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Gold has been struggling to move higher before a selloff takes the metal back down to the lows. One of the problems is coming from COT which is suggesting a decrease in long contracts. However, price is still moving upward towards yet another test at a key level. Here are a few catalysts that could eventually push gold back to the $1900s.

Higher Inflation

Inflation is a major factor in the behavior of the stock market, USD and gold. Annual inflation rate jumped to 7% which is a multi-decade high, but gold is still struggling to move higher. This is likely because investors are already expecting a higher interest rate in March, but such a high jump in inflation cannot be quelled from a single hike of 25 bp from the Fed.

gold

Wedge Breakout Pattern

Another potential catalyst is caused by the technical pattern setting up on the 1D chart. Gold has been stuck in a long term wedge for over a year, but recent activity suggests a breakout to the upside.

Here is gold on the 1D timeframe. Movement to the top of the wedge has become more frequent meaning buyers are testing the level more and seeing if they can catch a breakout. This is important to note since gold is coming back up to make another test on this level. If we do see a break, I think we could watch gold go all the way to the $1900s level again. However, I am mixed about a long-term uptrend in gold's price after hearing the very hawkish Fed statements going all the way through 2024.

Bitcoin finally popped on consumer demand after we discussed a potential surge last week in this article. This seems like a crypto-led rally since tech stocks are not causing a spike in the market overall. COT doesn't even suggest a big money shift into the crypto industry, so this move must be a retail rally.

How To Trade The Bitcoin Surge

The problem we face as the smaller investor always comes down to FOMO or hesitation. When we see the price of an asset spike, we either come to one or two conclusions: we hop in or we stay on the side lines. Both decisions can lead to good or bad consequences, so it is never an easy choice. However, that is when the smart investor will starts evaluating the possibilities.

Bitcoin
Bitcoin broke above the $40K psych level and is not testing resistance in the $43Ks. A big bullish indicator would occur if the pair could close above the 50 DMA today. This would suggest a higher move above resistance and another test at the 200 DMA.

If you are still not holding any BTC but want to get in, then you could consider what's going on in other markets. For example, the dollar (DXY) is down today after losing just over 2% from the highs last week suggesting that the USD is hurting from inflationary pressures.

Mixed earnings is also causing some uncertainty in the equities market, and investors are unsure of where to put their money. Crypto has been in a downtrend for months that were initially sparked by regulatory concerns late last year. The crypto market tends to go in and out of these cycles making them the perfect choice for profitability one month and an account-blower the next.

Additionally, we know the momentous moves bitcoin and other altcoins can make. So, a pop like this might be an indication that this is where investors are putting their money. This means that the gains on BTC so far could be just the beginning.

Other Altcoins To Watch

Bitcoin
ETHUSD also looks promising on the 1D chart after coming above resistance and nearing the 50 DMA. It's the same idea as Bitcoin: if we can see a close above current resistance, we will likely see a move higher to the 200 DMA.
Bitcoin
ADAUSD is bouncing up over the wedge on the 1D chart and nearing the 50 DMA as well. Due to the recent crypto surge, we could see Cardano coming to the top of the wedge. The downtrend suggests that momentum probably isn't that strong to the upside, but a move higher to the top of the wedge seems likely.

Mixed jobs data in the US has caused major uncertainty in the stock market which could be beneficial to BTC (Bitcoin) overall. BTC/USD is up nearly 8% on the day at the time of writing this, while the SPX500 is down a little over 1%.

Mixed Market Data

Although NFP showed us an additional 467K jobs this month, we still saw a rise in the unemployment rate. This caused some uncertainty in the equities markets as well as a spike in crypto. This uncertainty has driven investors away from riskier bets on Wall Street due to high levels of volatility.

BTC
US NFP from the past 7 months

A mixed earnings season has also caused investors to worry as major tech stocks miss but still see incredible upside in after-hours trading. Amazon got downgraded and missed earnings, but the stock saw over a 10% spike in price during post market.

The recent tech rally could be helping bitcoin's price as well since the majority of them use or plan to use crypto in their business model over time. There is a chance that this rally could fade due to the fact that there was an unjust surge in tech stocks coupled with mounting USD demand. However, when crypto catches momentum, it rides that wave for a while and for a long time. So, this spike could be the beginning of a larger rally to come.

BTC/USD

BTC
BTCUSD spiked today on a US jobs number miss and is now testing a significant resistance level around $39,700s. If we see a break above, the next stop could be at the 50 DMA. The death cross at the beginning of the year is still concerning, but we could be seeing a momentum shift in the short term.

Breaking the $40K mark was a significant step for the crypto, although it is still uncertain how much farther the coin will rise. I think the momentum going into today's session is a good sign that we could see a couple more like this at least. One key indicator to look for is if BTC can close in the $40,000s to prove that it has broken resistance.

Today, the European Central Bank announced that they will be keeping their rates the same at -0.50%. This dovish statement is raising some eyebrows as investors look at the inflation index hitting a higher number since the 90s. The recent rise could be an indication that sellers are getting ready to short euro.

Reasons To Short Euro

Other than inflation rates, President Lagarde gave a bearish outlook on the economy of the Euro-area as a whole. Lagarde said that Europe is simply not ready for higher interest rates. This means that these countries have a long way to go recovery-wise. It also means that they can't even consider catching up with other countries who are already taking these measures.

short euro

Additionally, ECB has interest rates set to -0.50%, meaning that you will get paid to borrow a loan or keep your money in a bank, but purchasing the euro will not yield you any money. And the euro's value will keep depreciating with inflation rising. Overall, this looks less attractive to other interest-yielding currencies like USD or GBP.

Short Setups

short euro
EURAUD is shooting up towards the top of a wedge on the 1D chart. Price could retrace from this level and come back down to support around the 200 and 50 DMAs.
short euro
EURGBP is up 0.65% on the day despite the ECB deciding to keep their short term interest rate the same while BOE has risen theirs to 0.50 from 0.25 bp. On the 1D chart, price is nearing a short term high and the 50 DMA.

Lastly, today's rise in the euro seems like a short setup to me. There isn't much reason to be bullish on this currency when you compare it to other governments' monetary policies. Record inflation and negative interest rates is not a good look for the euro. And I think that we will start to see further declines in the currency in the future.

AUD pairs are drifting higher today in anticipation of Governor Lowe speaking about economic outlook and bank policy going forward. Aussie pairs are running as high as 1.20% at the time of writing this (AUDJPY).

AUD Forecast This Week

The buck looks like it will remain in bullish favor up until Thursday's RBA statement. Investors are expecting a clearer picture on the bank's monetary policy after Thursday as well as some hopeful statements regarding rising annual GDP growth rate.

AUD
https://tradingeconomics.com/australia/gdp-growth-annual

Australia saw the largest growth in GDP in Q2 of 2021 and slowed down in the third quarter, but GDP beat expectations in both quarters. We won't see Q4's numbers until March 2. And the low forecast leads me to believe that we could see another beat in expectations although the annual GDP growth rate has slowed considerably.

Another factor to consider is that a recovering economy could then lead to higher interest rates, according to an FXStreet article. If we take into account the possibility of higher rates in the latter half of this year, then we have to consider the possibility of investors pricing in a higher value in the buck. Lowe will probably cover that topic in depth during the meeting this Thursday.

Pairs that will probably do the best with this news would be AUD/JPY, EUR/AUD, and AUD/NZD.

AUD Pair Setups

AUD
AJ forms a double bottom support level and bounces up towards the 50 and 200 DMAs. A falling trend line on the 1D chart looks like the next major level of resistance. Additional support lies below around 78.788.
AUD
EUR/AUD could find resistance at the falling trend line on this timeframe and revert back to the moving averages or the lows of 2022. 1.57205 seems like another level of support for price to come down to should the pair fall under the 200 DMA.
AUD
AUDNZD is coming up towards June highs of 2021 after a huge momentum shift on the pair. A golden cross opportunity also marks bullish favor as sentiment around the buck is getting more bullish. Support lies below around 1.06497.

Aussie pairs are heavily volatile today according to the heat map that suggests a bearish trend for the currency. Other than technical indicators, there are a few reasons as to why AUD is bearish now.

Lower Gold Prices

Investors now have a risk-aversive attitude towards the forex market and equities markets as they shift from Aussie to USD. Money is now being moved from the gold-heavy Australian economy to the "safe-haven" USD which will likely see higher interest yields in the coming months. WTI spot is up 1.20% and gold is down 0.78% on the day at the time of writing this.

Hawkish Fed

A hawkish Fed statement has brought a lot of demand towards the USD, and in turn has been hurting currencies who's countries are slower to the tighter monetary policy phase. Risk-off behavior has taken over the forex market as analysts are now expecting a rate hike by 125 basis points in this year alone, according to an FXStreet article.

This means that we could see a total of five individual hikes of 25 bp throughout the span of a year. If this expectation turns out to be true, Aussie would likely be bearish for a while.

AUD/USD

aud is bearish now
AU touches lower under support on the 1D chart as the sell off continues. Price is right on the support level now, but a lower low suggests a move lower to the 0.69200s.

With nearly zero moves towards tightening monetary policy, Japan's currency stands almost no chance against the major pairs like GBP, USD, EUR, CAD and AUD. Here are some reasons and setups behind why shorting the yen could be beneficial in your trading.

High Debt-To-GDP

If you were to look at the amount of accumulated debt in 2020, you would see an extremely high increase in the amount of debt Japan took on paired with their stagnant and somewhat dwindling GDP over the span of a year.

shorting the yen
https://tradingeconomics.com/japan/government-debt-to-gdp

Japan also has a negative growth outlook GDP-wise. We are probably not going to see much improvement in the economy or in the currency in 2022. And even if Japan decides to switch gears at some point this year and tighten policy, the others have already had a head start. Interest rates are incredibly important in the world of forex, and the fact that other countries are taking that initiative before Japan is a big indicator for yen-shorters.

Best Pairs For Shorting The Yen

shorting the yen
GBPJPY could be a promising pair to long if price can break above a falling trend line on the 4H chart. Further resistance lies above around 155.420s should the pair close above this level and break out.
shorting the yen
USDJPY looks very bullish even as it tests resistance on the 1D and 4H charts. It looks like the pair wants to break above this level and test the top of this channel around the 116-116.900s.
CADJPY looks somewhat bullish on the 1D chart as the pair is stuck between support and resistance levels. The 50 and 200 DMAs lies below the price which suggest a bullish trend bias for the pair. If CJ can close above the 91.159 mark, we could see a further move higher to the 92.200s.

For more forex analysis on other pairs, click here.

An uncertain Fed statement has helped the price of gold go higher on the day because traders do not know whether to expect increased hawkishness or dovishness. Price of gold bullion is up 0.32% on the day along with the dollar which is up 0.28%.

What Could Cause Gold To Breakout

One thing that could help gold breakout of its long term wedge would be for the Fed to take a more dovish stance. In recent weeks, unemployment claims have been coming in higher than expected. This could be an alarming sign to the Fed who wants to tighten policy very soon. They may have to back track and wait for the economy to adjust and recover before hiking rates.

unemployment claims

Last week's claims shot way higher than the predicted 223K which is the most number of jobless claims since October last year. A slower US economy is always bullish for gold, so we may see some upward movement this week. However, it mostly depends on what traders interpret from the FOMC tomorrow at 2 p.m. EST and what the plan of action is going forward.

Reasons for a bearish case on gold can be found here.

Trade Setup

gold
Gold takes another test at the top of a falling trend line on the 1D chart. Price seems to move along with the dollar move even though they usually act as inverse relationships. If gold can break out of the wedge, we may see another test at $1878.

Overall, it looks like we could find some upward pressure in the short term (as in this week). However, it is tricky to determine where price is more likely to go from here. I can see a test in the $1870s, but I do not think it has much more room to to from there. Unless we get a more dovish statement from the Fed, we may not see a $1900 gold price.

The dollar index has seen a 1.5% gain from the lows it bounced from including a 0.38% gain on the day today. COT neither suggests the upside or downside of the dollar as it appears big money is decrease their foothold in the dollar altogether. However, we are seeing a move away from risky bets like crypto and stock market plays followed by a move towards risk-off bets. So, here's this week's USD forecast.

USD Forecast- Best Pairs

USD/CAD (Bullish Bias)

usd forecast
USDCAD breaks above clean resistance on the 1D chart after bouncing above the rising trend line paired with the 200 DMA. More resistance sits above around 1.27462.

USD/JPY (Bullish Bias)

USDJPY fell to support on a rising trend line and is looking to test resistance around the 50 DMA. If price can hold itself above this trend line, we can expect a further move to the upside to possibly test a higher high.

AUD/USD (Bearish Bias)

Aussie-dollar looks bearish as Australia's government is slower to move towards a tighter monetary policy. CPI is also expected to come out higher this quarter than the last. It looks like price will want to come down to test support around 0.69938 before it makes another directional decision.

A potential stock market surge could be gearing to happen soon as investors and analysts stay bullish. Some analysts are calling for a bottoming-out soon where price finds itself at a key level of support. Buyers look like they are ready to step in although stuck in volatile behavior that is rocking the discipline of most retail.

Key Drivers For A Market Surge

Although the market is looking incredibly bearish, it doesn't reflect the strong earnings by major companies. Netflix, however, is a key factor in this recent drop after a miss in the expected subscriber numbers last quarter. The plunge sent the stock down over 21% regardless of the yearly revenue. Net income, and subscribers also grew substantially year-over-year.

A big focus on earnings is going to be big for the market as Proctor and Gamble had an impressive beat. If outlook can be raised on most of the value stocks, we might see a strong foothold on market stability this quarter, although nothing is certain.

The same way earnings can help the market surge, it can also plummet major indices if they come out weaker. Last week's COT suggested a further move to the downside. But after today, we'll get a clearer picture on what institutions are buying.

market sruge
The SPX500 is near breakeven on the open after touching the 200 DMA for support.

The 200 DMA has served as a reliable level of support in the past, and it could spark a potential rally if price closes above this level. Again, interest rates are always a concern for the value of stocks going forward. But, major bank and healthcare stocks are pumping out more revenue and income over the past quarter.

A major thing in the short term is this moving average. The movement today will be imperative in the next week as to whether we close above or below the level. The next clean level of support is at $4270 which would be a 3.5% move lower.

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