The Trump administration has once again stirred the global trade waters, extending its tariff pushback on Canada and Mexico for another month while keeping the ongoing US-Sino trade war alive. These developments have left investors in a state of uncertainty. The return of Chinese traders after a week-long Lunar New Year holiday is expected to revive the haven demand for the US Dollar. Meanwhile, Israeli Prime Minister Benjamin Netanyahu met with former US President Donald Trump at the White House on Tuesday. Their discussions focused on the elimination of Hamas, strategies concerning Iran, and the normalization of relations between Israel and Saudi Arabia.
Amid these geopolitical developments, the currency market remains dynamic. The USD/JPY continues its downward trajectory, with expectations of testing the 153.00 level during Asian trading on Wednesday. Investors are also closely monitoring the release of the US ISM Services PMI data later in American trading, which promises to provide fresh trading impetus. Fed policymakers Austan Goolsbee and Michelle Bowman are also scheduled to speak later, potentially influencing market sentiment further.
Gold prices have surged to an all-time high, surpassing $2,850 early on Wednesday. This rise in gold prices underscores its appeal as a safe-haven asset amid market volatility and geopolitical instability. As one notable figure stated:
"Gold tends to benefit in times of geopolitical instability and market turmoil." – The 47th American President
In the Asian trading session on Wednesday, the AUD/USD pair remains pressured near 0.6250. Several factors contribute to this decline, including disappointing China's Caixin Services PMI data, a slump in the Chinese Yuan, policy divergences between the Reserve Bank of Australia (RBA) and the US Federal Reserve (Fed), and lingering fears surrounding the US-China trade war.
With impending trade talks between US President Donald Trump and his Chinese counterpart Xi Jinping, market participants eagerly await any progress that could ease tensions. The last line of defense for Gold buyers is observed at the 21-day Simple Moving Average (SMA) at $2,731, as overbought conditions on the daily chart continue to caution traders ahead of crucial US jobs data.
The upcoming US jobs data is set to take center stage, potentially influencing the direction of Gold prices. A mixed set of US economic data releases, including the ISM Manufacturing PMI and the Jobs Openings survey, has sustained bets for two interest rate cuts by the US Federal Reserve this year. In terms of employment figures, the US ADP Employment Change is anticipated to reach 150K in January, following a December figure of 122K.
The global economic landscape remains fraught with uncertainty. The combination of trade tensions, geopolitical developments, and economic indicators presents a complex environment for investors. Market participants are keenly watching for any signs of resolution in trade negotiations and shifts in monetary policy that could impact financial markets.