Gold price is struggling just above $2,000 as the risk-off mood extends into Thursday. US Dollar retreats with bond yields, despite Middle East geopolitical risks and easing Fed cut bets. Gold price leans bearish, with $1,975 eyed as the next crucial support.    Gold price is trying hard to find a floor just above $2,000 early Thursday, despite a broad US Dollar (USD) pullback and ongoing Middle East geopolitical tensions. Attention turns toward the mid-tier US economic data and speeches from US Federal Reserve (Fed) policymakers for fresh trading impetus. Gold price languishes near five-week lows Risk sentiment continues to remain in a weak spot, in the wake of a likelihood of no further big stimulus from China, Red Sea geopolitical tensions and easing bets for aggressive Fed rate cuts. However, the US Dollar fails to benefit from the safe-haven flows, as the US Treasury bond yields pullback from multi-week highs remains a drag. This somewhat turns in favor of Gold price, as it looks to defend the $2,000 barrier, following two straight days of sharp declines. At the time of writing, the US Dollar Index is losing 0.18% on the day to trade at 103.30, extending the retreat from five-week highs of 103.70. The benchmark 10-year US Treasury bond yields is off the highs but hold the fort above the 4.0% level. After late Tuesday's strikes by the US military in Yemen against the anti-ship ballistic missiles in a Houthi-controlled part of the country, Houthi rebels targeted a US-owned cargo ship with a kamikaze drone in the Red Sea on Wednesday after Washington said it would re-designate the Houthis to its list of "specially designated global terrorists," per BBC News. Meanwhile, strong US Retail Sales data supported the Fed policymakers' pushback against aggressive Fed rate cut expectations. Retail sales in the US increased 0.6% last month, buoyed by a pickup in clothing and accessory stores as well as online nonstore businesses. The data exceeded the market forecast for a 0.4% rise. Looking ahead, the Gold price action will likely remain driven by the Fed expectations, as investors eye the mid-tier US Jobless Claims and housing data for fresh policy hints. Also, in focus remains the speeches by the Fed officials before the Fed's 'blackout period' begins on Saturday. Geopolitical developments will also play a pivotal role, driving the broader market sentiment, eventually impacting the US Dollar and the Gold price. Gold price technical analysis: Daily chart Following Tuesday's downside break from the triangle and a sustained move below the 50-day Simple Moving Average (SMA), then at $2,021, Gold sellers flexed their muscles to test the $2,000 threshold. The 14-day Relative Strength Index (RSI) indicator remains below the midline, keeping the door ajar for more downside. If the $2,000 mark support fails, the next strong cushion is seen around the $1,975 region. But Gold buyers could find temporary support near $1,990 before that latter is challenged.   On the flip side, Gold price needs acceptance above the 50-day SMA support-turned-resistance to initiate a recovery toward the triangle support at $2,037. Further up, the confluence of the 21-day SMA and the triangle resistance at $2,045 could challenge bearish commitments. Fresh buying opportunities will generate above the latter, allowing the Gold price to retest the $2,050 psychological level.

Notes/observations - Falling equities corresponding with rising US dollar, which has been given momentum from Fed Waller hawkish commentary and geopolitical tensions in the Red Sea. - BOE rate cut expectations were also dialed down after an upside surprise to UK Dec inflation. - Abundance of ECB speakers heavily downplayed market pricing of rate cuts, uniformly chanting a similar stance. Chief Lagarde let slip that an ECB cut is likely by summer. - Overnight, China Q4 GDP and Dec Retail Sales missed expectations. Substantial weakness seen from Hang Seng and Kospi. - Asia closed lower with Hang Seng under-performing -3.7%. EU indices are -0.4% to -1.6%. US futures are -0.4% to -0.6%. Gold -0.2%, DXY 0.0%; Commodity: Brent -1.9%, WTI -2.1%, TTF -2.9%; Crypto: BTC -0.5%, ETH +0.2%. Asia - China Q4 GDP Q/Q: 1.0% v 1.1%e; Y/Y: 5.2% v 5.2%e. - China Dec Industrial Production Y/Y: 6.8% v 6.8%e. - China Dec YTD Fixed Urban Assets Y/Y: 3.0%. - China Dec YTD Property Investment Y/Y:-9.6% v -9.5%e. - China Dec Retail Sales Y/Y: 7.4% v 8.0%e. - China Dec Surveyed Jobless Rate: 5.1% v 5.0% prior; Youth Unemployment Rate (16–24-year-olds): 14.9% v 21.3% prior record level as methodology update. - China National Bureau of Statistics (NBS) reiterated stance to enhance economic vitality and prevent risks. Domestic economy faced more favorable conditions than challenges in 2024. Does face complex external environment, insufficient demand in 2024. Europe - ECB's Muller (Estonia, hawk) noted that market expectations for 2024 ECB rate cuts were aggressive. Euro zone wage growth was not in line with the inflation target. - ECB's Simkus (Lithuania) stated that was far less optimistic than markets on rate cuts, wage data was going to be very important. Americas - Fed's Waller (voter, hawk) stated that would be able to cut the policy rate this year as long as inflation did not rebound or stay high; No reason to move as quickly, to cut as rapidly as in the past; Policy path must be 'carefully calibrated, not rushed'. - US Senate stopgap funding bill said to avert govt shutdown on Saturday won enough votes to clear first procedural hurdle; Voting continues. Speakers/fixed income/FX/commodities/erratum Equities Indices [Stoxx600 -1.12% at 467.74, FTSE -1.66% at 7,432.75, DAX -0.95% at 16,414.12, CAC-40 -1.10% at 7,316.48, IBEX-35 -1.17% at 9,876.72, FTSE MIB -0.91% at 30,061.00, SMI -0.99% at 11,118.30, S&P 500 Futures -0.40%] Market focal points/key themes: European indices opened lower across the board amid broad global repricing of rate cuts expectations; sectors leading the way into the red include industrials, tech and consumer discretionary; shares of Just Eat Takeaway.com in London erased earlier gains to trade little changed following trading update; shares of shipping giant Hapag-Lloyd trade lower few percent following Maersk and COSCO comments on Red Sea disruptions; Telecom Italia shares in Milan slightly higher following Italian govt's approval of KKR's acquisition offer for its network grid; earnings expected in the upcoming US session include Charles Schwab, US Bancorp, Prologis, Citizens Financial, Discover Financial Services and Alcoa. Equities - Consumer discretionary: Just Eat Takeaway.com [JET.UK] +0.5% (trading update). - Healthcare: Pixium Vision [ALPIX.FR] +24.0% (postponement of the decision on the adoption of a sale plan). - Industrials: Hapag-Lloyd [HPAG.DE] -1.5% (operational cooperation with Maersk; COSCO and Maersk comments), Meyer Burger Technology [MBTN.CH] -28.0% (strategic alternatives), Diploma [DPLM.UK] -2.0% (trading update), Antofagasta [ANTO.UK] -3.5% (production). - Telecom: Telecom Italia [TIT.IT] +1.5% (Italian govt approves KKR's €18.8B offer to acquire its network grid), Pearson [PSON.UK] -2.5% (trading update). Speakers - ECB Chief Lagarde noted that too optimistic markets did not help ECB inflation fight; Inflation was not where ECB wanted it to be. ECB had reached peak rates barring any major shock. Watching wages, profit margins, energy and supply chains; 2nd round effects would be a cause for concerns. - ECB's Knot (Netherlands) noted that market were getting ahead of themselves on rate cuts. - ECB Villeroy (France) noted that it was premature to say when ECB would cut rates in 2024; job of monetary policy was not done yet. - ECB Vasle (Slovenia, hawk) noted that his rate expectations significantly differed to market ones; absolutely premature to expect rate cut at start of Q2 2024. - UK Chancellor of the Exchequer (Fin Min) Hunt stated that inflation did not fall in a straight line; govt plan was working and should stick with it. - EU Commission Chief Von der Leyen stated that was working on reforms to prepare for +30 EU members and to present the plans in Feb. - Sweden Central Bank (Riksbank) Breman stated that probably no need to raise interest rates further. - Hungary Central Bank Dep Gov Virag stated that had room for 100bps rate cuts at upcoming meeting. Base Rate could fall to 6.00-7.00% area by mid-2024 (**Note: currently at...

AUD/USD dropped to six-week lows near 0.6530. Mixed Chinese data releases weighed on AUD. Markets' attention now shifts to the Australian jobs report. Sellers continued to exert control during Wednesday's session, prompting a retreat of AUD/USD to the low-0.6500s, marking six-week lows. This further extends the recent breach of the critical 200-day SMA (0.6581). In light of the ongoing price action, the pair fully faded the rally seen in the second half of December, while the recent break below the 200-day SMA leaves the door wide open to further retracements in the short-term horizon. Wednesday's bearish developments around the Aussie dollar followed disheartening prints from the Chinese economy for the month of December released during early trade, where the GDP Growth Rate expanded below consensus by 5.2% in the October-December period, the Unemployment Rate ticked higher to 5.1%, Retail Sales increased less than predicted by 7.4%, and the House Price Index contracted 0.4% vs. the same month of 2022. On a brighter note, Industrial Production expanded 6.8% YoY. Adding to the persevering sour mood around the high-beta currency emerged another positive session in the greenback, which remained propped up by shrinking speculation of an interest rate cut in March.   In the meantime, market participants are anticipated to assess the forthcoming release of the labour market report in Australia on January 18 in relation to the ongoing speculation surrounding the RBA's stance at its February event. On this, market chatter around the likelihood that the RBA could keep rates unchanged next month has been underpinned by the recent lower-than-expected inflation figures in the country, as indicated by the Monthly CPI Indicator for December. AUD/USD daily chart AUD/USD short-term technical outlook The AUD/USD pair hit a new 2024 low of 0.6534 on January 17. A further decline might see the December 2023 level of 0.6525 (December 7) retested before the transitory 100-day SMA at 0.6512. Further deterioration of the outlook should cause the pair to attempt to move to the 2023 bottom of 0.6270 (October 26). If bulls take control, the focus will turn to the December 2023 high of 0.6871 (December 28), which comes before the July 2023 top of 0.6894 (July 14) and the June peak of 0.6899 (June 16), all of which are prior to the important 0.7000 mark. The negative tone appears to be exacerbated on the 4-hour chart. In fact, the breach of the year-to-date lows opens up the possibility of a move to 0.6525 and 0.6452. The MACD deepens into the negative zone, while the RSI hovers around 23, opening the door to more losses in the near term. The bullish trend, on the other hand, may face first resistance around the 200-SMA at 0.6687, followed by the 100-SMA at 0.6732, which is regarded as the final line of defense before the previous high at 0.6870. View Live Chart for the AUD/USD

Summary Today's retail sales report for December showed consumer spending picked up speed in the final month of the year. Not all the dollars spent found their way into holiday spending categories, but a surge in control group sales means upside risk for Q4 PCE forecasts. December to remember sales event For anyone thinking that the consumer was losing momentum at the end of last year, think again. Retail sales rose 0.6% in December, handily exceeding expectations. Auto sales were expected to be a key driver, and that category was indeed up 1.1% in the month, but the strength extended beyond motor vehicle sales (chart). The biggest monthly gains, in fact, were reserved for some of the categories that comprise holiday shopping. The biggest percentage gainer was department stores where cashiers rang up 3.0% more sales in December. Clothing stores tied for second place with a 1.5% increase in December. Clothing store sales were up 4.3% over the past year which means that more than a quarter of all last year's sales at clothing stores occurred in December, at least in dollar terms. Although a lot of holiday shopping took place in person this year, e-commerce still saw gains with a 1.5% increase in December, enough to tie the percentage gain at clothing stores (e-commerce is almost four times the size of clothing stores). Overall our measure of holiday sales, which includes total retail sales less sales at auto dealers, gasoline stations and restaurants, rose 0.7% in December (10.5% on a non-seasonally adjusted basis). Holiday sales were thus up nearly 4% over last year, which is slightly below our initial estimate for a 5% annual gain. As seen in the nearby chart, this puts the 2023 holiday sales season essentially in line with the pre-pandemic average. Cruising control Control group sales, which are the best read for personal spending in the GDP accounts, rose 0.8%, and these retailers saw sales revised higher in November as well (chart). Once adjusting the estimates for inflation, these data suggest modest upside to Q4 real personal spending. That is, our measure of inflation-adjusted retail sales rose at a 3.5% annualized pace in Q4, compared to an estimated 3.3% prior to today's release. This implies some upside risk to our estimate for total real personal consumption expenditures to rise 2.2% in Q4. We'll get the full personal income and spending release next week in which we'll get a cleaner read on the larger services side of consumption. Yet, with 12 full months of data, some patterns are evident in the composition of retail sales. More than any other category, the one that saw the largest gain in 2023 was bars and restaurants, which were up 11.3%. As this is the lone services category in this release, it shows that while goods spending remained resilient in 2023, there was an ongoing wallet transition back to services happening under the surface. A distant second and third place finish go to health and personal care stores (+8.5%) and ecommerce (+8.0%). Overall it appears that the staying power that has helped prop up spending over the past year remains. It may be shifting away from excess liquidity to a reliance on borrowing and real income growth, but it's intact as consumer resilience helped stave off an economic contraction. For 2024, we still anticipate a moderation in spending as most likely. As the labor market continues to moderate, we expect to see renewed pressure on real disposable income. At the same time, households' reliance on borrowing does not look like a sustainable source of purchasing power ahead. Download The Full Economic Indicator

XAU/USD Current price: 2,004.64 Resilient United States data and comments from Fed officials undermine the market mood. Stocks trade in the red for a second consecutive day, yields reach fresh multi-week highs. XAU/USD bearish momentum supports a slide below the $2,000 mark in the near term. Spot gold trades at its lowest since mid-December, as the US Dollar extends its advance as global stocks fell further. The XAU/USD pair trades near an intraday low of $2,003.28 mid US-afternoon, as investors keep reducing bets on a Federal Reserve (Fed) rate cut next March. The CME FedWatch Tool shows a 52% chance of such an event, down from roughly 70% a couple of weeks ago. Mixed United States (US) data released on Wednesday further weighed on the pair. The country reported that Retail Sales were up 0.6% MoM in December, while Industrial Production in the same month increased 0.1%, both beating expectations. Capacity Utilization rose 78.6%, below the 78.7% expected. Resilient macroeconomic data combined with hawkish words from Fed officials weighing down the odds for a March cut. Government bond yields are also on the rise, with the more sensitive 2-year Treasury note currently offering 4.36%, while the 10-year note yields 4.10%, both standing at fresh multi-week highs. Wall Street, on the other hand, extends its Tuesday slump with the three major indexes trading in the red. XAU/USD short-term technical outlook XAU/USD is down for a second consecutive session, and the daily chart shows additional declines are on the table. The pair extends its slide below a mildly bearish 20 Simple Moving Average (SMA) but holds above the 100 and 200 SMAs, both in the $1,960 region. Technical indicators, in the meantime, head sharply south within negative levels without signs of bearish exhaustion. The bearish momentum is stronger in the near term. The 4-hour chart shows XAU/USD develops below all its moving averages, slowly gaining downward traction. The 200 SMA provides dynamic resistance at around $2,037.25. Finally, technical indicators maintain the downward pressure near oversold readings, supporting a bearish breakout of the $2,000 threshold. Support levels: 2,049.15 2,037.90 2,024.50 Resistance levels: 2,062.35 2,074.40 2,087.00

EUR/USD Current price: 1.0874 Financial markets await US Retail Sales for the next directional movement. Risk mood is off amid market players recalculating bets on upcoming rate cuts. EUR/USD maintains the bearish bias, could accelerate its slump once below 1.0845. The EUR/USD pair extended Tuesday's slump to 1.0855 at the beginning of the day, slowly trimming intraday losses and currently trading flat in the 1.0870 price zone. Comments from US Federal Reserve (Fed) officials made investors hesitate about rate-cut odds, sending stocks sharply down, and Treasury yields firmly up. Asian stocks edged lower, further supporting the Greenback, as softer-than-anticipated Chinese data spurred concerns. The Gross Domestic Product posted a quarterly increase of 1% in the final quarter of 2023, while the annual comparison printed at 5.2%, below the expected 5.3%, although better than the previous 4.9%. European stocks replicate their overseas counterparts, trading in the red and weighing on Wall Street futures. In the meantime, US Treasury yields maintain their positive tone, with the 10-year note currently offering 4.07% and the 2-year note yielding 4.28%. Data-wise, the Eurozone confirmed the December Harmonized Index of Consumer Prices  (HICP) at 2.9%, while the US published  MBA Mortgage Applications for the week ended January 12, up 10.4%, up from the previous 9.9%. The country will publish December  Retail Sales and Industrial Production for the same month, while a few Fed speakers will be on the wires. EUR/USD short-term technical outlook The  EUR/USD pair is at risk of extending its slide, according to technical readings in the daily chart. The pair develops far below a mildly bearish 20 Simple Moving Average (SMA) while approaching a flat 200 SMA, providing support at 1.0845. At the same time, the Momentum indicator heads firmly south within negative levels, while the Relative Strength Index (RSI) indicator hovers around 42, without signs of downward exhaustion. Bears retain control in the near term. The 4-hour chart shows EUR/USD develops below all its moving averages, and with the 20 SMA accelerating its slide below a flat 200 SMA, reflecting sellers' strength. Finally, technical indicators grind lower near oversold readings, lacking momentum amid the limited intraday range. Support levels: 1.0845 1.0800 1.0760 Resistance levels: 1.0890 1.0940 1.0980  

Markets US yields yesterday started a catching up move after the rise in Germany on Monday. Contrary to last week, a poor NY Empire manufacturing survey this time was no pretext to push yields back lower. On the contrary, US yields were propelled higher by comments of Fed's Waller as he provided a detailed analysis of the Fed's rate strategy going forward. Waller acknowledged that the pieces are falling in place for the Fed to gradually start cutting rates this year. However, the process should be deployed 'methodically and carefully'. In this respect, he tempered markets' aggressive rate cut expectations. "With economic activity and labor markets in good shape and inflation coming down gradually to 2%, I see no reason to move as quickly or cut as rapidly as in the past", he was quoted. He also indicated that it is reasonable to start thinking about slowing the pace of the balance sheet runoff. US yields extended their intra-day rise post Waller, closing between 7.5 bps (2-y) and 12 bps (30-y) higher. Spill-overs from the US also help German yields back into positive territory. In a steepening move, the 2-y yield closed little changed, but the 30-y added 3.0 bps. Equities stayed in the defensive (S&P -0.37%). The rise in US real yields also supported the dollar. DXY set a now 2024 top (close 103.35). EUR/USD extensively tested the 1.0877 support (close 1.0875). This morning, the combination of higher US yields and poor Chinese data (cf infra) is causing an outright risk-off positioning on Asian market. The dollar profits. EUR/USD declines further to 1.086. USD/JPY extends its sharp rally (USD/JPY 147.75). US yields maintain yesterday's rise. Later today, the US December retail sales are taking center stage. Monthly sales growth is expected at 0.4% M/M (0.2% for the control group). We look out whether markets keep Fed's Waller's assessment in mind that there is no reason to rush to aggressive rate cuts as US activity data continue to show resilience. Of course, the risk-off sentiment might hamper a further rise in (US) yields. Even so, the US 10-y yield sustainably returning above 4.10% indicates that the bottoming out process is finding more solid ground. The USD momentum is also improving further. EUR/USD 1.0724 (Dec low) is next target on the charts. This morning, the UK inflation brought a material upward surprise, suggesting that there is still a lot of work to do for the BoE. Headline inflation rose 0.4% M/M and 4.0% Y/Y (from 3.9%). Core inflation was unchanged at 5.1% (VS 4.9% expected). Services inflation also remains stubbornly high at 6.4% (from 6.3%). The report clearly shows that any speculation on the time of BoE rate cuts is very premature. Sterling rebounds after the data. EUR/GBP drops from 0.8615 back to the 0.86 big figure. News and views China's economic growth hit the 5% target in 2023. Official numbers released this morning showed the economic number two in the world expanding 5.2% y/y while ending the year with 1% quarterly growth. Hitting the government target was made easier by 2022's low comparison base. Separate December data indeed show the Chinese economy is still struggling to recover from a housing and consumer confidence slump. Residential property sales fell 6% for the whole year compared to 2022 and home prices declined at the fastest monthly rate (-0.45%) since 2015. Retail sales came in at a disappointing 7.2%. In addition, the jobless rate for the first time in five months picked up in December, from 5% to 5.1%. Industrial production extended a recovery that began early last year (4.6% YtD y/y) while fixed investments showed tentative signs of bottoming out after a year's long decline. They are only faint spots that won't ease calls for additional fiscal stimulus, especially as the government is rumoured to set a growth target between 4.5-5% for this year at the March National People convention. Monetary support is also seen as upcoming, even as the PBOC earlier this week defied expectations for a 10 bps cut to its one-year lending facility rate. China's yuan is holding steady after the publication of the figures. USD/CNY is testing resistance at 7.20. Early indicators from a Swedish private data company showed that housing construction started weakening again towards the end of 2023. Coming ahead of official data, the series showed new home construction fell by 4.7% m/m in December while readings of the previous months were revised lower. That brings the total decline from the peak in August 2021 to 68%. The numbers followed a couple of months which suggested the market was more or less stabilizing. Swedish housing faced a deep rout after the central bank sharply raised interest rates to fight inflation. Some 75% of homeowners have mortgages with variable rates, leading to a fast pass-through of monetary...

EUR/USD drops to over a one-month low on Wednesday amid some follow-through USD buying. Reduced bets for a March Fed rate cut act as a tailwind for the US bond yields and the Greenback. Mixed signals from ECB policymakers fail to impress the Euro bulls or lend support to the major. The EUR/USD pair remains under some selling pressure for the second straight day on Wednesday and drops to its lowest level since December 13, closer to mid-1.0800s, or the 200-day Simple Moving Average (SMA) during the early European session. The US Dollar (USD) builds on this week's breakout momentum through a short-term trading range and jumps to over a one-month peak, which, in turn, is seen as a key factor weighing on the major. Federal Reserve (Fed) Governor Christopher Waller said on Tuesday that the US central bank will not rush to cut policy rates until it is clear that lower inflation will be sustained. The comments forced investors to further push back their expectations for a more aggressive policy easing and remain supportive of elevated US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond holds steady above the 4.0% threshold, which, along with a generally weaker risk tone, is seen underpinning the safe-haven Greenback. Reduced bets for an early interest rate cut by the Fed, along with an escalation of military action in the Middle East and rather unimpressive Chinese macro data, temper investors' appetite for riskier assets. In the latest development, the US carried out another airstrike targeting a Houthi missile facility in Yemen amid a threat to merchant vessels and US Navy ships in the Red Sea. Meanwhile, the official data released by the National Bureau of Statistics (NBS) showed that China's economy expanded at an annual rate of 5.2% in the final quarter of 2023. China's GDP growth was above the government's 5% target for 2023, though was driven by a lower base for comparison from 2022. On a quarterly basis, Chinese GDP expanded by 1.0% in Q3, as expected. Following the release, the NBS noted that China's economy faces a complex external environment and low consumer prices reflect insufficient domestic demand. Other data showed that China's Retail Sales and Industrial Production rose by 7.4% YoY and 6.8% YoY, respectively, in December, though did little to fuel any optimism or boost the broader risk sentiment. Adding to this, mixed views on inflation and interest rates by the European Central Bank (ECB) policymakers turn out to be another factor weighing on the shared currency, contributing to the offered tone around the EUR/USD pair. Bundesbank President Joachim Nagel said on Monday that it is too early for the ECB to discuss cutting interest rates as inflation remains high. In contrast, ECB Governing Council Member Tuomas Valimaki on Tuesday signalled his openness to consider lowering interest rates sooner than most of his colleagues. Furthermore, Portuguese central bank chief Mario Centeno said that a rate cut should be part of the discussion and no option should be taken off the table. Moreover, an ECB survey on Tuesday showed that Eurozone consumers have slashed their inflation expectations and see prices to grow by 3.2% in the following 12 months, down from 4.0% a month earlier. Adding to this, expectations for inflation three years ahead also came down to 2.2% from 2.5%. This fails to assist the Euro to attract any buyers or lend support to the EUR/USD pair. Moving ahead, traders now look to the release of the final Eurozone CPI print for some impetus. Meanwhile, the US economic docket features the release of monthly Retail Sales and Industrial Production figures later during the early North American session. This, along with scheduled speeches by Fed Governors Michael Barr and Michelle Bowman, the US bond yields and the broader market risk sentiment, will influence the USD price dynamics and contribute to producing short-term trading opportunities around the EUR/USD pair. Technical Outlook From a technical perspective, spot prices already seem to have found acceptance below the 61.8% Fibonacci retracement level of the December move-up. Given that oscillators on the daily chart have just started gaining negative traction, some follow-through selling below the 200-day SMA, currently around mid-1.0800s, will be seen as a fresh trigger for bearish traders. The EUR/USD pair might then accelerate the fall further towards the 100-day SMA, around the 1.0765 region, before aiming to challenge the December swing low, near the 1.0725-1.0720 area. This is closely followed by the 1.0700 mark, which if broken decisively should pave the way for an extension of the recent corrective decline from a multi-month peak touched in December. On the flip side, the 1.0900 round figure now seems to act as an immediate barrier ahead of the 1.0920 horizontal zone, representing a nearly two-week-old trading range support...

Asia wrap The tone set by Federal Reserve Governor Christopher Waller has caused a shift in bond markets, indicating that there may not be a swift rate-cutting trajectory as previously expected. Waller, who played a role in the Fed's dovish pivot with his remarks in November, now emphasizes a cautious approach to rate cuts, suggesting that the Fed should proceed methodically and carefully. This stance contrasts with the market's anticipation of multiple rate cuts in 2024. Waller acknowledges that recent economic data has allowed the Fed to consider rate cuts in 2024. Still, he emphasizes the need for careful calibration, given concerns about the sustainability of these trends. The market had priced in a more aggressive rate-cutting scenario, leading to an upward shift in yields across the curve. The key takeaway from Waller's recent comments is the emphasis on a more measured approach to rate cuts, challenging the market's expectations of a March cut. While he believes that the policy settings are appropriately restrictive and should continue to put downward pressure on demand, he also notes that the healthy state of the economy provides flexibility. There is no urgency for immediate rate cuts. Waller's mention of potential revisions to the Consumer Price Index (CPI) data next month adds an element of uncertainty, and his suggestion of a terminal rate for bank reserves provides insight into the Fed's monetary policy considerations. Overall, Waller's remarks have contributed to a reassessment of rate-cut expectations and have prompted a notable shift in bond markets. China question marks China has achieved its growth goal for 2023, with a reported annual growth rate of 5.2%. This figure was pre-announced by Premier Li Qiang in Davos. However, the journey to this growth has been marked by challenges, including tepid domestic demand, producer prices in deflation, and three consecutive months of consumer price declines—the longest stretch of CPI deflation since 2009. The lingering impact of President Xi's property crackdown continues to affect the economy, with efforts to revive the housing market showing limited success. In 2024, the Chinese government plans to prioritize "industrial innovation" overconsumption, facing challenges from restrictions imposed by the Biden administration on China's access to advanced technology. Investors' expectations for China's economic growth have declined, as reflected in BofA's Global Fund Manager survey, where expectations turned negative for the first time since May 2022. The People's Bank of China (PBoC) refrained from a Medium-Term Lending Facility (MLF) cut earlier in the week, raising questions about potential steps for economic recovery. Recent activity data for December showed mixed results, with retail sales, industrial output, fixed asset investment, and the surveyed jobless rate presenting a varied picture. The headwinds facing China's economy in 2023 have not subsided, and the geopolitical environment may become more contentious following election results in Taiwan.

Gold price is testing critical daily support ahead of Thursday's US Retail Sales data. Middle East geopolitical escalation and easing Fed cut bets support the US Dollar. Gold price witnessed a symmetrical triangle fakeout, as tables turned against buyers.  Gold price is licking its wounds at around $2,025 in Wednesday's Asian trading, having incurred heavy losses on Tuesday, courtesy of the unabated demand for the US Dollar (USD) amid a further escalation in the Middle East geopolitical tensions and easing bets for aggressive US Federal Reserve (Fed) rate cuts this year. Gold price eyes US Retail Sales for repricing of Fed expectations The US Dollar found solid demand on Tuesday, surging to its highest level in more than five weeks against its major rivals near 103.40 after risk sentiment took a big hit on reports that Iran's Islamic Revolutionary Guard Corps (IRGC) fired missiles at targets near the US Consulate in Erbil, Iraq. Also, Iran-backed Houthi rebels struck a US-owned cargo vessel with an anti-ship ballistic missile off the coast of Yemen. Additionally, investors pared back bets for aggressive Fed rate cuts this year, following Fed Governor Christopher Waller's less dovish speech, offering extra legs to the US Dollar comeback. Waller walked back on his previous view on the dovish policy pivot, as he noted on Tuesday that while inflation was approaching the central bank's 2.0% target, the Fed should not rush to cut interest rates until lower inflation can clearly be sustained. In Wednesday's trading so far, risk-aversion continues to dominate the market sentiment, keeping the US Dollar underpinned near multi-week highs. Therefore, Gold price remains vulnerable as persistent geopolitical tensions in the Red Sea are likely to keep investors on edge, supporting the US Dollar's safe-haven status. In the latest developments, the US military carried out new strikes in Yemen late Tuesday against anti-ship ballistic missiles in a Houthi-controlled part of the country after a missile struck a Greek-owned vessel in the Red Sea. Looking ahead, the US Retail Sales data due later at 13:30 GMT will be closely eyed for fresh hints on the timing and pace of the Fed rate cuts. Markets are now pricing in a 65% probability of a rate cut by the Fed in March, according to the CME Group's FedWatch tool, compared with the 81% likelihood at the start of the week. The US Retail Sales are seen rising 0.4% MoM in December, compared with a 0.3% increase reported in November. Retail Volume, ex-Autos, is set to rise 0.2% in the same period. A weak US Retail Sales report is likely to point to easing inflationary pressures, in turn, reverberating aggressive Fed rate cut expectations. Gold price technical analysis: Daily chart As observed on the daily chart, Gold price portrayed a symmetrical triangle fakeout on Tuesday and in fact confirmed a downside break from the triangle after closing the day below the rising trendline support, then at $2,031. Gold sellers barged in after the 21-day Simple Moving Average (SMA) at $2,046 failed to hold the fort. Gold price is challenging the critical 50-day SMA support at $2,021, at the time of writing. Failure to defend the latter on a sustained basis could fuel a fresh sell-off toward the $2,000 mark. Ahead of that, the $2,010 round level could offer some temporary support to Gold buyers. The 14-day Relative Strength Index (RSI) indicator has flipped bearish, as it falls further below the midline. Any recovery in Gold price would need acceptance above the triangle support now turned resistance at $2,033. The next strong upside barrier is seen at $2,046, the confluence of the 21-day SMA and the triangle resistance. Fresh buying opportunities will generate above the latter, allowing Gold price to retest the $2,050 psychological level.

Stocks are lower across the board on Tuesday and the key driver is the revaluation of rate cut expectations. The market has scaled back the prospects for a US rate cut in March. The CME Fedwatch tool is now pricing in a 69% chance of a cut, this had been above 75% on Monday. The increase in Treasury yields comes on the back of some hawkish commentary from the ECB, and further attacks on commercial vessels in the Red Sea. More Red Sea disruption, but will it really impact inflation? The WSJ is reporting that Shell has suspended Red Sea transits indefinitely, and overnight Qatar said that shipments of LNG would be delayed due to the unrest. The reaction in the oil markets has been fairly muted so far, the Brent crude price is up by less than 1%, and remains below $80 per barrel, and UK natural gas prices have risen only slightly after falling last week. However, the attacks are a warning sign that supply disruptions could come back to haunt the market. We mentioned last week that the Vix, the index that measures volatility in the S&P 500, was at subdued levels. The Vix has picked up in the last 24 hours and is now back above 13. This is still low by historic standards. While the Vix seems to be underestimating risks that could derail stock markets in the future, the IMF produces a chart called the World Uncertainty Index. As you can see, this has risen in the last quarter of 2023, as geopolitical tensions come back into focus.   Chart: IMF world uncertainty index Source: IMF Traders need to be aware of the magnitude of the increase, because the greater the uncertainty the more this can impact stock prices. Right now, the increase in global uncertainty is manageable. Although ships are being attacked on the Red Sea, many are still sailing through. Added to this, it takes an extra 9 days approx. to reroute ships and avoid the Suez Canal and sail around the horn of Africa. This is annoying, but it should not cause the magnitude of supply disruptions that we saw during the pandemic era. Overall, the markets are right to reassess the level of the Vix, and to scale back some of the interest rate cuts it had been expecting in recent weeks. However, there is no panic in the market. Watch Waller comments for market direction Added to this, the 10-year Treasury yield may have popped above 4% on Tuesday, but Fed member Christopher Waller, a member of the board of governors of the Federal Reserve System, is speaking later today. His comments are worth watching since he is a noted dove. Comments that he made at the end of November were considered to be dovish and supportive of rate cuts. This was seen as a precursor to the Fed's pivot at its December meeting. Thus, Waller's comments will be watched closely in case they give us a steer on what to expect from the Fed in the coming weeks, and whether a March rate cut is likely. The disinflation trend is mostly intact, even with the uptick in prices in December, and there have some weak labour market indicators recently, which could see Waller maintain his dovish message.   Thus, although stocks are falling alongside bonds (bond yields are rising), and the dollar is higher, these trends could reverse course if Waller signals a rate cut is coming in March. A bad earnings season could clear the decks for a recovery for financials in 2024 Both Goldman Sachs and Morgan Stanley reported weak earnings for 2023. Goldman reported its lowest annual profits in 4 years, although its performance picked up in the final quarter. Investment banking remains a bleak spot as deal making levels are subdued. Morgan Stanley saw its profits fall by a third in Q4, as its wealth management division saw costs rise. For 2023 as a whole, Morgan Stanley saw profits fall by 17% to $9.1bn. Overall, US bank earnings for Q4 have been disappointing, with few of the large US banks benefiting from strong net interest income, although JP Morgan reported a record quarter in Q4. The financial sector in the S&P 500 has lagged the overall index this year and has been basically flat since the start of January. The financial sector also underperformed the S&P 500 for 2023 as a whole, rising a mere 5%. At the time of writing, Goldman Sachs and Morgan Stabley's share prices were higher, as the markets shrugged off the weak earnings data, however, both stocks have a long way to go to catch up with the overall market. CPI could see the UK fall back in line with its peers Elsewhere, the UK's CPI data will be...

Currencies & metals get sold in the overnight markets Credit Card delinquencies rise... Uh-oh! Good Day... And a Tom Terrific Tuesday to you! Well, congrats to the Bills and the Bucs as they joined the other 4 winners of their playoff games yesterday and last night. Man, do I miss my RedZone tv station, as i find it difficult to watch a full NFL game, and prefer to watch highlights from live games instead... The day yesterday was warm, but overcast, and allowed me to sit outside and read a good part of the day, without worrying about the sun on my skin... I've just started a new book for me... The Memory Man series... It's a good one so far! Good friend, Karen brought me a ton of books to read the other day, and so now I'm set, with reading material for some time to come! The Guess Who greets me this morning with their song: Undun...  Well, it was a holiday here in the U.S. yesterday, so there wasn't much movement in the metals, Gold did gain $6 on the day to close at $2,055... Silver ended up losing 3-cents on the day, Mondy, and ended the day t $23.16... The BBDXY gained 1 index point on the day... The price of Oil bumped higher in its range to a $72 handle, and after I chastised the bond boys yesterday for not listening to the Fed Head Speakers last week, they adjusted the 10-year's yield higher to 4.0%...  I was reading my weekly Classic Wisdom yesterday, and realized that I had become addicted to knowing more and more about the ancient Greeks, and others of the time... Yesterday they drew a comparison of Socrates and MLK... they had both given their lives to better enlighten people... You learn something new every day, folks... and when you don't, it was a wasted day!  In the overnight markets last night... Well, all hell broke loose last night... The dollar bugs went on rampage, and Gold got sold down the river... The BBDXY gained 7 index points overnight, and Gold lost $17 in the early trading. This has been swift, and strong... I guess it was bound to happen given all the talk of no rate cuts early by the Fed Heads... But C'mon dollar bugs... are you kidding me? You really believe the dollar should be bought right now? Apparently so... UGH! Silver is down 15-cents to start the day today, barely holding on to the $23 handle...  The price of Oil has bumped higher in the range and trades with a $73 handle, and the 10-year's yield inched higher and trades this morning with a 4.01% yield... I really don't get why the dollar bugs are running all over the kitchen floor this morning, but they are, and so we'll just batten down the hatches. The euro has dropped below 1.09, and the rest of the currencies, sans rubles, are looking pretty ugly this morning...  Well... the world planners are meeting in Davos, Switzerland... this isn't as clandestine as the Bilderberg meetings, and I did get a kick out of their plan for the meeting... "To restore Trust"... Hmmm... that would mean that they did have our trust before, and somehow lost it... I wouldn't trust these boys and girls with anything!  Did you hear that Credit Card delinquencies are rising? And that to me is sign that consumers have been using credit cards to make ends meet, and now they're having problems with paying the large interest rate-based loans down... This could end up being what really causes the U.S. economy to fall flat on its face, folks... I'm just saying... Last week I wrote about how Gold had outperformed stocks and bonds since the turn of the century... And then i Bill Bonner's letter yesterday, he wrote this: "Our guess is that we've already seen "Peak America" in the late '90s. That was the best time – ever – to sell US equities. The Dow was trading at over 40 ounces of gold. So, if you had $100,000 in stocks…and you traded them for gold, you would have gotten 357 ounces.   If you'd left your money in stocks, it would have grown from $100,000 to over $370,000 over the next 23 years. Not bad. But your gold coins would have gone from $280 per ounce in 1999 to over $2,000 an ounce today, turning your $100,000 into $714,000. " - Bill Bonner from Bonner private research...  Well, the warnings have all been sounded regarding traveling through the Red Sea... Another U.S. ship was hit by a missile fired from those not wanting anything to go through the passageway. The US. had tried to send a message last week by firing on the terrorists, but now we learn that Congress hadn't given the POTUS...