February 22, 2024
US Dollar on Tenterhooks Ahead of US CPI;  Setup on Gold, USD/JPY and GBP/USD


Market Forecast – Gold Prices, USD/JPY, GBP/USD

  • The US dollar advanced without direction on Monday ahead of US CPI data.
  • January’s US inflation report will capture the market’s attention on Tuesday
  • This article focuses on the technical outlook for gold prices, USD/JPY and GBP/USD

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Most Read: EUR/USD Forecast – US Inflation Data Will Boost Market Sentiment, Fall in Play

The US dollar, as measured by the DXY index, was trading nervously at the start of the new week, moving up and down around the flatline without making significant progress in either direction amid mixed US Treasury yields.

Monday’s slow move in the FX sector, with low volatility, can be attributed to cautious conditions ahead of a high-impact event on the US economic calendar on Tuesday morning: the release of January Consumer Price Index data.

The upcoming report is expected to show annual headline inflation declined to 2.9% from 3.4% last month, a welcome development for the US central bank. Core CPI is also seeing a decline, but gradually, it has declined to 3.7% from 3.9% in December.

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To assess the potential market reaction to data on key financial assets, traders should look at how official results compare to consensus forecasts, paying particular attention to the trend in key metrics.

If progress on deflation stalls and the CPI number turns surprisingly upward, the recent rebound in yields and the US dollar is likely to be extended, weighing on gold prices. This is because steady inflation could push back the timing of the first FOMC rate cut and reduce the likelihood of aggressive easing in 2024.

On the other hand, if the CPI data comes in below expectations, an adverse reaction could emerge, especially if the miss is significant. Under such circumstances, bond yields and the greenback could decline sharply in the near term, giving a boost to the precious metals in the process.

For a comprehensive overview of gold’s medium-term prospects, including insights from fundamental and technical analysis, download our Q1 trading forecast now!

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Gold Price Forecast – Technical Analysis

Gold (XAU/USD) fell on Monday, but losses were limited, with the precious metal lacking strong directional conviction – a sign of market indecision. To develop a more attractive trading setup, resistance at $2.065 or support at $2.005 is needed.

If the resistance is broken, a sharp rally towards $2,085 could occur. With continued strength, the focus will soon shift to all-time highs near $2,150. Conversely, if support is breached, attention will shift to $1,990, followed by $1,975. Below this area, the next major technical floor is located at $1,965.

gold price technical chart

Gold price chart created using TradingView

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USD/JPY Forecast – Technical Analysis

USD/JPY rose modestly on Monday and consolidated above technical support at 148.90. If prices rise in the coming days, resistance emerges around the psychological 150.00 level. Bulls may struggle to overcome this barrier, but in case of a bullish breakout, a retest of the 152.00 area is possible.

Conversely, if the pair turns lower and breaks the support at 148.90, the selling pace could accelerate, setting the stage for a pullback towards 147.40. Further losses from this point could draw attention towards the 146.00 handle, followed by 145.50, the 50-day simple moving average.

USD/JPY Technical Chart

USD/JPY chart created using TradingView

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GBP/USD Forecast – Technical Analysis

GBP/USD has made a moderate comeback after a sell-off at the beginning of the month, reclaiming its 200-day simple moving average and consolidating above the 1.2600 handle. If Cable’s rebound extends over the next few trading sessions, resistance hovers at 1.2675 (50-day SMA), followed by 1.2740.

On the other hand, if GBP/USD resumes its bearish trend and drops below 1.2600, trendline support and the 200-day simple moving average are visible at 1.2565. Bulls will need to desperately defend this technical area; Failure to do so could lead to a move towards 1.2500.

GBP/USD Technical Chart

GBP/USD chart created using Trading View

Source: www.dailyfx.com

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