US dollar in focus after supportive US GDP revisions

Asia-Pacific market briefing – US GDP data underscored a hawkish Fed

Gold prices fell 1.2% on Thursday as general market sentiment deteriorated, producing a volatile Wall Street trading session. The Dow Jones, S&P 500 and Nasdaq 100 sank 1.05%, 1.45% and 2.18%, respectively. As a result, the VIX market ‘fear gauge’ soared about 9.6%, the most since September. Meanwhile, the haven-linked US dollar gained cautiously.

Reduced liquidity due to thinner trading conditions before Christmas means markets can be sensitive to event risk. This came in the form of revisions to US third-quarter GDP data. Growth clocked in at an annualized pace of 3.2% q/q versus the 2.9% estimate. Meanwhile, personal consumption, the most important segment of GDP, surprised at 2.3% versus the 1.7% consensus.

The data underscored the Federal Reserve’s ongoing fight against the highest inflation in decades. Improving growth could increase the likelihood of the so-called ‘soft landing’ and point to a more robust economy. In turn, that could mean a more hawkish Fed. You can see that reflected in Treasury yields, which rallied alongside the US dollar.

Gold technical analysis

XAU/USD left behind an Evening Star candlestick pattern, which is a bearish formation. Meanwhile, prices continue trading within the boundaries of a bearish Rising Wedge. A breakout and confirmation are lacking at this time, but a downside push may open the door to resuming the broader downtrend that started earlier this year.

That places the focus on the 50-day Simple Moving Average (SMA). Otherwise, closing above 1824 exposes the June high at 1879.

XAU/USD daily chart

Friday’s Asia-Pacific trading session – ASX 200, Nikkei 225, ASX 200 at risk?

Friday’s Asia-Pacific trading session is lacking notable economic event risk. That places the focus for traders on risk appetite. A further deterioration in sentiment in the wake of Wall Street’s volatility places the ASX 200, Nikkei 225 and Hang Seng Index at risk. This could leave gold vulnerable to a rising US dollar.

US dollar technical analysis

The DXY US dollar Index continues to idle above the key 103.93 – 104.39 support zone. This follows a string of losses since September. Prices remain under the downward-sloping 20- and 50-day SMAs. The latter continues to maintain a near-term downside focus. Breaking above the latter could open the door to a bullish reversal. Otherwise, breaking support exposes the May lo at 101.29.

DXY daily chart

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