US DOLLAR AND GOLD ANALYSIS, PRICES, AND CHARTS

• March rate cut probabilities are cut back sharply as Powell continues to look at data.
• Gold prints a sixth successive higher low despite dampened rate expectations.

Federal Reserve Chair Jerome Powell tempered market rate cut expectations yesterday, saying that the central bank needed greater confidence that inflation would hit target adding, ’I don’t think it’s likely that we’ll reach a level of confidence by the time of the March meeting, I don’t think that’s the base case.’ Going into the meeting the market was pricing a 50/50 chance of a March rate cut, the current probability is seen at just 35%. Despite the Fed pushback, financial markets still expect the US central bank to cut interest rates by nearly 150 basis points this year.

With the Fed reiterating that they remain data dependent, Friday’s US Jobs Report (NFP) takes even greater significance than usual especially after yesterday’s US ADP Report missed expectations (+107k actual vs. +145k forecast). Nonfarm payrolls are expected to show 180k new jobs added in January, compared to 216k in December, while the unemployment rate is seen rising to 3.8% from a prior reading of 3.7%.

After posting a multi-week low of $2,002/oz. in mid-January, gold has put in a solid, if unspectacular, performance. The precious metal hit a pre-FOMC high yesterday of $2,056/oz. before fading lower to trade around $2,042/oz. Gold has posted six consecutive higher lows and is back above all three simple moving averages for the first time in a month. The CCI indicator shows gold heading towards overbought territory. Initial support is seen around $2,032/oz. ahead of $2,010/oz. and $2,002/oz. A break above Wednesday’s high should leave gold bulls looking at $2,088/oz. as the first short-term target.

 

Retail trader data show 58.92% of traders are net-long with the ratio of traders long to short at 1.43 to 1.The number of traders net-long is 9.22% lower than yesterday and 15.32% lower than last week, while the number of traders net-short is 5.16% higher than yesterday and 7.10% higher than last week.