The dollar index was under pressure at around 90.40 in late Asian trading on Wednesday. Gold futures were up slightly at around $1, 843 an ounce. In the trading day, investors will get a speech from Federal Reserve Chairman Colin Powell and U.S. inflation data, both of which are expected to trigger market moves. Kshitij Consultancy Service’s latest post on Wednesday 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.
At 21:30 Hong Kong time on Wednesday, investors will get US January inflation data, which is expected to show a 0.4% increase in the seasonally adjusted consumer price index (CPI). But the core CPI is expected to remain below 2%.
The U.S. consumer price index is expected to have risen 1.5 percent on a seasonally adjusted annual basis in January, the survey showed, up from 1.4 percent the previous month. The U.S. core consumer price index is expected to have risen 1.5 percent on a seasonally adjusted annual basis in January after rising 1.6 percent the previous month.
If U.S. CPI rises more than expected, gold could rise further, analysts said. Gold is seen as a hedge against inflation and currency devaluation that could result from broad stimulus measures.
“Inflation has become an important part of the market discussion, especially with commodity prices rising and interest rates rising,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group.
At 03:00 Hong Kong time on Thursday, Fed Chairman Colin Powell will speak at an online event hosted by the Economic Club of New York. Analysts said any discussion of the economic outlook and monetary policy by Powell is expected to move markets, and investors can look for more information on the shrinking balance sheet and prospects for economic recovery.
On January 27, the Federal Reserve said after a two-day policy meeting that it would keep its benchmark short-term borrowing rate near zero and maintain its asset purchase program, in which the Fed buys at least $120 billion a month, as expected.
At a news conference after the January 27 meeting, Powell said the Fed would maintain its accommodative monetary policy until its dual goals were achieved. The logical scenario for the Fed would be a high level of easing. Now is not the time to talk about a date for tapering asset purchases.
If Powell sends a dovish signal in his latest speech, the dollar could come under further pressure, while gold could continue to rally.
Gold futures are steady and could rise to $1,880 / oz in the short term. We expect the $1880-1820 / oz range to hold for the time being. Once above $1,880 an ounce, gold futures are expected to advance further to $1,920 an ounce or higher.
Silver futures are also solid, as long as they are above $27 / oz, we wouldn’t rule out a move to $28.00- $29.50 / oz in the medium term.
The dollar index
The dollar index has fallen sharply and is likely to test support at 90 in the short term before rebounding from that level.
EUR/USD has risen significantly and if it moves to 1.22 or higher, expect the recovery to continue over the medium term. Watch for possible resistance at 1.22 over the next few sessions.
EUR/JPY currently has resistance around 127.20/25 and could fall to 126.75 or lower in the short term if this resistance zone is not overcome. But a break above 127.25 could push euro/yen up to 128 in the medium term before a pullback is expected. Now watch EUR/JPY for price action around 127.20/25.
USDJPY has fallen sharply as the USDX has fallen and could face support at 104.50 or 104 below which, if held, could push USDJPY back towards 105 or above in the medium term. In the near term, keep an eye on USDJPY price action around 104.50.
AUD/USD was significantly higher on higher copper prices. AUD/USD is expected to move towards 0.78 in the near term as copper prices are likely to continue to move towards $3.80/90 / lb.
GBPUSD broke through the key weekly chart resistance at 1.38 and as long as the rally continues, we may not be able to rule out a move to 1.40 in the near term. The short-term view on GBP/USD remains bullish as long as the level above 1.38 is maintained.