US Brief: top Trade Setups in Forex - Consumer Price Index Ahead!

The U.S. stock indexes closed higher, as sentiment continued to improve ahead of a planned signing of a U.S.-China trade deal. Both the S&P 500 (+22 points or 0.7% to 3288) and the Nasdaq Composite (+95 points or 1.0% to 9273) closed at record highs. The Dow Jones Industrial Average soared 83 points (+0.3%) to 28907.

Shares in Technology Hardware & Equipment (+1.9%), Materials (+1.36%) and Consumer Durables & Apparel (+1.29%) sectors became market leaders. Baxter International rose 4.0%, and NVIDIA was up 3.1%, while Illumina dropped 3.7%, and Abiomed slumped 11.1%.

The U.S. government recorded a monthly budget deficit of $13.3 billion in December, lower than a deficit of $15.0 billion expected. Later today, the U.S. Consumer Price Index (CPI) for December is expected to grow at a steady pace of 0.3% on the month.

USD/JPY - Potential Setup for Bearish Retracement

The USD/JPY takes on the 110 handles as market uncertainty continues. The US-China goodwill sign sparked a risk-on sentiment in the market. Having reached the highest levels since May 2019 at 110.21, the USD/JPY has entered a phase of bullish consolidation on the 110 handles, as the bulls await the U.S. Consumer Price Index (CPI) figures for the next push higher.

The risk-on action seen in the global equities combined with higher U.S. Treasury yields, in the wake of the anticipation circling an impending US-China phase one trade deal, which is keeping an upbeat momentum intact in the USD/JPY.

On the other hand, the United States stocks hit the fresh highs with both the S&P 500 and NASDAQ, making new closing highs. 

Looking forward to the calendar, we have China Dec trade data, which is scheduled to be released along with the U.S. December's Consumer Price Index, with consensus 0.3%mth, 2.4% year. 

Let us recall that the Fed judges this series to overstate inflation consistently, so it targets the PCE deflator, which was a reduced 1.5%yr in Nov, 1.6% on the core rate. Although, traders will keep their eyes on U.S. inflation data and the Sino-US phase-one trade deal.

USDJPY - Daily Technical Levels

USD/JPY - Daily Trade Sentiment

On the 4 hour timeframe, the USDJPY currency pair is trading around 110.060 after violating the horizontal resistance level of 109.630. The pair is now facing an immediate resistance around 110.250, and closing of Doji and spinning top candles are suggesting offs of a bearish trend in the market. 

The USD/JPY can go for completing 23.6% Fibonacci retracement at 109.650. A bullish breakout of 110.200 can extend bullish bias until 110.600, but below 110.200, the pair has the potential to drop until 109.700.

XAU/USD - Bullish Channel In-Play

The safe-haven-metal prices flashing red and hit the 11-day low, mainly due to the risk-on sentiment in the wake of optimism surrounding the United States and China phase-one trade deal. As in result, it pushed the global equities higher and reduced safe-haven demand.

Gold prices fell by 0.7% to $1,539.05 earlier during the Asian session. The yellow metal hit April 2013 high last week after Iran launched rockets at U.S. airbases in Iraq in response to an airstrike that killed a top Iranian general earlier this month.

Besides that, the Sino-U.S. trade optimism considered dangerous for the safe-haven metal today. Global equities traded higher today because of China and the U.S., who are ready to sign a truce in their 18-month-long tariff dispute.

Meanwhile, the Treasury Secretary Steven Mnuchin told that China had promised to buy $40 billion to $50 billion worth of U.S. farm products annually and a total of $200 billion of U.S. goods during the next 2 years.

On the other hand, the latest report came that the United States Trade Representative removed the currency manipulator tag for China. This news also helped in increasing the risk-on market sentiment. 

XAU/USD - Daily Technical Levels

XAU/USD - Daily Trade Sentiment

The stronger dollar continues to impact the market as it dragged gold prices lower from 1,555 to 1,538. Today, gold prices can stay bearish below 1,543, as the next support is likely to be found around 1,525 areas. Since the Fibonacci 50% retracement falls at 1,538 and gold has already completed this retracement, we can expect gold to exhibit a slight upward movement. Consider taking sell below 1550 level today.

AUD/USD – 38.2% Fibo Level to Drive Selling

The AUD/USD currency pair still flashing red and continues to register losses despite the better-than-expected China data, indicating the world's second-largest economy might have bottomed out. The AUD/USD is trading at 0.6905 and consolidates in the range between 0.6885 - 0.6908.

At the data front, China's trade data for December released in Asia and showed better-than-expected data on both imports and exports. Where, the exports crossed the estimate of a 2.8% increase by a big margin and up from the preceding month's 1.3% growth, while imports rose by 17.7% contrary to an expected drop of 1.4%, signaling a strengthening of domestic demand. However, this upbeat data is a sign of growing domestic and global demand conditions. Even after, the EUR currency failed to get support from this.

Although the positive data did not succeed in putting the bids for Aussie dollar, a proxy for China, leaving the AUD/USD pair at session lows near 0.6890. On the other side, the currency pair could recover losses if the details of the report show China's surplus with the U.S. dropped sharply in December.

At the Sino-US front, the latest report came that the United States Trade Representative removed the currency manipulator tag for China. This news also helped in increasing the risk-on market sentiment. 

AUD/USD - Technical Levels 

AUD/USD - Daily Trade Sentiment

The AUD/USD continues to trade sideways below 38.2% Fibonacci retracement level of 0.6922. Taking a look at the 4-hour chart, the pair has crossed below 50 periods EMA which is suggesting a bearish trend for the pair.

On the downside, the AUD/USD may find the next support around 0.6851. While on the upper side, an immediate resistance stays around 0.6906. Today, consider trading bearish below 0.6906 to target 0.6860 and 0.6830.

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