Markets rally on unexpectedly softer inflation print.

US500 or S&P 500 rallied 5.9% last week and registered its biggest weekly gain in almost 5 months on the back of easing inflation data. On Friday S&P 500 edged higher by 0.92%, Nasdaq jumped up by 1.88% and Dow Jones also moved up by 0.096%. The investors scrambled to push the markets higher on better than expected 7.7% inflation print, betting that the federal reserve would slow its rates hike path in the next meeting. There is a notable shift in the market as investors sentiments and risk appetite has improved.  

US500 Daily Chart Directional bias - 1 Week 

Trade Insights – US500

The chart shows viable long positions above the pivot at 3983 with the target to test the key resistance Level at 4060 and then the test of the resistance zone between 4120 to 4140.

Alternatively, possible short positions below the pivot at 3983 heading towards the target of the key support level at 3910 and then the further test of the support zone between 3830 to 3800.

US Inflation Rate is down to 7.7%

The US inflation is finally showing signs of cooling as signalled in last week’s Consumer Price Index Report. The annual inflation rate in the US slowed for a 4^th month to 7.7% in October, the lowest since January 2022 and well below the forecasts of 8%. The markets rallied in response, with investors expecting that the Federal Reserve might finally slow down on the aggressive interest rate hikes in the next month’s meeting. The CPI data still points towards strong inflationary pressures and a broad increase across the US economy.

XAU/USD – Major bullish reversal in Gold, it jumps up by 5.1% last week on softer inflation data.

Gold: Gold jumped bout about 5.1% last week as markets soared in the immediate effect of October’s US CPI data last week. The US Dollar and US Bond yields both fell hard after the inflation report showing a very sensitive and mostly inverse relationship between a cheaper dollar, bond yields and gold prices. (Check the below chart) Markets are expecting a dovish stance from the Federal Reserve as inflation is showing signs of cooling off. However, the inflation is still quite high and shows inflationary pressures on the US economy. The 75-bps point rate hike is somewhat off the table and investors are looking for a 50-bps move that will bring the interest rates in the US to 4.5%.

Chart Analysis:  

The above gold chart shows the pair soared by about 5.1% last week as.  The major bullish reversal in gold has just invalidated all the past support and resistance levels and moved up from $1620 to $1765 in just 6 sessions. Could gold mover further higher from here and continue to soar is to be seen however, the investors' enthusiasm at this stage is pointing at more upside for the pair. The MACD indicator shows the Gold in overbought territory. The Gold is also heading into the 200-day SMA resistance line around $1800 while trading well above the 50- and 20-day SMAs that are about to cross. A cross in the SMA levels could bring downward pressure on the pair.  

Please check the Chart Trading Insights below

• Resistance Zone: $1800 to $1810
• Key Resistance Level: $1787
• Major Pivot Point: $1767
• Key Support Level: $1727
• Support Zone: $1700 to $1690
• 200 Day SMA – Green Line
• 50 Day SMA – Red Line
• 20 Day SMA – Blue Line

Daily Chart Directional bias - 1 Week 

Trade Insights – XAU/USD

The chart shows viable long positions above the major pivot point at $1767 heading towards the first target of the key resistance level at $1787 and then a test of key resistance zone between $1800 to $1810.

Possible entry of long above below the major pivot at $1767.

Potential first-take profit could be at – $1787

Potential second take profit could be at – $1800 to 1810.

Alternatively, possible short positions below the major pivot point at $1767 with the target to test the key support level at $1727 and then the test of the support zone between $1700 to $1690.

Possible entry for short trades below the major pivot point at $1767.

Potential first take profit could be at – $1772

Potential second take profit could be at – $1700

Potential third take profit could be at – $1690.