- US dollar eases lower on waning Omicron fears
- Gold struggling for direction amid rising yields
- EURUSD under pressure above 1.1300
The US dollar is in recovery mode after selling off to one-week lows on Wednesday. The dollar index, which measures the greenback strength against the majors, is trying to bounce back after tanking below the 96.00 level.
The dollar has come under pressure amid strong demand for risk-friendly assets in recent days. Subsiding Omicron fears has also continued to weigh heavily on dollar strength amid waning demand for safe havens. Softness on the buck could also be attributed to investors awaiting a key Federal Reserve policy meeting next week.
Gold technical analysis
Amid the dollar softness, gold has struggled to capitalize. The precious metal has struggled to power through the $1800 an ounce level, let alone finds support above the $1790 an ounce level. XAUUSD has since resorted to trading in a tight trading range of between $1790 and $1780.
The $1780 has emerged as powerful support from where XAUUSD has consistently bounced back on sell-offs. A drop below the support level could result in the bright metal dropping towards the $1772 level ahead of $1762, the next pivotal support level.
On the flip side, bulls need to steer a ride followed by a close above the $1795 level to have any chance of pushing for a rally towards the elusive $1800 level.
Bearish biasness remains intact on gold despite the dollar softness. The precious metal sentiments have been hurt by treasury yields rebounding on easing Omicron fears. A bounce back in Treasury yields affirms dollar strength despite the recent pullback. The 10-year Treasury yield is up by more than 1.4 basis points back to above the 1.5% range.
In addition, expectations that the FED will accelerate the bond-buying program next week also continues to deal gold bulls a big blow. The acceleration is highly expected to fuel dollar strength as the central bank continues to explore ways of stemming the runaway inflation.
Nevertheless, hot US inflation and rising Chinese Consumer Price Index should continue to offer support to gold, consequently limiting downside action on XAUUSD. The yellow metal is often seen as a hedge against runaway inflation.
While the precious metal has remained unchanged as the FED entered the silent period this week, things could change on Friday with the US Consumer Price Index. With indications the CPI rose significantly in November, it could push for the acceleration of asset purchases.
Amid the push to accelerate asset buying, charter around rate hikes also continues to weigh heavily on dollar strength in the market. There is already talk that the FED could hike interest rates in March, something that should continue to weigh on XUAUSD, sending it lower.
EURUSD above $1800
Meanwhile, the EURUSD pair is on the defensive after a recent rally past the 1.1300 psychological level. The pair has come under selling pressure after rallying to one-week highs of 1.1350. With bears coming back into the fold, a pullback faces strong support near the 1.2990 level, below which a drop to the 1.1265 could come into play.
Similarly, EURUSD finding support above the 1.1300 should fuel hopes of further rallies after a recent bounce back from 17-month lows. In two weeks. The common currency has jumped the most amid strong demand for riskier currencies on waning Omicron fears.
However, sentiments on the EURUSD continue to be weighed by US-China tussles over Iran and Taiwan that could trigger renewed demand for a safe haven. Rate hike talks in the US could also curtail further price gains on the EURUSD pair.
Looking ahead, the focus is on the release of the US CPI data likely to influence dollar strength, consequently swaying EURUSD price action. Focus is also on the Federal Reserve meeting outcome scheduled for next week.