Daily Analysis 04/12/2024

• GBP/USD Price: The GBP/USD pair trades cautiously below the 1.2700 level during Wednesday's European session. With the 14-day Relative Strength Index (RSI) stuck below the midline at 45.35, the pair maintains a bearish bias, suggesting further downside risk.
• Fed Officials: Federal Reserve officials offered insights into policy outlooks. Fed's Goolsbee highlighted inflation volatility but expressed confidence in rate reductions over the next year, while Fed's Kugler emphasized a meeting-by-meeting approach, noting the policy is nearing a more neutral stance. These comments reinforce the market’s expectation of a gradual easing cycle.
• BoE’s Bailey: Bank of England Governor Andrew Bailey is set to make an appearance via a pre-recorded interview during an FT-hosted conference. Traders will closely analyze his remarks for any shifts in the BoE’s approach to managing inflation and supporting the UK economy, especially as the Pound remains under pressure.
• Fed Chair Powell’s Discussion: Federal Reserve Chair Jerome Powell is scheduled to answer questions in a moderated discussion hosted by The New York Times. Any comments on the future rate path could impact USD demand and, in turn, the GBP/USD pair's trajectory.
• Pair Sentiment: While GBP/USD consolidates its recent moves, persistent uncertainty around US and UK central bank policies and global economic conditions weighs on the pair. Mixed economic signals keep traders cautious ahead of key central bank commentary.

Closing statement: GBP/USD remains range-bound below 1.2700 as traders await remarks from both BoE Governor Bailey and Fed Chair Powell. While Fed officials hint at policy easing, GBP/USD could face further downside risk if the BoE strikes a more dovish tone or if USD demand strengthens following Powell’s comments.

• Gold Price: Gold (XAU/USD) trades with minor gains on Wednesday, struggling to extend its recent recovery. The market awaits key US economic data releases, including Fed Chair Powell's comments later today, which could influence the next directional move.
• US Labor Market: Tuesday's JOLTs Job Openings report revealed a stronger-than-expected increase to 7.744 million, signaling continued labor market resilience. This reinforces the Fed's cautious stance on rate cuts, weighing on gold as higher US yields and a firm Dollar challenge the precious metal.
• China’s Situation: Chinese economic concerns deepened after the Caixin Services PMI dropped to 51.5 in November, missing expectations of 52.5. Additionally, China's export ban on key materials to the US exacerbates US-China trade tensions, adding uncertainty to global markets and modestly supporting gold’s safe-haven appeal.
• Fed Commentary: The focus shifts to Fed Chair Jerome Powell’s speech, marking his last public remarks before the Fed enters its pre-policy meeting blackout period. Powell's tone could determine near-term market sentiment for gold, especially if he hints at a cautious monetary policy path.
• Upcoming Data: With a thinner market environment ahead of the December policy meeting and year-end holidays, gold traders are treading carefully. Upcoming US Nonfarm Payrolls and inflation data will play a critical role in shaping Fed expectations and gold’s trajectory.

Closing statement: Gold prices remain in a holding pattern, caught between geopolitical risks and expectations for US economic strength. The precious metal could face volatility following Powell's speech, with upside potential limited unless risk aversion deepens or the Fed hints at a more dovish stance.

• WTI Prices: West Texas Intermediate (WTI) crude oil remains stuck in a narrow range above $70.00 per barrel during Tuesday’s European session. The lack of clear momentum reflects a balance between supply-side uncertainties and cautious market sentiment ahead of OPEC+ decisions.
• OPEC+ Situation: Reports suggest that OPEC+ may extend its production freeze through the first quarter of 2025, with key producers like the UAE needing to agree to delays in previously scheduled output increases. Such decisions could lend support to oil prices by avoiding oversupply in a fragile market.
• Geopolitical Tensions: A shaky ceasefire in the Middle East, escalating Syrian conflict risks, and instability in South Korea keep geopolitical risks elevated. These factors, involving major oil-producing regions, add a layer of uncertainty that could disrupt supply lines and support prices if tensions escalate.
• US Inventory Data: The American Petroleum Institute reported a surprise 1.2 million-barrel increase in US crude oil inventories last week, countering expectations of a 700,000-barrel decline. The official Energy Information Administration (EIA) report later today will be closely monitored for confirmation, which could pressure prices further.
• OPEC+ Meeting: All eyes are on Thursday’s OPEC+ meeting, as any policy shifts on production could have a significant impact on prices. Combined with geopolitical developments and the US inventory report, market volatility could increase in the near term.

Closing statement: Crude oil prices remain in a delicate balance, with potential upside capped by rising US inventories and cautious sentiment. Any shifts in OPEC+ policy or intensification of geopolitical tensions could disrupt the current equilibrium, driving price volatility.

• DAX Hits ATH: On Tuesday, the DAX advanced 0.42% to close at a new all-time high of 20,017, breaking past the psychological 20,000 barrier. This follows Monday’s strong rally of 1.57%, underscoring bullish market sentiment driven by robust performances across multiple sectors.
• Market Movers: Materials and technology stocks led the charge, with Heidelberg Materials surging 3.21%. Tech giants SAP and Infineon Technologies also gained 2.19% and 0.82%, respectively, bolstered by BNP Paribas upgrading ASML to "outperform," fueling investor interest in the tech sector.
• Services PMI: Germany’s preliminary Services PMI for November slipped into contraction territory, falling from 51.6 in October to 49.4. The finalized data, due Wednesday, could influence ECB policy expectations and broader Eurozone growth outlooks, adding weight to EUR/USD dynamics.
• US Labor Data: US JOLTS job openings rose to 7.744 million in October, reflecting a resilient labor market. Higher quit rates further indicated worker confidence, which could sustain risk-on sentiment but also support the USD, creating potential headwinds for European equities.
• US Data Releases: Wednesday’s US ADP Employment Change and ISM Services PMI data will be closely watched. Projections of a slowdown in employment growth (150K vs. 233K) and a modest ISM Services PMI decline (55.5 from 56.2) could shape global risk appetite and influence the DAX’s momentum.

Closing statement: The DAX’s bullish trajectory highlights investor optimism, supported by strength in tech and materials stocks. However, weaker German Services PMI data and potential US economic surprises could inject volatility, necessitating cautious optimism for further gains.