Articles

Silver Price Analysis: Silver finds support at June 13 low and consolidates

398667   June 27, 2024 19:27   FXStreet   Market News  

• Silver has fallen to key support and is currently consolidating. 
• If it breaks below the support it will continue its short-term downtrend within its channel. 
• A bounce could also signal a return to the top of the channel and a critical level for Silver. 

Silver (XAG/USD) has fallen to a key support level at $28.66, the June 13 low, and is currently trading along that support. It is at a critical turning point for the trend. 

The precious metal is in a falling channel formation and the short-term trend is bearish on balance, suggesting the odds favor more downside, albeit with one caveat. 

Silver 4-hour Chart 

In the last few hours, Silver has bounced off of the $28.66 support level, however, given the trend is bearish and “the trend is your friend” an eventual break lower is expected.  

If price pierces below $28.57, the June 26 low, that would probably signal further weakness, with the next target lying at the lower channel line, at around $27.50. 

The caveat to this bearish picture lies in the fact that Silver temporarily broke out of the top of the falling channel on June 20, and although it quickly fell back, the fact it breached the integrity of the channel, albeit temporarily, indicates the upper channel line has been weakened and is more likely to be broken again.

If the June 13 lows hold, therefore, and Silver starts to recover, there is a chance it could rise back up to the upper channel line at around $29.90, which is also a major resistance level at the top of a four-year consolidation zone. A decisive break above that level would be required to indicate a change in the short-term trend. 

A decisive break would be one accompanied by a long green up candle that broke clearly above the level and closed near its high or three green candles in a row that broke above the level. 

EUR/USD rebounds from 1.0660, broader trend remains fragile

398665   June 27, 2024 19:26   FXStreet   Market News  

• EUR/USD finds interim support near 1.0660 while uncertainty ahead of US core PCE inflation keeps the outlook vulnerable.
• Investors see the Fed reducing interest rates twice this year.
• The Euro will dance to the tunes of the preliminary June HICP data for France, Italy, and Spain on Friday.

EUR/USD rebounds slightly on ThursdayÂ’s European session after declining to a seven-week low near 1.0665 the day before. The major currency pair finds support as the US Dollar (USD) struggles to extend its upside amid uncertainty ahead of the United States (US) core Personal Consumption Expenditures (PCE) Price Index data for May, which will be published on Friday. However, the near-term demand remains vulnerable amid fears of widening policy divergence between the US Federal Reserve (Fed) and the European Central Bank (ECB).

The US Dollar Index (DXY), which tracks the Greenback’s value against six major peers, faces pressure in an attempt to move above the crucial resistance of 106.00. 

Investors will pay close attention to the US core PCE inflation data, which will provide cues about when and how much the Fed will reduce interest rates this year. The US PCE report is expected to show that core price pressures grew at a slower pace of 0.1% month-on-month in May against 0.2% in April. Annually, the underlying inflation is projected to decelerate to 2.6% from 2.8% in April. 

Softer-than-expected inflation figures would boost expectations of early Fed rate cuts, which would be unfavorable for the US Dollar. On the contrary, hot numbers will diminish Fed rate-cut prospects.

Currently, financial markets expect that the Fed will start reducing interest rates at the September meeting and deliver subsequent rate cuts in November or December.

Daily digest market movers: EUR/USD will be guided by Eurozone HICP data

• EUR/USD continues to face selling pressure near the round-level resistance of 1.0700. The EuroÂ’s near-term outlook is uncertain ahead of the EurozoneÂ’s election outcome and growing speculation that the ECB will deliver back-to-back rate cuts.
• Investors remain cautious over the outcome of the French election amid speculation that the new government would make significant fiscal policy shifts, which would widen the financial crisis. The uncertainty over the French elections was triggered after French President Emmanuel Macron called for a snap election after his party suffered defeat in preliminary results from Marine Le PenÂ’s far-right National Rally (RN).
• On the monetary policy front, ECB policymakers refrained from committing to any pre-defined interest rate path after the central bank commenced the rate-cutting cycle in its policy meeting in early June amid concerns over wage inflation. However, higher interest rates weigh heavily on overall demand, which impacts activities in manufacturing as well as the service sector.
• Going forward, preliminary Eurozone Harmonized Index of Consumer Prices (HICP) data for June will be under the spotlight next week, as it will provide major cues about the interest rate outlook. Currently, investors expect that the ECB will deliver one more rate cut this year.

Technical Analysis: EUR/USD struggles to recapture 1.0700

EUR/USD trades inside WednesdayÂ’s range as investors sidelined ahead of the US core PCE inflation reading. The downward-sloping border of the Symmetrical Triangle pattern formation on a daily timeframe remains a major barrier for the Euro bulls. A fresh downside would appear if the pair delivers a decisive breakdown of the above-mentioned chart pattern.

The shared currency pair establishes below the 200-day Exponential Moving Average (EMA) near 1.0780, suggesting that the overall trend is bearish.

The 14-period Relative Strength Index (RSI) hovers near 40.00. A bearish momentum would trigger if the oscillator slips below this level.

Gold bounces off $2,300 ahead of potentially market-moving inflation data

398663   June 27, 2024 19:21   FXStreet   Market News  

• Gold bounces off the psychologically important $2,300 level after another leg of selling. 
• The pair continues to be pressured by a higher-for-longer outlook on interest rates – data on Friday could be key.
• XAU/USD approaches the neckline for a potential topping pattern – if broken, a cascade down could result.  

Gold (XAU/USD) edges higher, trading just above $2,300 on Thursday, as short-traders take profit following the last down leg from the $2,330s. The yellow metal has been pressured by comments from Federal Reserve (Fed) officials – those tasked with setting interest rates in the US – who have consistently stated that more progress has to be made on bringing down inflation before they can consider cutting interest rates. 

Their reluctance to cut rates weighs on Gold because it makes the non-interest paying asset comparatively less attractive to investors.  

Gold pressured by reluctant Fed

Gold backs and fills on Thursday after another big down-day on Wednesday as markets took their cue from a mixture of Fed speakers keeping reserved about cutting interest rates, and chart-based technical opportunism.  

In regards to interest rates, of key importance will be the release of the US Personal Consumption Expenditures (PCE) Price Index for May on Friday, which is the Federal Reserve’s (Fed) preferred gauge of inflation. A lower-than-expected result could make the Fed more optimistic about cutting interest rates. The opposite would be the case if the PCE beats expectations. 

Whilst the Fed sits on its hands, the market is a bit more optimistic seeing a relatively high probability (62%) of the Fed cutting interest rates at (or before) the Fed’s September meeting, although this is below the 66% seen on Wednesday. The estimates are according to the CME FedWatch tool, which calculates chances using Fed Funds futures prices. 

GoldÂ’s downside capped by longer-term factors

Gold’s downside is capped by various long-term positive factors. Firstly, there is its role as a safe-haven in an increasingly fractured, uncertain world. Geopolitical uncertainty in the Middle East, Ukraine and now France ahead of its contentious elections, is making some investors nervous, as is the impact of AI-driven revolutionary economic change as well as the threat of climate change.  

The US Dollar (USD) is a further double-edged factor. A strong US Dollar has led to such a steep depreciation in mainly Asian currencies recently, prompting regional central banks to hoard Gold as a hedge against the effects. That said, a stronger Dollar also tends to lower Gold price precisely because it is priced in Dollars. 

Recently USD reached a 38-year high against the Japanese Yen (JPY) and the higher it goes the more demand Gold will see as a currency hedge. 

Another longer-term positive factor for Gold is the BRICS trade confederation’s strategy to use Gold as a replacement for the US Dollar in global trade. Given its position as a stable, safe store of value, Gold is the most reliable alternative as a means of exchange between nations with different, often volatile currencies. 

Technical Analysis: Gold continues approaching key support 

Gold has steadily pushed lower towards key support and the neckline of a possible topping pattern at $2,279. A break below the neckline would signal a strong down move. 

XAU/USD Daily Chart

 

The XAU/USD pair had been forming a bearish Head-and-Shoulders (H&S) pattern over the last three months. However, the upside break on June 20 has brought the validity of the pattern into doubt. That said, a more complex topping pattern that might still prove bearish is still possibly forming. 

If so, then a break below the pattern’s neckline – even if it is not an orthodox H&S – at $2,279 would provide confirmation of a reversal lower, with a conservative target at $2,171, and a second target at $2,105. 

At the same time, it is also still possible that Gold could find its feet and continue higher. GoldÂ’s original break above the trendline and the 50-day SMA on June 20 was supposed to reach an initial, conservative target in the mid $2,380s (June 7 high), and it is still possible it could reach that target despite the fallback.

However, it would require a break above $2,350 to confirm a move up to the June 7 high. A further break above that might indicate a continuation up to the May – and all-time – high at $2,450. 

A break above that would confirm a resumption of the broader uptrend. 

There is a risk that the trend is now sideways in both the short and medium term. In the long term, Gold remains in an uptrend. 

Pound Sterling recovers against US Dollar ahead of US core PCE Inflation

398661   June 27, 2024 19:02   FXStreet   Market News  

• The Pound Sterling rises against the US Dollar but the overall direction remains uncertain.
• Economists expect that the US core PCE inflation softened in May.
• The uncertainty over the UK elections outcome keeps the Pound Sterling on its toes.

The Pound Sterling (GBP) finds a cushion above the round-level support of 1.2600 against the US Dollar (USD) in ThursdayÂ’s London session. The GBP/USD pair gauges ground as the US Dollar registers a modest correction. The US Dollar Index (DXY), which tracks the GreenbackÂ’s value against six major currencies, edges down after posting a fresh eight-week high near 106.10.

However, the near-term outlook of the US Dollar remains firm as investors are expected to trade cautiously ahead of the United States (US) core Personal Consumption Expenditure price index (PCE) data for May, which will be published on Friday. Core PCE inflation, the Federal ReserveÂ’s (Fed) preferred inflation measure, is estimated to grow at a slower pace of 0.1% against 0.2% in April month-on-month. Annually, the underlying inflation is projected to decelerate to 2.6% from 2.8% in April.

A scenario in which PCE inflation declines, as economists expect, would boost expectations for the Fed to begin reducing interest rates from September. According to the CME FedWatch tool, traders see a 62.3% that interest rates will be reduced from their current levels. The tool also shows that the Fed will cut interest rates twice this year. However, Fed policymakers signaled in their latest dot plot that there will be only on rate cut this year.

In ThursdayÂ’s session, investors will focus on the Initial Jobless Claims data for the week ending June 21, the revised Q1 Gross Domestic Product (GDP) estimates, and Durable Goods Orders data for May.

Daily digest market movers: Pound Sterling remains down against Asian peers

• The Pound Sterling gains against its European peers and the US Dollar but is exhibiting weakness against Asian currencies in ThursdayÂ’s European session. In Asia, the Japanese Yen (JPY) rises as fears of JapanÂ’s intervention in the FX domain have intensified. Meanwhile, antipodean currencies are showing strength as investors expect that the Reserve Bank of Australia (RBA) and the Reserve Bank of New Zealand (RBNZ) will not pivot to policy normalization this year.
• The British currency is expected to face volatility as the United Kingdom (UK) parliamentary elections are held on July 4. According to polls, UK Prime Minister Rishi SunakÂ’s Conservative Party is expected to suffer a defeat from the opposition Labour Party. 
• On the economic front, the deteriorating economic outlook due to the Bank of England’s (BoE) higher interest rates and stubborn wage growth keep policymakers concerned. The preliminary S&P Global/CIPS Purchasing ManagersÂ’ Index (PMI) for June showed that business activity in the manufacturing sector expanded at a faster pace, while operations in the service sector unexpectedly slowed. Meanwhile, high wage growth continues to empower individuals with high purchasing power, making it more difficult for policymakers to kick-start the policy-easing cycle.
• Financial markets expect the BoE to start reducing interest rates from the August meeting. Meanwhile, investors will focus on the revised UK Q1 GDP estimates, which will be published on Friday.

Pound Sterling Price Today:

Technical Analysis: Pound Sterling establishes below 61.8% Fibo retracement support

The Pound Sterling finds interim support near 1.2600 against the US Dollar. The GBP/USD pair has come under pressure after breaking below the crucial support of 1.2700. The Cable declines toward the 200-day Exponential Moving Average (EMA), which trades around 1.2590. 

The Cable has dropped below the 61.8% Fibonacci retracement support at 1.2667, plotted from the March 8 high of 1.2900 to the April 22 low at 1.2300.

The 14-day Relative Strength Index (RSI) oscillates inside the 40.00-60.00 range, indicating consolidation ahead.

WTI steadies above $80 as US Oil buildup offsets Middle East risks

398660   June 27, 2024 18:56   FXStreet   Market News  

• WTI holds breadth above $80.00 with US core PCE inflation in focus.
• Unexpected Oil buildup in the US intensified demand concerns.
• Israel prepares for massive damage in Lebanon if Hezbollah launches war.

West Texas Intermediate (WTI), futures on NYMEX, remain steady above the psychological support of $80.00 in ThursdayÂ’s European session. The upside in the Oil price has been restricted by growing demand concerns as the United States (US) Energy Information Administration (EIA) unexpectedly reported a significant buildup of inventories for the week ending June 21. While the downside remains favored amid caution that Middle East tensions would expand from Gaza to Lebanon.

On Wednesday, the US EIA reported Oil stockpiles at 3.59 million barrels. Economists expected a drawdown at a faster pace by 3.0 million barrels from the former release of 2.55 million barrels. This has raised concerns over the Oil consumption in worldsÂ’ largest nation. Investors worry that maintenance of a restrictive interest rate framework by the Federal Reserve (Fed) from a longer period has deepened household crisis, which has resulted in poor demand prospects.

Going forward, investors will focus on the United States (US) core Personal Consumption Expenditure price index (PCE) data for May, which will be published on Friday. The core PCE inflation data, a Federal ReserveÂ’s (Fed) preferred inflation measure, will provide cues bout when the rate-cutting cycle will be kicked-off.

The US core PCE inflation data is estimated to have grown at a slower pace of 0.1% against 0.2% in April month-on-month. Annually, the underlying inflation is projected to have decelerated to 2.6% from the former release of 2.8%.

On the geopolitical front, Israeli Defense Minister Yoav Gallant warned of a massacre in Lebanon if Hezbollah launches a war. Investors worry that the spread of war from Gaza to Lebanon would disrupt the Oil supply chain.

Mexican Peso takes a break after two-day decline ahead Banxico meeting

398658   June 27, 2024 18:45   FXStreet   Market News  

• The Mexican Peso is taking a breather after a two-day decline. 
• Thursday will see the Banxico policy meeting and Mexican labor and trade data. 
• USD/MXN completes an ABC correction higher and reaches a critical turning point.

The Mexican Peso (MXN) trades little-changed on Thursday as traders catch their breath after two straight days of depreciation. This may be a “calm before the storm” effect ahead of the Bank of Mexico (Banxico) monetary policy meeting at 19:00 GMT, a potentially market-moving event for the Peso. 

At the time of writing, one US Dollar (USD) buys 18.30 Mexican Pesos, EUR/MXN is trading at 19.58, and GBP/MXN at 23.15.

Mexican Peso trades flat after two-day drop

The Mexican Peso trades flat in the run-up to the Banxico policy meeting on Thursday.  An overwhelming majority of economists expect the central bank to maintain its policy interest rate at its current 11.00% level. Of the 25 economists surveyed by Bloomberg, 23 expect the central bank to keep interest rates unchanged. A recent survey by Mexican lender Citibanamex showed that the majority of respondents expect Banxico to keep its policy rate unchanged – although most expect a cut in August.

The high interest-rate differential between Mexico and most major economies has kept the Mexican Peso strong. Relatively higher interest rates attract greater inflows of foreign capital. Therefore, deciding not to cut interest rates might be bullish for the Peso, although given that this outcome has been widely predicted, the market may already have priced it in.

Many analysts have changed their minds about Banxico cutting interest rates due to the sharp depreciation in the Peso after the June 2 election. They now see imported inflation as a factor further weighing against immediate interest-rate cuts. 

Rabobank’s Senior Strategist Christian Lawrence was one analyst who expected Banxico to cut interest rates in June. However, he changed his opinion in light of the sharp devaluation of the Mexican Peso since the election, which “has acted as a de facto cut.” 

The same goes for economists at Standard Chartered: “We now expect Banco de México (Banxico) to stay on hold instead of cutting by 25bps at its 27 June meeting, amid sharp currency depreciation driven by elevated political noise and fiscal uncertainty,” said the bank in a recent note. 

Prior to the Banxico decision, at 12:00 GMT, the Mexican Unemployment Rate and Balance of Trade (BoT) for May will also be released. 

Unemployment is expected to rise to 2.7% from 2.6% in the previous month, and the BoT is forecast to show the deficit shrinking to $2.04 billion from $3.75 billion previous.

Better-than-expected data might support MXN. 

Technical Analysis: USD/MXN completes ABC correction and reaches crossroads

USD/MXN has completed an ABC corrective pattern higher on the 4-hour chart. 

The pair is now at a critical juncture. If it continues to make higher highs, it could mean the short-term downtrend has reversed. Alternatively, a recapitulation would suggest the downtrend is resuming, and the pair could move to lower lows. 

USD/MXN 4-hour Chart 

A move below 18.06 (June 26 low) would suggest the downtrend was resuming and probably see a continuation down to 17.87 (June 24 low). 

At the same time, the short-term trend remains bearish, leaving the pair at risk of a recapitulation lower. Further weakness could see it reach the 17.72 swing low made on June 4.

Alternatively, if USD/MXN rallies and breaks above 18.39 (June 26 high), it would form a higher high and suggest a new short-term uptrend was evolving. Resistance at 18.48 (2023 October 6 high) and 18.68 (June 14 high) might supply upside targets afterward.

The direction of the long and intermediate-term trends remains in doubt. 

US Core PCE Preview: Forecasts from seven major banks, inflationary pressure may subside

398657   June 27, 2024 18:40   FXStreet   Market News  

The FedÂ’s preferred inflation gauge, the Core Personal Consumption Expenditure (PCE), will be released by the US Bureau of Economic Analysis (BEA) on Friday, June 28 at 12:30 GMT and as we get closer to the release time, here are the forecasts of economists and researchers of seven major banks.

The US Core PCE inflation is expected to grow at a slower pace of 0.1% against 0.2% in April month-on-month. Annually, the underlying inflation is projected to decelerate to 2.6% from 2.8% in April.

Deutsche Bank

The focus in the US next week will be on spending and PCE data on Friday. Our US economists expect MoM growth in core PCE to remain at +0.2% and see MoM growth in both income and consumption picking up to +0.4% and +0.3%, respectively (vs +0.3% and +0.2% in April).

TD Securities

CPI and PPI data suggest core PCE inflation lost further momentum in May, with the series advancing 0.13% m/m — its lowest monthly gain of the year and following a 0.25% April expansion. We also look for the headline PCE and the supercore to print 0.0% each in May. Separately, personal spending likely advanced 0.3% m/m, with income rising 0.4%.

Charles Schwab

Back home, the big story this week is still a couple of days off when Friday morning brings May Personal Consumption Expenditures (PCE) prices data, the Fed’s favored inflation monitor. Analysts expect 2.6% year-over-year PCE growth for both headline and core, according to Trading Economics, but rising crude oil prices this month stirred fresh inflation concerns. Month-over-month PCE prices are expected to rise 0.1% for core, which excludes volatile energy and food, with headline PCE flat.

Citi

USD: US May PCE Deflator MoM – Citi: 0.0%, median: 0.0%, prior: 0.3%; PCE Deflator YoY – Citi: 2.6%, median: 2.6%, prior: 2.7%; Core PCE MoM – Citi: 0.2%, median: 0.1%, prior: 0.2%; Core PCE YoY – Citi: 2.6%, median: 2.6%, prior: 2.8% – based on details of CPI and PPI, Citi Research expect a 0.15%MoM increase in core PCE inflation in May, technically rounding to a 0.2%MoM but with clear risk of a softer 0.1% increase. But regardless of 0.2% or 0.1%, May core PCE inflation should slow markedly compared to 0.25% in April, with the YoY rate dropping from 2.8% to 2.6%. Most notably, various services prices in CPI slowed in May. Core goods prices should also decline with a boost from pharmaceutical prices offset by declines in certain recreation equipment prices and cars. Headline PCE should be flat on the month but would be close to rounding to a 0.1%MoM increase. This would mean headline PCE also pulls back to 2.6% on a YoY basis.

MUFG

The release in the week ahead of the latest US PCE report is expected to provide confirmation that the core deflator increased by only +0.1%M/M in May which alongside leading indicators pointing towards a further softening of US labour demand is encouraging US rate market participants to price back in multiple Fed rate cuts in the 2H of this year.  

ING

May PCE figures are released this Friday. If the US May core PCE on Friday does come in at the consensus 0.1% month-on-month, the short-term downside for the dollar against European currencies may be less pronounced as markets could still favour defensive positions ahead of the French vote on Sunday.

Rabobank

In the U.S., eyes will be on the PCE deflator for May. Based on the inputs from the CPI, the PPI and import prices, the core rate is anticipated to show a deceleration to 0.1% m/m and 2.6% y/y. 

US Independence Day Holiday Trading Schedule 2024

398646   June 27, 2024 18:34   ICMarkets   Market News  

Dear Client,

Please find our updated Trading schedule and general information related to the US Independence Day Holiday on Thursday, 04 July, 2024.

Liquidity over the holidays is expected to be particularly thin so please take the necessary precaution to ensure that you are not affected by increased volatility, spreads and intermittent pricing.

All times mentioned below are Platform time (GMT +3).

Forex / Crypto Pair:

Precious Metals:

Spot Energies:

Indices:

Energy Futures:

Soft Commodities Futures:

Indices Futures:

Bonds Futures:

Equities:

Kind regards,

IC Markets Global.

The post US Independence Day Holiday Trading Schedule 2024 first appeared on IC Markets | Official Blog.

Japanese Yen slightly recovers from its multi-decade low

398644   June 27, 2024 18:33   FXStreet   Market News  

• The Japanese Yen slightly recovers from its multi-decade low of 160.87 against the US Dollar seen on Wednesday.
• The Yen finds some support after comments from Japanese Finance Minister ShunÂ’ichi Suzuki. 
• The US Dollar Index falls back below 106.00 ahead of US Q1 GDP, Durable Goods Orders and weekly Jobless Claims. 

The Japanese Yen (JPY) recovers a touch on Thursday after its steep decline the day before when markets started playing a chicken game with the Japanese government. The Japanese Yen sank to 160.87 against the US Dollar (USD), even lower than the level of 160.20 seen at the end of April right before the Japanese Ministry of Finance intervened and pushed the USD/JPY back to 151.95. Early comments during the Asian session on Thursday from Japanese Finance Minister Shun’ichi Suzuki seemingly had more impact than the comments from Masato Kanda, Vice Minister for International Affairs, on Wednesday when the actual move occurred. 

Meanwhile, the US Dollar Index (DXY) – which gauges the value of the US Dollar against a basket of six foreign currencies – is also easing ahead of a packed economic calendar. Besides the final reading of the US Gross Domestic Product (GDP) print for Q1, traders will also wait for the Durable Goods Orders numbers for May. As each week, the Initial and Continuing Jobless Claims are set to be released as well on Thursday, making it a very charged US session. 

Daily digest market movers: Suzuki seems to have more weight

• At 01:30 GMT, Japanese Finance Minister ShunÂ’ichi Suzuki commented on the recent moves in the Japanese Yen. Suzuki said they are watching currencies closely and will act when needed, though Suzuki declined to comment on specific FX levels 
• At 12:30 GMT, most of the ThursdayÂ’s important data points will all come out at the same time:
  • US Gross Domestic Product numbers for Q1:
    • Headline GDP is expected to head to 1.4% from 1.3%.
    • Headline Personal Consumption Expenditures (PCE) Prices for the quarter should remain stable at 3.3%.
    • Core PCE should remain as well stable at 3.6%.
  • Durable Goods Orders for May:
    • Headline Durable Goods Orders are expected to contract by 0.1% from the prior positive 0.6% in April.
    • Durable Goods Orders ex Transportation are expected to slide lower to 0.2% from 0.4% in April.
  • Initial Jobless Claims for the week ending June 21 are expected to remain rather stable at 236,000 from the previous weekÂ’s reading of 238,000. Continuing Claims are expected to remain stuck with a marginal move from 1,828,000 to 1,820,000. 
• Equities are having issues again on Thursday and look to be on track for a negative week overall. US futures are all down less than half a percentage. 
• The CME Fedwatch Tool is broadly backing a rate cut in September despite recent comments from Federal Reserve (Fed) officials. The odds now stand at 56.3% for a 25-basis-point cut. A rate pause stands at a 37.7% chance, while a 50-basis-point rate cut has a slim 6.0% possibility. 
• The Overnight indexed Swap curve for Japan shows a 64.0% chance of a rate hike on July 31, and a smaller 52.8% chance for a hike on September 20. 
• The US 10-year benchmark rate trades near the weekly high at 4.33%.
• The benchmark 10-year Japan Treasury Note (JGB) trades around 1.07%, nearing highs not seen since 2011.

USD/JPY Technical Analysis: Everyone knows it’s coming

The USD/JPY is trading off its multi-decade high, freshly printed on Wednesday at 160.81. For now, the words from Japanese Finance Minister Shun’ichi Suzuki are having a bit of an impact, though the question is how long the impact will last as the attention will start to die down. The Japanese government is playing a dangerous game, though, seeming to bet on weak US data on Thursday and Friday, which would trigger a pullback in the DXY and might see Yen strengthen without aid from the Japanese government. 

Although the Relative Strength Index (RSI) is overbought in the daily chart, a correction could soon occur. If weaker US data, when that plays out and is undoubtedly not a certainty, will be enough to drive USD/JPY down to 151.91 remains to be seen. Instead, look at the 55-day Simple Moving Average (SMA) at 156.39 and the 100-day SMA at 153.69 for traders to quickly build a pivot on and try to test highs again, testing the Japanese deep pockets again. 

USD/JPY: Daily Chart

Italy 5-y Bond Auction up to 3.55% from previous 3.54%

398643   June 27, 2024 18:07   FXStreet   Market News  

Gold bounces off $2,300 as traders take profit

398641   June 27, 2024 18:06   FXStreet   Market News  

• Gold bounces off the psychologically important $2,300 level after another leg of selling. 
• The pair continues to be pressured by a higher-for-longer outlook on interest rates – data on Friday could be key.
• XAU/USD approaches the neckline for a potential topping pattern – if broken, a cascade down could result.  

Gold (XAU/USD) edges higher, trading just above $2,300 on Thursday, as short-traders take profit following the last down leg from the $2,330s. The yellow metal has been pressured by comments from Federal Reserve (Fed) officials – those tasked with setting interest rates in the US – who have consistently stated that more progress has to be made on bringing down inflation before they can consider cutting interest rates. 

Their reluctance to cut rates weighs on Gold because it makes the non-interest paying asset comparatively less attractive to investors.  

Gold pressured by reluctant Fed

Gold backs and fills on Thursday after another big down-day on Wednesday as markets took their cue from a mixture of Fed speakers keeping reserved about cutting interest rates, and chart-based technical opportunism.  

In regards to interest rates, of key importance will be the release of the US Personal Consumption Expenditures (PCE) Price Index for May on Friday, which is the Federal Reserve’s (Fed) preferred gauge of inflation. A lower-than-expected result could make the Fed more optimistic about cutting interest rates. The opposite would be the case if the PCE beats expectations. 

Whilst the Fed sits on its hands, the market is a bit more optimistic seeing a relatively high probability (62%) of the Fed cutting interest rates at (or before) the Fed’s September meeting, although this is below the 66% seen on Wednesday. The estimates are according to the CME FedWatch tool, which calculates chances using Fed Funds futures prices. 

GoldÂ’s downside capped by longer-term factors

Gold’s downside is capped by various long-term positive factors. Firstly, there is its role as a safe-haven in an increasingly fractured, uncertain world. Geopolitical uncertainty in the Middle East, Ukraine and now France ahead of its contentious elections, is making some investors nervous, as is the impact of AI-driven revolutionary economic change as well as the threat of climate change.  

The US Dollar (USD) is a further double-edged factor. A strong US Dollar has led to such a steep depreciation in mainly Asian currencies recently, prompting regional central banks to hoard Gold as a hedge against the effects. That said, a stronger Dollar also tends to lower Gold price precisely because it is priced in Dollars. 

Recently USD reached a 38-year high against the Japanese Yen (JPY) and the higher it goes the more demand Gold will see as a currency hedge. 

Another longer-term positive factor for Gold is the BRICS trade confederation’s strategy to use Gold as a replacement for the US Dollar in global trade. Given its position as a stable, safe store of value, Gold is the most reliable alternative as a means of exchange between nations with different, often volatile currencies. 

Technical Analysis: Gold continues approaching key support 

Gold has steadily pushed lower towards key support and the neckline of a possible topping pattern at $2,279. A break below the neckline would signal a strong down move. 

XAU/USD Daily Chart

 

The XAU/USD pair had been forming a bearish Head-and-Shoulders (H&S) pattern over the last three months. However, the upside break on June 20 has brought the validity of the pattern into doubt. That said, a more complex topping pattern that might still prove bearish is still possibly forming. 

If so, then a break below the pattern’s neckline – even if it is not an orthodox H&S – at $2,279 would provide confirmation of a reversal lower, with a conservative target at $2,171, and a second target at $2,105. 

At the same time, it is also still possible that Gold could find its feet and continue higher. GoldÂ’s original break above the trendline and the 50-day SMA on June 20 was supposed to reach an initial, conservative target in the mid $2,380s (June 7 high), and it is still possible it could reach that target despite the fallback.

However, it would require a break above $2,350 to confirm a move up to the June 7 high. A further break above that might indicate a continuation up to the May – and all-time – high at $2,450. 

A break above that would confirm a resumption of the broader uptrend. 

There is a risk that the trend is now sideways in both the short and medium term. In the long term, Gold remains in an uptrend. 

Italy 10-y Bond Auction: 4.01% vs 3.97%

398640   June 27, 2024 18:06   FXStreet   Market News