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Market participants wait for XAUUSD to decline

16 January 2024 161
Market participants wait for XAUUSD to decline

Today, let's take a look at the prospects of the XAUUSD pair. To begin with, let's turn to the assessment of the US economy, as it determines trends in the movement of the US dollar.

The U.S. has the highest GDP growth rates among the G10 countries. Thus, in October 2023 GDP growth (quarter-on-quarter) was 4.9%, in November 5.2%, and 4.9% in December. By comparison, the eurozone economy had a negative GDP ratio (-0.1%) during the same periods. And the Swiss economy, comparable to the US in terms of innovation characteristics, grew by 0.3% in December.

The unemployment rate in the US is at the average level among the G10 countries and amounted to 3.7% in December. In the eurozone, the unemployment rate at the end of the year reached 6.4% and 2.1% in Switzerland.

Contrary to common opinion, the US is far from being a leader in the decline of inflationary pressures. For example, over the last six months, inflation in the UK and the eurozone has been falling at a much higher rate than in the US. In the UK, the year-on-year CPI was 7.9% in June, 6.7% in September, and only 3.9% in November.

In the eurozone, the CPI was 5.5% in June, 4.3% in September, and 2.4% in November.

In the US, inflation was 3.0% in June, 3.7% in September, 3.1% in November, and 3.4% in December.

All this points to the US economy remains heated, with the Federal Reserve likely to be forced to maintain restrictive measures for longer than optimists of market sentiment expect. In other words, conditions for strengthening the US dollar have not lost their strength.

From the technical analysis point of view, XAUUSD has an untested level below the current market price at 2040, which XAUUSD is likely to aim for in the near term.

The final recommendation is to sell XAUUSD with the target of 2040. A stop-loss could be set at the level of 2060.

This content is for informational purposes only and is not intended to be investing advice.

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