sticky CPI data play, long XAUUSD
Updated
Expecting CPI data release to remain sticky or print higher than 8.8% YoY
The tricky yet fun part about trading XAUUSD is the tug-of-war analysis between dollar vs commodity gold where traders stress out weighing between USD vs XAU and which is playing the determinant factor at point of time.
As everyone knows gold is seen as a safe haven and macro-economic theory explains that in an inflationary environment, Gold is the best commodity to counter inflation;(in-fact commodity will appreciate is a better proper term to use here). "abit complicated to explain but summary here is that current high CPI are due to past easing policies + russia/ukraine war + global supply chain disruption, resulting to high food and commodity inflation"
However XAU was seen depreciating against USD since March, which can be explained by the strong Dollar Index (DXY) due to aggressive monetary policy that Fed Powell had emphasized on multiple occasion to increase interest rate at all cost.
Trade Rationale:
1y, 2y vs 10y yield curve inversion seen as recessionary event taking place.
1y, 2y, 10y yield due to rebound higher, indicating higher interest rate hike
SPX, NDX, DJI due to retrace from current level
VIX look to bottom and rebound from current level
With* tonight's higher CPI print, Fed is likely to downplay the data and instill market confidence, hence long limit order for XAUUSD.
Dollar effect will take play pushing XAUUSD to last year August low before easing off and inflation/risk free sentiment taking play to push XAU for rebound play.
Low risk trade
The tricky yet fun part about trading XAUUSD is the tug-of-war analysis between dollar vs commodity gold where traders stress out weighing between USD vs XAU and which is playing the determinant factor at point of time.
As everyone knows gold is seen as a safe haven and macro-economic theory explains that in an inflationary environment, Gold is the best commodity to counter inflation;(in-fact commodity will appreciate is a better proper term to use here). "abit complicated to explain but summary here is that current high CPI are due to past easing policies + russia/ukraine war + global supply chain disruption, resulting to high food and commodity inflation"
However XAU was seen depreciating against USD since March, which can be explained by the strong Dollar Index (DXY) due to aggressive monetary policy that Fed Powell had emphasized on multiple occasion to increase interest rate at all cost.
Trade Rationale:
1y, 2y vs 10y yield curve inversion seen as recessionary event taking place.
1y, 2y, 10y yield due to rebound higher, indicating higher interest rate hike
SPX, NDX, DJI due to retrace from current level
VIX look to bottom and rebound from current level
With* tonight's higher CPI print, Fed is likely to downplay the data and instill market confidence, hence long limit order for XAUUSD.
Dollar effect will take play pushing XAUUSD to last year August low before easing off and inflation/risk free sentiment taking play to push XAU for rebound play.
Low risk trade
Note
similarly long UVXY while market look to dive red.
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