The gold market resists, pushed between dollars and rupees

After months on the threshold of the minimum, the gold market continues to suffer. Nevertheless, the haven asset par excellence has managed to maintain altitude despite the sharp weakening caused by the recent appreciation of the dollar.

The Asian market has been an absolute life saver in this case, especially since last week India’s expansionary monetary policy led to a surge in cash, and their citizens started to seek a more convenient way to convert cash into a tangible asset that can function as a real investment. It’s easy to predict that a cap on gold imports will be imposed in the country soon, as the government has already long been considering this possibility.

Obviously, this move has also contributed to an increased demand for Indian gold: many investors and ordinary citizens try to maintain sufficient reserves of gold in order to use it opportunely. Appreciation of the dollar and high demand from India are two strong currents flowing in opposite directions, but they are keeping the most noble of the metals afloat above the 1200 level.

Top 5 Things to Know in the Market on Monday

Top 5 Things to Know in the Market on Monday

1. Oil jumps to 3-week high on Putin freeze comments

Oil prices rallied to a three-week high on Monday, adding to last week's strong gains after Russian President Vladimir Putin said he sees a “high probability” that an agreement to curb oil production will be reached at a meeting later this month.

Speaking at a news conference in Lima after an Asia-Pacific Economic Cooperation summit on Sunday, Putin said Russia is willing to freeze its crude oil output at current levels.

U.S. crude was up 87 cents, or 1.88%, to $47.23 a barrel by 5:55AM ET (10:55GMT), while Brent tacked on 88 cents, or 1.88%, to $47.73.

Prices jumped almost 5% last week on growing expectations that global oil producers will find a way to cap output at a meeting scheduled for the end of this month.

2. Dollar rally shows signs of fatigue

A rally in the U.S. dollar showed signs of fatigue early on Monday, after the greenback hit its highest level in nearly 14 years against a basket of major currencies in the previous session.

The dollar index was last down 0.35% at 101.06 in early trade, after climbing to 101.54 on Friday, a level not seen since April 2003.

Against the yen, the dollar was down 0.2% at 110.69, pulling back from a five-and-a-half month high of 111.19 touched earlier.

The euro was up 0.45% at 1.0637, bouncing off Friday’s 11-month lows of 1.0568.

Meanwhile, the yield on the U.S. 10-year Treasury was down 1.4 basis points at 2.323%, retreating from a one-year high of 2.364% set late last week.

3. Global stocks mostly higher

U.S. stock markets pointed to modest gains at the open on Monday morning, ahead of a four-day Thanksgiving trading week. Wall Street will shut Thursday and then close early on Black Friday, the traditional kickoff to holiday shopping.

Meanwhile, European and U.K. stocks were broadly higher in mid-morning trade, as dollar strength took a breather and oil prices jumped.

Earlier, Asian shares closed mostly higher, with Japan's Nikkei rising to a 10 1/2-month high, thanks to the weaker yen.

4. Fed rate hike odds approach 100%

According to Investing.com's Fed Rate Monitor Tool, odds for a rate hike at the Federal Reserve's December 13-14 meeting are at around 96%, up from 86% late last week, as markets wagered that increased fiscal spending and tax cuts under a Trump administration will spur economic growth and inflation.

A speech from Federal Reserve Vice Chair Stanley Fischer at 8:00AM ET (13:00GMT) Monday is likely to draw attention.

5. ECB President Draghi speaks to European Parliament

ECB President Mario Draghi is due to testify about the European Central Bank's Annual Report before the European Parliament, in Strasbourg on Monday at 16:00GMT (11:00AM ET).

Investors will be looking for indications that the ECB is moving towards boosting monetary stimulus at its December meeting.

While the ECB has not been clear about its bond-buying program plans, most economists expect the bank to announce an extension to its quantitative easing program beyond the originally-planned end date of March 2017.

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EURAUD. Eurozone Refinancing Rate Decision (20 October 14:45 GMT)

Economies of Eurozone and Australia are under the pressure. The ECB leaders can’t solve their biggest issue – boost of CPI and debt crisis. Apart from that, there is a massive concern regarding the “Brexit” and EU-UK asset sharing, as EU leaders no longer want their assets to be traded on London exchange.

On the other hand, there are problems in the economy of Australia due to slowdown of Asian economy and unstable commodity prices which is one of the key aspect of Australian economy.

If the leaders of European Central Bank decide to cut either the deposit facility rate or the  interest rate it will have a negative impact on the European currency.

EURAUD chart:

There is a similar situation with EURUSD D1 on EURAUD D1 price chart – the downward trend also starts to accelerate. Both indicators of technical analysis “Parabolic SAR” and “Awesome Oscillator” prove it. But traders have to keep in mind that fundamental factors prevail on this asset and commodity prices have a vital role in pricing on EURAUD.

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EURJPY. Publication of Japanese Industrial Production report (October 17, 04:30 GMT)

Low inflation is the key problem of Eurozone at the moment. On the latest meeting of European Central Bank representatives it was decided to keep both deposit facility rate and interest rate unchanged (-0.40% and 0.00% respectively).

Head of ECB Mario Draghi said that there will be no additional measures of economy of stimulation at the moment and the asset buyback program will remain on the same level.

On the other hand, representatives of Bank of Japan are also playing a risky game by decreasing the rates regularly and having all sorts of interventions. Rate increase or decrease does not mean the strength of the national currencies, that’s rather a weakness.

If the numbers of Industrial Production report are higher than expected it will have a positive impact on Japanese Yen.

EURJPY chart:

There is still a flat rate movement on EURJPY D1 chart despite the fact that there are minor upward or downward trend movement. According to the indicator of technical analysis “CCI” the rate got back into the neutral area and further flat rate movement is expected now.

EURUSD. FOMC Meeting Minutes (October 12, 18:00 GMT)

Last Friday US labor market data was published and it was insignificantly lower than the forecast. Level of unemployment increased by 0.1% from 4.9% to 5.0% while theNonFarm result was 156,000 against forecasted 175,000.

Despite the fact that the level of unemployment remains significantly lower that 6% (optimal value) it keeps increasing (in June the level of unemployment was 4.7%) and market participants start to worry about the future of US labor market.

Now traders emphasize the FOMC Meeting Minutes report as most likely some information and vision regarding the future of US economy will be described there. If market participants won’t find the ways how to solve all the issues in US economy then there will be a high chance that the refinance rate will remain on the same level and that is why USD might be under pressure.

EURUSD chart

There is still a flat rate movement on EURUSD D1 chart and the rate is moving in the narrowing price range (highlighted with yellow on the price chart). According to the indicator of technical analysis “Awesome Oscillator” the possibility of downward rate movement prevail. Also, the factors of fundamental analysis point at the same scenario.