Gold Holds Above $3,000
The gold (XAU/USD) price remained relatively unchanged yesterday. Still, the bullish trend was intact as concerns over US President Donald Trump’s new tariffs kept prices above $3,000.
Although the US Dollar Index (DXY) strengthened following the release of a much better-than-expected Durable Goods Orders report, XAU/USD barely changed.
"Gold remains underpinned by haven interest amid ongoing tariff uncertainties and geopolitical risks. Fresh record highs would bode well for the attainment of my next upside target at $3,150", said Peter Grant, vice president and senior metals strategist at Zaner Metals.
Over the past few months, investors have been worrying that Trump’s tariffs would stoke inflation and hinder economic growth. Thus, market participants were taking refuge in safe-haven assets like gold.
However, the risk of new tariffs has been subsiding lately. Donald Trump said that automobile tariffs are coming soon but indicated that not all of the levies would be imposed on 2 April. Some countries may get a break from it.
"If the tariffs are not as serious as people are thinking, we could see a correction (in gold)", said Marex analyst Edward Meir.
Meanwhile, Neel Kashkari, the President of the Minneapolis Federal Reserve (Fed), said ’we have more work to do’ to get inflation towards the Fed’s 2% target. He suggested that the US central bank will cut the rates only cautiously in 2025. A less dovish Fed may limit the current XAU/USD rally.
XAU/USD rose during the Asian and early European trading sessions. Today, traders should focus on the US Gross Domestic Product (GDP) report and Weekly Jobless Claims at 12:30 p.m. UTC. Additionally, Pending Homes Sales will be released at 2:00 p.m. UTC. All three reports may shed more light on the US interest rate path.
The GDP report may have the slightest impact on XAU/USD because it will include the final estimates for Q4, which are already priced into the market. Unemployment claims and home sales data will have the most impact. Key levels to watch are support at $3,010 and resistance at $3,050.
Euro Remains Under Bearish Pressure
The euro (EUR/USD) lost 0.36% against the US dollar (USD) on Wednesday as the greenback strengthened after the higher-than-expected Durable Goods Orders report release.
US Census Bureau reported yesterday that new orders for long-lasting, US-made goods unexpectedly rose by 0.9% last month instead of the expected 1% decrease. However, new orders for core and non-defence capital goods fell. Demand could remain sluggish as economic uncertainty rises, discouraging businesses from boosting equipment spending. Still, the greenback strengthened after the report. Thus, other currencies, including the euro, declined.
In addition, EUR/USD is under pressure due to the uncertainty around new US automobile tariffs. Maros Sefcovic, the European Union’s (EU) trade commissioner, met with Donald Trump’s top trade officials on Tuesday. They tried to avoid US tariffs on EU goods, which were announced to be set next week, but the outcome was unclear. Meanwhile, Bank of America’s data showed an acceleration of selling from the official sector—including sovereign wealth funds and central banks—of euros against the US dollar since the beginning of last week.
"Such flows suggest the official sector has yet to believe in the fading of the ’US exceptionalism’ and the ’European renaissance’ that could trigger a potentially substantial rebalancing towards EU assets", said Athanasios Vamvakidis, head of Forex strategy at BofA.
The fundamental pressure on EUR/USD remains bearish, especially given that the eurozone economy continues to struggle amid high energy costs and declining competitiveness.
EUR/USD rose during the Asian and early European trading sessions but remained below the important 10-day moving average. Today, US macroeconomic data releases—Gross Domestic Product (GDP) report and Weekly Jobless Claims at 12:30 p.m. UTC, with the Pending Homes Sales report at 2:00 p.m. UTC—may trigger a lot of volatility in all USD pairs. Key levels to watch for EUR/USD are support at 1.07290 and resistance at 1.08000.
Newly Announced US Tariffs Pressure Canadian Dollar
The Canadian dollar (USD/CAD) initially rose towards 1.42350 on Wednesday but later lost most of its gains and finished the day essentially unchanged.
Traders were unwilling to place bearish bets on USD/CAD ahead of the expected US auto tariffs announcements and the upcoming minutes from the Bank of Canada’s (BOC) latest meeting. Yesterday, US President Donald Trump announced a 25% tariff on imported cars and light trucks starting next week, further widening the global trade war.
"What we’re going to be doing is a 25% tariff for all cars that are not made in the US", Trump said at an event in the Oval Office.
Canada sends about 75% of its exports to the US, including oil and autos. Mark Carney, Canadian Prime Minister, said if the ruling liberals win a 28 April election, his government would create a $1.4 billion fund to boost the auto sector’s competitiveness.
The BOC decided to cut rates by 25 basis points (bps) on 12 March, but the regulator saw fewer signs of inflation slowing, a summary of monetary policy deliberations showed.
"Policymakers are extremely sensitive to upside inflation risks after the past few years, especially with fiscal stimulus likely playing a role in the response to the trade war", said Benjamin Reitzes, Canadian rates and macro strategist at BMO Capital Markets.
"That won’t keep the BoC from cutting rates if tariffs worsen, but it suggests any further easing won’t be aggressive and limits how low the Governing Council is willing to go", he added in a note.
USD/CAD fell during the Asian and early European trading sessions but remained above the important 100-day moving average. Today, US macroeconomic data releases at 12:30 p.m. and 2:00 p.m. UTC may trigger a lot of volatility in all USD pairs. Key levels to watch for USD/CAD are support at 1.42340 and resistance at 1.42720.