recapturing the 50-day SMA will be critical to targeting the February 7 high of $2,044 once again. The next upside barrier for Gold price is then seen at the $2,050 psychological barrier.