GOLD
Gold prices hedged up during early Tuesday trading, halting the losing streak that started at the end of last year. Investors are now waiting for the release of US inflation numbers on Thursday, hoping the figures will help clarify a likely path for the Federal Reserve’s unwinding of its monetary policy. Gold’s price action has been largely determined by the performance of the dollar as investors try to guess the scope and timing of the Fed’s rate cuts. In the runup to the end of the year, the greenback was under pressure as optimism took over and traders priced in a first rate cut in March and then more in almost every other Fed meeting thereafter. However, as December approached its end, expectations started to shift, resulting in dollar gains and a corresponding downside for the bullion price. Against this background, this Thursday’s release of US CPI numbers will be important and, depending on how the American inflation numbers are perceived, can either renew the increase in dollar demand and further hurt gold prices or reawaken the optimism of early December and support gold prices.
Ricardo Evangelista – Senior Analyst, ActivTrades
Source: ActivTrader
EUROPEAN SHARES
Equities drifted lower shortly after Tuesday's opening bell in Europe, fading yesterday's gains amid lingering uncertain sentiment.
Yesterday's bullish move that drove the STOXX-50 to its 4,500.0pts resistance has proven to be a simple technical pull-back following the drop registered in the first week of the year. Prices came to test the newly established resistance after the market broke out of its 3-week-long trading range between 4,500.0pts and 4,590.0pts.
The lack of new bullish catalysts and the fact that investors may have been overpricing dovish shifts in monetary policies can explain the current lower appetite for risk from traders.
Of course, this situation may change this week, depending on the semantics used in the speeches from ECB and Fed officials, while tomorrow's US inflation print may also impact sentiment significantly.
However, for now, the most likely scenario remains bearish for stocks from a technical perspective.
The STOXX-50 is currently challenging very short-term support at 4,465.0pts following a sharp rejection below 4,500.0pts. We expect the market to return to its annual lows around 4,430.0pts quickly, while a deeper correction towards 4,380.0pts and 4,355.0pts is also possible.
Pierre Veyret – Technical analyst, ActivTrades
Source: ActivTrader
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