March 27, 2023

Smart Money Likes USD and Gold

Frank Cabibi

As of 9:10 am EST, the 10-Year bond rate is up ~3.50% while the dollar index remains flat. Some big news coming up in the next 24 hours for the USD, EUR and AUD. US consumer confidence is expected to fall from the last reading. We received a strange signal from the EdgeFinder that could indicate a larger swing to the upside on both the USD and gold Here is a snapshot of the high impact news tomorrow.

EdgeFinder Analysis

AUDUSD is still at a strong sell on the EdgeFinder at -8. Retail is largely for this pair while institutions disagree. US will announce this month's unemployment data on Thursday which analysts are expecting 4,000 more claims than last week.

Aussie has retail sales tomorrow which is expected to come in much lower than previous. Very mixed behavior on from the pair has investors speculating on what could be its next move. Historically (10-year average), AU gains in the month of April. However, the past 5 year average has not been so bullish.

Gold fell under key support on the 1D timeframe, but hasn't closed yet. Because of the recent highs over $2000, mass profit taking occurred. The EdgeFinder is still bullish on the metal regardless of the pullback. If price establishes a higher low on this timeframe, it could be promising for the bulls.

If not, the metal can find support on the previous bottom around $1935 and the $1900 level. One fundamental factor this week that could cause a spike in gold would be for jobless claims to come in higher than expected and/or the previous amount. Gold is a +4 buy rating on the EdgeFinder.

A recent EdgeFinder flip to the buy side could have price to moving accordingly. The euro is not a very strong currency overall, however, mostly technical metrics suggest upside for this pair. Lacking in inflation, unemployment and interest rate scores, the euro still has CAD beat.

Institutions are not very interested in CAD, whereas copious smart investors see potential in EUR. Heavy impact news is to come for both currencies as EUR will announce CPI while CAD has GDP at the end of the week.

Retail Spotlight

Retail is bias towards USDCHF, NZDUSD and AUDUSD on the bull side. They are majority short GER30, USDCAD and GBPUSD. As we can see, the crowd is very mixed, partly because of the confusion in the interpretations of bank defaults and Fed plans.

Smart Money Spotlight

When comparing 4 different US assets, we might be able to conclude that smart money is leaning towards the dollar and gold. As of last week, they took large shorts against the stock market, while hardly touching USD in either direction. Although USD and gold are opposing assets, there could still a case to the upside, according to analysts.

Fundamental Spolight

Comparing unemployment between 4 currencies, EUR and CAD are struggling the most. Although UE rates are coming down over time, the US and Japan have a better handle on it. The US, however, saw an unexpected rise in UE from 3.4-3.6%. This Thursday will be another jobless claims report for the US. Claims have decreased over the last two weeks, but a rise would be concerning for the next NFP and unemployment rate numbers.

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