The dollar index held steady near 90.90 in late afternoon trading on Thursday. Gold futures were trading around $1,782 an ounce. Kshitij Consultancy Service’s latest post on Thursday offers forward-looking analysis of future trends in gold futures, silver futures, the dollar index, euro/dollar, euro/yen, dollar/yen, pound/dollar and Aussie/dollar.
The Kshitij Advisory Services team wrote that the dollar index rose sharply after strong U.S. retail sales data. Gold has fallen sharply on the back of a stronger dollar, but silver has held steady and is relatively bullish on gold.
U.S. retail sales rose 5.3% in January from December on a seasonally adjusted basis, far more than economists had expected, according to data released Wednesday.
Gold fell sharply on Wednesday as bets on an economic recovery boosted the dollar and benchmark U.S. Treasury yields. Comex gold for April delivery fell 1.5 percent to settle at $1,772.80 an ounce, the lowest close for the most actively traded contract since late June.
Gold futures closed lower for a fourth straight session on Wednesday as a “death cross” has formed on the technical chart, suggesting a long-term decline is likely ahead. Gold futures, the most actively traded contract on Wednesday, saw its first “dead cross” since June 2018, when its 50-day moving average fell below its 200-day moving average, which is often seen as the dividing line between long-term uptrend and downtrend.
At 20:30 Hong Kong time on Thursday, the European Central Bank will release the minutes of its January monetary policy meeting. Analysts said euro/dollar could be hurt if the ECB minutes were more dovish.
On January 21, the European Central Bank announced to keep three major interest rates unchanged, as expected by the market. The ECB reiterated its very accommodative monetary policy stance and kept the duration and size of its asset purchase programme unchanged. At a press conference following the January meeting, the president of the European Central Bank, Christine Lagarde, said the current vaccination programme for the new vaccine was an important milestone on Europe’s path to recovery, but the current outbreak still posed a serious risk to the economy, with renewed infections and blockades disrupting economic activity.
Ms Lagarde reiterated in recent days that the ECB would maintain its current accommodative monetary policy in order to boost the eurozone’s economic recovery. Ms Lagarde said keeping monetary policy stable at a time of severe economic contraction in Europe would be positive to boost consumer confidence and reduce uncertainties in the economic recovery.
Gold futures have fallen sharply in the past few sessions on the strength of the U.S. dollar. There is no chance that gold will fall to $1, 760- $1, 740 an ounce anytime soon. The current bearish view on gold futures is expected to fall to $1,740 an ounce first in the next few sessions.
Silver futures are surprisingly holding above the support level of $26 / oz and don’t look as bearish as gold. As long as the price stays above $26 / oz, optimism remains that silver could move to $29.50- $30 / oz in the medium term.
The dollar index
The DXY rose as high as 91.06 after the US retail sales data yesterday. A sustained break above 91 would see the dollar index rise to 91.50 or even 92 before a pullback is expected.
EUR/USD fell sharply, breaking short term support around 1.2095 as the DXY rose sharply following the positive and strong US retail sales data. As long as the level below 1.21 is maintained, EUR/USD is likely to fall further towards 1.20-1.1948 in the short term before rallying.
EUR/JPY fell, with 128.45 still looking like resistance for now. EUR/JPY is likely to rebound from 127 in the near term, which could keep the bullish view unchanged in the short to medium term. If EURJPY fails to hold above 127, this could drag it down again towards 126/125.75 in the near term.
USDJPY dipped below 106 again after testing 106.23 on the upside. As long as it stays below 106, USDJPY could fall towards 105.50 before rallying again to higher levels.
AUD/USD is also down, but keep an eye on price action around 0.7680 to see if it holds. If AUD/USD holds above 0.7680, this could push the rally towards 0.7750/0.7800 in the short term.
GBP/USD remained below 1.40. As long as the dollar remains strong, GBP/USD is likely to fall towards 1.3760 in the short term before rebounding from that level.