Today’s Key Market Sentiments

United States Michigan Consumer Sentiment

In today’s Key Market analysis, I am expecting some influence from the United States Michigan Consumer Sentiment. University of Michigan's Consumer Sentiment Index (UMCS) can influence the US dollar index (DXY) and gold (XAUUSD). Higher consumer confidence, reflected in a strong UMCS, is often seen as positive for the US economy. This can lead to expectations of tighter monetary policy by the Federal Reserve, which could strengthen the dollar (DXY) as investors seek higher returns on US assets. Conversely, weak consumer sentiment might suggest the Fed will loosen policy to stimulate the economy, potentially weakening the dollar. However, the relationship is always straightforward, and other factors can influence currency markets.

The United States Durable Goods Orders Ex Transp

The United States Durable Goods Orders Ex Transp MoM (Month-over-Month) gauge new orders placed with factories for long-lasting goods, excluding transportation equipment. It reflects manufacturing activity in sectors like machinery, appliances, and electronics. A higher MoM number indicates expanding factory output, potentially signaling a strengthening economy. In today’s news, it can be seen as positive for the US dollar (USD) as investors might be drawn to US assets.

For example, in March 2024, Durable Goods Orders Ex Transp MoM rose 0.2%, suggesting a slight increase in manufacturing activity. This could be interpreted as a mildly bullish sign for the USD. However, it is important to consider the broader economic context and analyst expectations. The long-term trend and the difference from forecasts also matter. A negative reading, or one below expectations, could indicate softening demand and be seen as bearish for the USD.

United States Durable Goods Orders ex Defense MoM

The United States Durable Goods Orders Ex Defense MoM (Month-over-Month) tracks new orders placed with manufacturers for durable goods (lasting 3+ years), excluding defense contracts. This market indicator reflects business investment and future production plans. A strong MoM reading suggests companies are optimistic and increasing orders, potentially signaling economic growth. This can be seen as positive for the US dollar (USD) as it reflects business confidence and potential future inflation.

For instance, a March 2024 increase of 2.3% in Durable Goods Orders Ex Defense MoM could be interpreted as a bullish sign for the USD. However, the interpretation depends on analyst expectations and the long-term trend. A negative MoM reading, or one below forecasts, could indicate weakening business sentiment and be seen as bearish for the USD. This could signal a slowdown in manufacturing and potentially lower inflation.

United States Durable Goods Orders MoM

The United States Durable Goods Orders MoM (Month-over-Month) is a key indicator of manufacturing activity and business confidence. It measures the total value of new orders placed for durable goods, including items like machinery, appliances, and transportation equipment. A strong MoM reading, exceeding expectations, is generally seen as positive for the US dollar (DXY) for two reasons:

1.      Economic Strength: Higher orders suggest expanding factory output and potentially a strengthening economy. This can attract investors seeking returns on US assets, boosting the dollar's value.

2.      Monetary Policy: A robust manufacturing sector might lead to expectations of tighter monetary policy from the Federal Reserve to control inflation. Higher interest rates can make US dollar-denominated assets more attractive, further strengthening the DXY.

Conversely, a weak MoM reading, particularly one below forecasts, can be bearish for the dollar. It might indicate softening demand and a potential economic slowdown. This could lead to speculation of looser monetary policy by the Fed, weakening the dollar's appeal.

 

However, the impact on DXY is not always straightforward. The overall economic climate, other data releases, and investor sentiment all play a role.

 

The influence on gold (XAUUSD) is often the opposite. A strong dollar (due to high Durable Goods Orders MoM) can make gold, a non-interest-bearing asset, less attractive. Conversely, a weak dollar (due to low Durable Goods Orders MoM) can make gold a more appealing hedge against inflation.

 

XAUUSD Support & Resistance	XAUUSD Price Analysis
Resistance (R3)	2422.968
Resistance (R2)	2403.387
Resistance (R1)	2366.10
Pivot	2346.48
Support (SI)	2309.15
Support (S2)	2289.57
Support (S3)	2252.24

Today Market Expectations

Considering the previous readings of the United States Michigan Consumer Sentiment, the United States Durable Goods Orders ex Defense MoM, and United States Durable Goods Orders MoM, there is a high chance of a weakening dollar index providing XAUUSD (Gold) as an appealing hedge against inflation.