Two trades to watch: Gold, USD/CAD

Gold trades below $1850 ahead of the Fed. USDCAD falls ahead of the BoC.

Gold 4

Gold trades below $1850 ahead of the Fed

Gold is holding steady on Wednesday after booking mild gains across the week. The precious metal has been caught up in mixed market sentiment.

Eastern Europe political tensions are acting as a support to the price of gold. Fresh developments pointing to an invasion by Russia into Ukraine could lift the precious metal higher.

Meanwhile, the prospect of a more hawkish Fed has been capping gains, keeping Gold below the psychological level of $1850.

No rate hike is expected from the Fed. However, should the Fed bring a hawkish surprise regarding the reduction of the balance sheet gold could correct lower.

Where next for gold prices?

Gold trades with a rising wedge with the upside resistance at $1853. Failure to push above this level could see the price could see the price fall back towards yesterday’s low of $1835 ahead of $1829 Friday’s low.

The 50 sma is crossing below the 200 sma in a death cross formation, a bearish signal.

Should the Fed sound less hawkish than expected Gold could push higher above $1853 towards $1864 the November 19 high.

gold chart

USD/CAD falls ahead of BoC interest rate

The BoC is due to announce its interest rate decision today. Whilst the central bank has guided for a rate hike later in 2022.

However, given the strength of the Canadian economic recovery, the low unemployment rate and surging inflation, the BoC could bring a hawkish surprise and give the green light to start hiking rates.

Markets are pricing in a 70% probability of a 25-basis point rate hike in the January. As a result, the CAD could jump on a BoC decision to hike pushing USD/CAD towards 1.25 (Fed dependent).

Where next for USD/CAD?

The recent bounce from the 200 sma at 1.25 saw USD/CAD run higher into resistance at the 50 sma at 1.27. A move below 1.26 yesterday’s low has opened the door to 1.2580, the mid-January high, before the 200 sma at 1.25. The RSI is supportive of further downside.

On the flip side, 1.2665 yesterday’s high could act as resistance ahead of a retest of the 50 sma at 1.27 and towards 1.2810 the 6 January high.

usdcad chart  

How to trade with City Index

Follow these easy steps to start trading with City Index today:

  1. Open a City Index account, or log-in if you’re already a customer.
  2. Search for the market you want to trade in our award-winning platform.
  3. Choose your position and size, and your stop and limit levels
  4. Place the trade.

 

 

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.