U.S. Inflation Softens And Gold Hit 10 Weeks High

U.S. Dollar Index (USDX)

The dollar index and dollar index futures lost 0.2% each while languishing at a two-month low after data showed U.S. CPI inflation grew 7.7% in October, its slowest pace in nine months.

The reading gives the Federal Reserve impetus to hike interest rates by a smaller hike of 50 basis points in December. Markets are also positioning for such a move, with traders pricing an 80% chance of the Fed hiking rates at a slower clip. A group of Fed members also said this week that they support such a move to avoid damaging the economy.

The dollar index broke below the support and neckline at 109.40. However, breaking the resistance at 109.20 led to a drop toward 107.50. Technical indicators also show selling pressure while MACD specifically is showing convergence and further decline.

Pivot Point: 107.70

Euro (EURUSD)

The European currency is still holding the gains above 1.0200, capitalizing on a fresh risk-on wave after China cut its quarantine restrictions and flight bans. The safe-haven U.S. Dollar resumes its post-CPI downside ahead of the Michigan Consumer Sentiment data.

During the previous session, the pair witnessed a dramatic intraday turnaround and rallied from the daily low in reaction to softer U.S. consumer inflation figures.

The pair remains positive as long as it trades above 1.0200 while breaking below 1.0160 will most likely lead to a drop below the parity levels. However, technical indicators show a possibility of a decline.

Pivot Point: 1.0210

Spot Gold (XAUUSD)

Gold prices stuck to ten weeks high on Friday and were set for their best week in over eight months. The signs of cooling U.S. inflation drove up hopes that the Federal Reserve will trim its pace of interest rate hikes in the coming months.

Metal markets were boosted by a softer-than-expected CPI inflation reading, with the Fed’s expectations for a smaller interest rate hike skyrocketing after the data. U.S. CPI inflation grew 7.7% in October, its slowest pace in nine months.

Spot gold lost 0.2% to $1,751.92 an ounce, while gold futures fell 0.2% to $1,755.20 an ounce. Both instruments rallied nearly 3% on Thursday and were set to gain 4.3% this week to record their best performance since late February.

Gold traded this morning below the resistance at 1,765 which weighs pressure shown in the readings of the technical indicators. However, the hourly chart shows wide divergence and a steep regression line. Meanwhile, the daily chart remains negative as long as it trades below 1,765, otherwise, it might have a probability to rise to 1,795.

Pivot Point: 1,760

West Texas Crude (USOUSD)

Oil prices rose during the morning session after softer-than-expected U.S. inflation data ramped up hopes of smaller interest rate hikes by the Federal Reserve, although concerns over slowing economic growth and a COVID spike in China still saw crude trade negative for the week.

Additionally, Hong Kong softened some COVID-19 restrictions for inbound travellers, driving speculation that China could follow with a similar move. But rising COVID cases in China constrained enthusiasm over such a move happening in the near term.

Brent oil futures rose 0.3% to $93.96 a barrel in early Asian trade, while West Texas Intermediate crude futures rose 0.4% to $86.78 a barrel. Both contracts clocked strong gains on Thursday after the inflation data but were still set to end the week about 6% lower.

WTI declines to 87.50 which is considered major support, breaking this level might lead to a drop towards 84.85 on the hourly chart and 76.10 on the daily chart. However, technical indicators on both time frames show resilience with a probability of further gains.

Pivot Point: 87.90