JAN 4, 2022
XAUUSD RETREATS AS US DOLLAR INDEX BOUNCES BACK
US equities rose cautiously on the first trading day of the year as investors started returning back from their holidays. The Dow Jones rose by about 100 points while the S&P 500 and Nasdaq 100 indices rose by 0.25% and 0.75%, respectively. The CBOE VIX index also rose by about 0.80%. Despite concerns over rising Covid cases and a hawkish Fed, investors have history to fall back on. For one, stocks have recorded a positive year in all years in the past decade. The SP 500 index, which rose by 28% in 2021, has risen by more than 10% in the past three straight years. Tesla shares jumped by 9% after the company surpassed its fourth-quarter orders.
The US dollar index rose slightly in the American session as investors reflected on the latest manufacturing PMI numbers from key countries. On Monday, data by Markit showed that the American manufacturing PMI declined slightly to about 57.7 in December. Since the data has remained above 50 for months, it is a sign that the manufacturing sector is doing well. The Institute of Supply Management (ISM) will publish its data later today. The same strong growth was seen in Europe, where the PMI declined to 58.0 from the previous 58.4. The dollar rose as investors predicted that the Fed will be more hawkish this year.
The Australian dollar declined against the US dollar after the latest interest rate decision by the Reserve Bank of Australia (RBA). The bank decided to leave interest rates unchanged and hinted that they will remain in that range for a while. It also decided to continue with its asset purchases in a bid to support the economy as it faces significant Covid-related challenges. The currency also declined after better manufacturing PMI data from China. Other key data to watch today will be the German unemployment rate, mortgage lending and US JOLTs job openings.
The EURUSD declined sharply in the overnight session. The pair is trading at 1.1290, which is the lowest level since December 29th. The pair managed to move below the important resistance at 1.1340. It has moved below the 25-day moving average and the 23.6% Fibonacci retracement level. Its Relative Strength Index (RSI) has moved below the neutral level of 50. Therefore, the pair will likely keep falling as bears target the lower side of the channel at 1.1231.
The NZDUSD pair declined sharply because of the strong US dollar. The pair declined to a low of 0.6775, which was the lowest level since December 22. It also moved below the lower line of the Bollinger Bands and the key support at 0.6787. It also declined below the 25-day and 50-day moving averages while oscillators have declined. The pair may continue falling as bears target the key support at 0.6740.
The XAUUSD pair declined to a low of 1,801, which is the lowest level since December 30. The pair moved below the lower line of the ascending trendline. It also moved slightly below the 25-day moving average while the Relative Strength Index has declined. Therefore, the pair will likely keep falling, with the next key target at 1,785.