EUR/USD is likely to find support at 1.1110 levels and now trading at 1.1142 levels. But as you can see in the chart below, the rally comes after a selloff in July and August, and is still well off the highs reached in November 2015.
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It is my view that misguided fears of rising rates have pushed the Dollars higher and capped the gold price advance.
LONDON – Gold slid to a two-month low on Wednesday after forecast-beating United States jobs data stoked speculation that the Federal Reserve would move ahead with plans to raise interest rates, propelling the dollar index to its highest in three weeks. “Further dip-buying support is expected; however, bearish signals from silver could a precursor for weakness in gold, with a breach of $1,300 likely to generate deeper downside pressure”.
“There is a consensus view that the USA has reached full employment but that is ridiculous considering that broad measures of joblessness peg the actual jobless rate at 9.7% and this has barely budged in the past five months”, notes Gluskin Sheff and Associates chief economist and strategist David Rosenberg. “We”;re referring to what”;s become known as the ‘Fed Feedback Loop,”; in which the bank is apparently adjusting expectations for interest rate hikes with consideration of the ‘wealth effect,”; while using a subjective interpretation of the ‘dual mandate”; to support their thesis in either direction.
US futures pointed to a flat open on Wall Street.
The comments from Yellen and Fischer dragged Wall Street lower at the close. The metal fell 1 percent to hit $1,308.65 on Tuesday, its lowest since June 28. After the Verizon workers’ strike helped to plunge payrolls in May to a near-six-year low, June brought a strong rebound by 287,000, and July produced 255,000.
The U.S. dollar fell from three-week highs against a basket of currencies on Wednesday after weak manufacturing data dented some optimism about U.S. economic growth ahead of a highly anticipated jobs report on Friday. Annual business investment as a proportion of gross domestic product has been running a full percentage point below its pre-recession readings. Economists expect a contraction at a 1.5 percent annualized pace as growth was shaken by wildfires in northern Alberta that disrupted oil production.
AUD/USD is supported around 0.7490 levels and now trading at 0.7508 levels.
The Australian dollar declined to $0.7505 from $0.7578. But, on average over the last 140 years, the stock market’s longer-term returns have been higher in the wake of higher interest rates rather than lower.
Rate hike probabilities for September and December had risen after last Friday’s remarks by Fed Chair Janet Yellen that the case for raising rates had strengthened in recent months.
To that end, the yield on the 10-Year U.S. Treasury has inched back up to 1.58% recently. Core PCE has been stuck at 1.6 percent for a few months now, with inflation expectations among the general public as well as in markets going nowhere.
Apple Inc was the largest weight on USA stock indexes on Tuesday after antitrust regulators ordered the company to pay about $14.5 billion in back taxes to the Irish government, but gains in bank shares partly offset the decline.
Nasdaq 100 e-minis were up 8.25 points, or 0.17 percent, on volume of 14,402 contracts. The 30-year fixed-rate mortgage rose 3 basis points to 3.46 percent. Traders will scrutinize Friday’s payrolls report in light of Fed Vice Chairman Stanley Fischer’s comment on Tuesday that the bank will base decisions at its September 20-21 meeting on data.
The metal for immediate delivery was little changed at $1,314.18 an ounce by 11:44 a.m.in London, set for a 2.8 percent retreat this month, according to Bloomberg generic pricing. The greenback dropped 0.2 percent to 75.36 cents versus the Aussie, following a 1.1 percent gain last month.
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Brent crude futures settled down 89 cents, or 1.8 percent, at $48.37 per barrel.
