Gold prices attracted some dip-buying for the fourth consecutive day on Monday, trading near the highest levels since December 28th.

Disappointing US ISM Manufacturing PMI and University of Michigan Consumer Sentiment Index data released last Friday, coupled with remarks from Fed officials, kept the US dollar bulls on the defensive and acted as a tailwind for gold.

Fed officials sent a strong signal to the market on the last trading day of the week—adjusting the balance sheet.

Fed Governor Christopher Waller, at the 2024 US Monetary Policy Forum in New York, expressed his desire to see two key developments in the Fed's portfolio.

Firstly, he’d like to see the Fed's institutional MBS holdings drop to zero. He would also like to see the Fed shift a larger proportion of its Treasury holdings toward shorter-dated securities (which is bullish for gold)

Before the financial crisis, about one-third of the US Treasury bonds held by the Fed were Treasury bills. Today, these short-term securities account for less than 5% of its holdings of US Treasury bonds and only 3% of all securities held. Moving towards more Treasury bills will adjust the term structure to better match the short-term policy rates controlled by the Fed.

It is worth noting that the Fed launched "Operation Twist" in the second quarter of 2012 (selling short-term Treasury bonds and buying long-term Treasury bonds) to extend quantitative easing, but it did not explicitly label it as such. Today, a similar operation is underway, but they won't use the correct term—quantitative easing (QE)—to refer to "reversed operation twist." This is because the first rule of the Fed QE club is to never mention QE.

Dallas Fed President Robert Kaplan, at the same event, suggested that slowing the pace of balance sheet reduction might be appropriate (also bullish for gold).

This week marks the last week before the Fed enters its blackout period and the final opportunity to communicate with the market before the March meeting. The speeches of Waller and Kaplan at this time imply that Fed officials will spark a wave of "slowing balance sheet reduction" discussions this week.

Among them, Fed Chairman Powell has stated that quantitative tightening and interest rate cuts are on independent tracks—meaning they can consider slowing or ending balance sheet reduction without cutting rates. For the market, halting balance sheet reduction would partially mitigate the risk of delayed rate cuts.

In addition, the March meeting is expected to delve into balance sheet issues, providing guidance for the final decision on the pace of balance sheet reduction.

Finally, if the Fed does not announce rate cuts at the March meeting (which seems to be the case now), it is highly likely that they will announce the start of slowing balance sheet reduction in March, with action beginning in April.

If so, it is expected that the Fed will reduce the cap on Treasury bond reductions by $150 billion per month starting from April. It would be $45 billion in April, $30 billion in May, $15 billion in June, and ending QT in July.

However, this is just a prelude. This week will also see many "game-changing" major risks: the US election enters its first climax this year, Fed Chairman Powell's testimony before Congress, and the release of February nonfarm payroll data in the US.

This week, 14 analysts participated in the gold trend survey, with none of them bearish on gold in the near term. The survey shows that 11 analysts (or 79%) are bullish on gold. At the same time, three analysts (or 21%) maintain a neutral stance on precious metals.

Furthermore, investor sentiment continues to steadily improve. This week, 175 votes were cast in an online survey. Slightly improving compared to last week, 77 retail investors (44%) expect gold prices to rise this week. Another 43 investors (25%) predict prices will decline, while 55 investors (31%) hold a neutral outlook on gold's near-term prospects.

Last week, gold prices surged significantly, partly due to a sharp decline in US Treasury yields on Friday. From a technical perspective, the key question now is whether the rebound initiated from $1,972 marks the beginning of a long-term uptrend recovery or merely constitutes a corrective pattern from $2,147.

Currently, we hold a negative stance on the latter scenario. Therefore, while gold prices may continue to rise, they are likely to gradually lose momentum below key resistance levels of $2,088, $2,090, and $2,020, respectively, and peak below $2,147.

In terms of short-term trends, the breakthrough of the $2,062-$2,064 range resistance last Friday is seen as a new bullish trigger and supports the prospect of further upside. At the same time, the aforementioned resistance range can now act as a buffer against immediate downside momentum. However, sustained weakness below this range may trigger aggressive technical selling and could test the 50-day SMA, currently situated near $2,034. Prices below the latter would negate bullish prospects and shift bias towards bearish trades.

Overall, last week's gold price testing of the key target range around $2,080 was in line with expectations. Prices were expected to climb alternately, but the bulls took a direct and excessive leap, causing the RSI in the daily chart to hover near the overbought zone, hindering fresh bullish bets. We believe that, ahead of the release of nonfarm payroll data this week, prices may continue to trade sideways, lacking direction. Traders should exercise caution while awaiting recent consolidation.

Trading Direction: Short

Entry Price: 2190

Target Price: 2052

Stop Loss: 2225

Valid Until: 2024-03-18 23:55:00

Support: 2064, 2057, 2052

Resistance: 2090, 2120,2147

Canada's GDP demonstrated robust growth, expanding by 1.0% year-on-year in the fourth quarter of 2023, surpassing market estimates of 0.8%. This upswing signals a significant turnaround from the revised 0.5% decline witnessed in the previous quarter. The surge in GDP was predominantly fueled by an increase in exports. Although December's monthly GDP remained flat, the preliminary estimate for January stands at a promising 0.4% month-on-month growth.

The Q4 GDP release has exceeded the Bank of Canada's (BoC) expectations, which had projected a flat GDP in February. However, as the BoC convenes on March 6th, the consensus anticipates the central bank to maintain its cash rate at 5.0% for the fourth consecutive time. While the markets have priced in a potential rate cut in either the June or July meetings, the BoC remains cautious, particularly with inflation hovering at 2.9%, significantly above the 2% target. The BoC's projection suggests that inflation will not reach the 2% target until 2025. Hence, unless inflation recedes faster than anticipated or key economic indicators such as GDP and job growth underperform, a rate cut in mid-2024 seems unlikely.

Conversely, in the United States, market expectations for rate cuts have diminished. Investors had previously priced in up to six cuts in January, but this has now reduced to three, aligning with Fed projections. Despite acknowledging that inflation is gradually aligning with the 2% target, Federal Reserve members have maintained a cautious stance, emphasizing a gradual approach to rate adjustments to navigate potential bumps in the journey towards target inflation.

From a technical standpoint, the USDCAD pair reached the initial target at 1.3600 before retracing momentarily to test the 1.3550 barrier. The EMA50 is currently providing positive support to the price from below, while stochastic indicators indicate a clear positive momentum, approaching positive overlap. Consequently, the outlook suggests a potential resumption of the bullish trend within the established bullish channel, with the next target projected at 1.3750. However, a breach of the 1.3510 level could halt the bullish momentum, triggering a bearish correction on an intraday basis.Today's anticipated trading range is between 1.3500 support and 1.3640 resistance, with the expected trend favoring a bullish trajectory.

BUY USDCAD

ENTRY PRICE : 1.3590

STOP LOSS  : 1.3510

TAKE PROFIT : 1.3750

During Monday's (March 4th) Asian session, WTI oscillated narrowly, and it is now trading at 79.5.

Last Friday, the accumulated momentum of oil prices exploded and boosted WTI above the upper limit of the oscillation. WTI once rose to 80.3 a line, the highest since November last year. The stock accumulation continues, and the highlight is the improvement of demand realization, as well as geopolitical risks supporting the WTI. With mixed information, news becomes less important, while the important thing is how the market thinks. The big bull candle in the last session explains the market choice. Currently, fundamentals show a certain marginal change, but at the same time, the March production cut program is approaching. Thus, we should pay attention to the substantial change to better grasp the future trend of oil prices.

Review the last trading day market catalysts: First of all, OPEC+ representatives said that OPEC+ agreed to extend production cuts to the end of the second quarter. The market news: Kuwait will extend the voluntary production cuts of 135,000 bpd to June. Although the substance has not been reduced by how much, such a statement is enough to ignite the market to go long. In addition, the data showed that in January, the actual discount on Urals crude oil averaged 18.12 dollars per barrel in the Russian ports, a disguised price increase of 3 dollars. Lastly, the Association of the Petroleum Industry of Kurdistan (APIKUR) confirmed they have not received any proposal from Erbil or Baghdad to reach an agreement that would help reopen the pipeline. The pipeline shutdown cut off the supply of nearly 500,000 barrels of crude oil to the global market, and the supply concerns are resurfacing.

In the Asian session yesterday, WTI once plunged to 77.6 while the highest price was 80.3. In the end, it declined again to 79.3. We planned to trade in the range of 76.8-79.0, going short high and ending with 0.5 dollars. Many investors used to trade a great stop-loss. Although there are thousands of rules to make stable profits, it is not recommended for beginners to trade a big stop loss as a stop loss should be traded when it is small. When it becomes big, investors will lose their minds and get trapped. Consequently, they will lose money, or even exit the trade with more tremendous damages.

Today's focus: Crude oil stocks and more importantly, the nonfarm payrolls report to be released this week.

Driven by news, WTI went stronger last Friday with few retracements. The lowest price was 77.6, and WTI rebounded quickly without sufficient pullbacks. Then, it broke the recent high but eventually failed to climb above $80, indicating the lack of capital. However, the direction is defined and the bulls will dominate later.  

Technically, WTI changed the previous oscillation and rebounded substantially during the last session. After it crossed above the previous high, the bullish sentiment strengthened while WTI depreciated again when it touched 80.3. It is aligned with technical trends as WTI should try several times when it faces significant levels. Unless there is sufficient momentum, it will be a battle between bulls and bears. In the 1H chart, MACD forms a death cross, indicating a possible change today. However, investors should not expect a great adjustment as WTI will ascend in a greater cycle. Thus, going short is not suggested. Regarding the 4H chart, WTI may turn weak, but the bullish sentiment indicated in the MACD is still valid and WTI should keep strong for a while. From the daily chart, WTI closed with a bull candle and jumped above the previous high. Meanwhile, MACD is expanding, showing a bullish trend in a long cycle. Therefore, the trading range today will be 78.5-80.5, where investors can buy low and sell high.  

Trading direction: Short

Entry price: 80.500

Target price: 78.500

Stop loss: 81.000

Support: 78.500/76.500

Resistance: 80.400/83.200

During the Asian session on Monday (March 4), spot gold fluctuated in a narrow range and is currently trading around 2080. 

Last Friday, gold prices may have surprised investors and performed a trend of cutting rates. Gold prices broke through the important resistance levels of 2050-2065-2088 continuously, hitting a record high this year, and once reaching the peak at the end of last year. This is a breakthrough of gold after a long period of oscillation. Even though many investors acknowledged that gold would break through the resistance level, they did not succeed in predicting the strength of its upside rush. Most of the upside is driven higher by the stop-loss orders offered by a lot of rang trading paranoids. We emphasized last Wednesday that gold prices will break through the resistance zone in the next two days, and traders need to avoid using a rang trading strategy. If the trend line is breached, the upside will also be opened.

At the moment, the fundamentals remain stable. According to the PMI data released last Friday, the economic data is still resilient. The consumer confidence index shows that US consumers' expectations for the economy have shown marginal deterioration. In this context, although gold prices are more easy to rise, the released data was not strong enough to guide gold prices to strengthen rapidly. Therefore, the market is currently volatile. After the short-term overshoot, as one side admits defeat and leaves the market, gold prices will inevitably need a correction. Shortly, traders should not chase the market but mainly try to go short at highs with small positions.

On Friday, gold prices retreated as low as 2039 in the Asian session, with support in the 2035-2040 area that we are emphasizing. Subsequently, gold prices fell to 2045 after a quick rally to around 2057 was blocked. In the American session, the price rose strongly again to 2088.2. Our strategy trades in the range of 2035-2055. At position 2055, the maximum floating profit was $10. However, the profit was taken back and we left the market at the entry level. On the downside, we missed out on the bullish market. Perhaps, the market taught another vivid lesson about paranoid investing yesterday. Resistance levels in the 2050-2065-2080 area have been broken one by one, and the bears in heavy positions may be hit hard. It is important to emphasize that a stop loss is the most effective way to protect your capital. Only those who succeed in escaping will survive to fight against the new day.

Data: The final value of the US Markit manufacturing PMI in February was revised up to 52.2 from 51.5, which is the highest level since July 2022. The final value of the US consumer confidence index in February was revised down to 76.9 from 79.6, which is the first decline in three months.

There is no big news today, and traders should mainly pay attention to the digestion of market sentiment. This week, the focus will be on the US ADP employment data for February, as well as the non-farm payroll data.

Last Friday, the gold price was incredibly bullish, but it also gave some room for a pullback. On review, this may be a chance for the bears to leave the market. After a quick break above the trend line around 2055, the room for gold to rise was opened, which also delivers on what we have previously highlighted. Eventually, the market closed with a 1cm long bull candle. Perhaps the bears only breathed a sigh of relief at the last closing moment! However, after yesterday's violent rally, perhaps the bearish momentum accumulated by the recent oscillations has been almost stopped. The momentum for gold prices to rush higher has weakened, and the bulls may already be thinking about how to take profits smoothly for now. After all, in the absence of news stimulus, continuing to rise at the current absolute high level will easily cause a counterattack by the bears. After a short-term overbought, gold prices may be able to pull back at any time.  

On Friday, gold mainly maintained a volatile trend. In the Asian session, gold prices retreated slightly to 2039, but recovered to 2045 after the bulls counterattacked to 2057. As the 2055 resistance level was not effectively broken, the pullback in gold prices attracted many investors with a rang trading strategy and bearish thinking to enter the market. This also allows us to witness the show of the US market bulls booby-trapping the bears. The price broke through three important supports in one fell swoop, leaving no room for the bears to counterattack. In the 1-hour candlestick chart, gold prices are seriously overbought in the short term after a surge. The MACD has also seen a death cross trend from the highs. During the day, traders should not chase the market, and aggressive traders can mainly go short at highs. Traders who want to take long positions should also wait for a sharp decline to gain support and seize the opportunity to rebound. The same is true for the 4-hour chart, and traders who want to go long need to be cautious. On the daily chart, due to the continuous closing of bull candles in the past few days, the bulls were more bullish, which created another long bull candle on Friday. The golden cross of the MACD was wider, but it was still not in the overbought area. In the short term, the market will be dominated by bulls, and gold prices are still on an upward trend as a whole, but there is no basis for a one-way move to the upside for the time being. During the day, aggressive traders can buy low and sell high in the 2065-2088 range.

Trading Direction: Short

Entry Price: 2088

Target Price: 2065

Stop Loss: 2093

Support: 2078.000/2065.000

Resistance: 2088.000/2100.000

During the Asian session on Friday (March 1), WTI crude oil fluctuated in a narrow range and is currently trading around 78.1 dollars per barrel.

Yesterday, oil prices maintained the trend the day before yesterday, retreating from highs. Oil prices rose as high as 78.8 at the beginning of the American session but failed to hold on to gains, and then they fell quickly back to as low as 77.5. Oil prices have sustained their oscillation pattern since mid-February. What’s more, it shows that traders do not have much enthusiasm to chase the market, although the bulls are currently dominant. At present, the market lacks effective fundamental factors that could change the oscillation pattern. All in all, the market was relatively thin yesterday. The surge of oil prices in the American sessions was mainly due to the release of employment data and inflation data, which was bearish for the dollar and supported the surge of risk assets. Also, oil prices strengthened driven by sentiment. However, the rally was not able to continue due to the lack of buying support. The price will still fluctuate recently.

In March, there are two main aspects that we need to focus on. One, which is also the most critical one, is OPEC+'s plan to cut production. Although this plan will not be announced until the middle of this month at the earliest, the market will keep hyping it. The other is the influence of geographical factors. At present, global frictions have become the norm. Russia-Ukraine, the Red Sea, and the Palestinian-Israeli conflicts are all potentially destabilizing factors. Although the current Biden administration's remarks that the Palestinian-Israeli conflict will cease fire before March 10 has some impact on the market, it is all uncertain.

Trading: Oil prices fell as low as 77.5 in the Asian session yesterday, rebounded as high as 78.8, and retraced to 77.5 at the end of the session. Our strategy trading range is 77.0-79.0, with no signal to open a position, which is a day of wait-and-see.  

Data: The US PCE price index increased by 2.4% YoY in January, in line with market expectations and slightly slower than the 2.6% growth rate in December. PCE increased by 0.4% MoM, which also met market expectations, and doubled from the 0.2% growth rate in December.  

Today, investors need to pay attention to the US manufacturing PMI data for January and the speech of Fed Governor Waller.

Yesterday, Oil prices rebounded slightly in the American session, rising as high as 78.8. But after blocked in the 79-79.5 area, oil prices retreated again. As support was in the 77-77.5 area, oil prices fell as low as 77.5 before rebounding to around 78. This trend is more a reflection of the caution of both the bulls and bears, but there is a lack of further clues, with both technical and fundamental factors relatively vague. At present, the important resistance area of oil prices is 79-79.5. However, it is not enough to rely on technical bullish factors to make an effective breakthrough. Fundamental factors or big news are required. In the short term, we can still use a rang trading strategy. After the oil price enters the resistance zone, traders can try to short with small positions.

The market did not fluctuate much yesterday. In the 1-hour candlestick chart, the continuous bearish piercing line pattern fully released the momentum of the bears. As the MACD has shown signs of a golden cross, an hourly rebound could be expected during the day. In the 4-hour K-line chart, the bullish and bearish piercing line patterns appeared one after another, and the MACD indicator stuck. As a result, price action did not provide any valuable reference signals, we should watch hourly rebounds. The daily chart closed slightly higher with a long upper shadow, but the MACD was still sticky. In the short term, it's uncertain whether the oil price will be bullish or bearish, so oil prices will be volatile. During the day, trading investors can buy low and sell high in the range of 76.8-79.0.

Trading Direction: Short

Entry Price: 79.000

Target Price: 76.800

Stop Loss: 79.500

Support: 77.000/75.500

Resistance: 78.500/79.500

During the Asian session on Friday (March 1), spot gold traded in a narrow range with current levels around 2044.

The inflation figures for January in the US, released yesterday, showed a gradual cooling trend with a year-on-year increase of 2.8%, while initial jobless claims were higher than expected. This significantly alleviated recent market concerns about inflation, driving gold prices higher yesterday. As expected, gold broke out of its previous consolidation range, reaching a new high since early February. It briefly touched the 2050 mark before retreating, mainly driven by long-accumulated sentiment.

Although yesterday's inflation figures did not exceed expectations, the month-on-month rebound to 0.4% marked the largest increase in nearly a year, continuing to pose risks of inflation. Fed official Loretta Mester's statement yesterday indicated no rush to cut interest rates, showing no fear of January's inflation data. The Fed's policymakers reiterated that it might be appropriate to start cutting rates this summer, with three rate cuts being suitable for this year. Perhaps this is the real driving force behind future gold prices. However, there is still a long time until this summer, and gold prices may not have short-term drivers yet. Time might favor the bulls.

Tonight, attention will be on remarks from Fed Board Governor Christopher Waller. Nick Timiraos, a Wall Street Journal reporter, indicated yesterday that Waller is likely to become the next Fed Chairman.

In terms of trading, gold prices oscillated and fell during the Asian session yesterday, dropping to around 2027.8. During the US session, prices surged to around 2050.6 after the data release, followed by volatile declines. We underestimated the bullish sentiment yesterday. Our suggested trading range was between 2020 and 2045, and we shorting at high levels incurred losses of $5. Stop-losses are not to be feared, yet many investors struggle to face them. In trading, using stop-losses is never wrong, even if the trade starts moving in the original direction immediately after the stop-loss is triggered. Trading is simply a probability game.

In terms of data, the US January PCE price index increased by 2.4% year-on-year, consistent with market expectations, slightly slower than December's 2.6% pace. The month-on-month increase of 0.4% also met market expectations, doubling from December's 0.2% increase.

On the news front, Nick Timiraos indicated that Fed Board Governor Waller may be the next Fed Chairman.

Focus of the Day: US January manufacturing PMI data and remarks from Fed Board Governor Waller.

Yesterday, gold prices behaved as expected. During the Asian session, they continued to be pressured in the 2035-2040 range; while during the US session and driven by data, prices broke through the resistance in that area, reaching as high as 2050.6. However, substantial bullish factors for gold are still lacking. The market was unable to firmly hold above 2050, meaning it failed to effectively break through the trend line shown below, leading to subsequent volatile declines.

Following yesterday's breakthrough, the previous resistance area has once again turned into a support area. Intraday attention needs to be paid to the support around the 2035-2040 region. Stabilizing after a pullback is still an opportunity for cautiously going long with small positions, but there isn't much room for upward movement. The initial focus should be on the resistance around the 2055 level. Short-term movement towards this area could also provide opportunities for cautiously going short with small positions.

From a technical standpoint, yesterday's significant fluctuations mainly occurred within the first hour after the release of US data. Subsequently, the market entered a phase of digesting both bullish and bearish sentiments. The driving force behind the upward movement in the market still hasn't shown significant changes. Short-term fluctuations are likely to continue around the trend line shown below.

Looking at the 1-hour candlestick chart, after a rapid upward breakthrough with a long white body, the MACD indicator entered the overbought zone, with a death cross appearing at high levels, suggesting a possible intraday correction. The 4-hour candlestick chart shows a similar pattern, with bullish momentum already being fully released, warranting attention to intraday correction opportunities. In the daily chart, the bullish close yesterday injected greater bullish sentiment into the market. The MACD formed a golden cross near the zero line, indicating continued bullish sentiment over larger timeframes.

Today's intraday trading range can be considered 2035-2055. Aggressive traders may consider buying low and selling high within this range.

Trading Direction: Short

Entry Price: 2055

Target Price: 2035

Stop Loss: 2060

Support: 2040.000, 2020.000

Resistance: 2055.000, 2065.000