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French stocks hit the lowest since January with voting set for Sunday

399108   June 28, 2024 21:12   Forexlive Latest News   Market News  

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Pound Sterling moves higher as US core PCE Inflation cools down expectedly

399106   June 28, 2024 21:03   FXStreet   Market News  

• The Pound Sterling moves higher against the US Dollar ahead of the US core PCE Inflation for May.
• Revised UK Q1 GDP estimates show that the economy grew at a higher pace of 0.7%.
• Fed policymakers expect rate cuts at this time are inappropriate.

The Pound Sterling (GBP) gains against the US Dollar (USD) in Friday’s New York session. The GBP/USD pair rises slightly as the United States (US) core Personal Consumption Expenditures (PCE) Price Index declined expectedly in May.

The core PCE inflation data, the Federal Reserve’s (Fed) preferred inflation measure, decelerated to 2.6% year-over-year (YoY), as expected, from April’s reading of 2.8%. On a monthly basis, the underlying inflation grew modestly by 0.1% against the prior increase of 0.2%.

Soft inflation figures have weighed on the US Dollar (USD) and would boost expectations of early rate cuts by the Fed. At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, falls to 105.80.

According to the CME FedWatch tool, 30-day fed funds futures pricing data suggest that traders have priced in two rate cuts this year, and the policy-easing cycle will begin at the September meeting. On the contrary, Fed officials advocate for keeping interest rates at their current levels until they are convinced that inflation will decline to the desired rate of 2%.

On Thursday, Fed Governor Michelle Bowman reiterated that the central bank is not yet at a point where it is appropriate to reduce interest rates. She warned of more rate hikes if progress in disinflation appears to stall or reverse.

Daily digest market movers: Pound Sterling performs strongly as UK Q1 GDP expanded at a higher rate than previously thought

• The Pound Sterling strengthens against its entire peers after the United Kingdom (UK) Office for National Statistics (ONS) reported in its revised Q1 Gross Domestic Product (GDP) report that the economy expanded at a higher rate of 0.7% quarter on quarter (QoQ) than estimates and the preliminary release of 0.6%. On an annualized basis, the economy grew by 0.3%, upwardly revised from 0.2%. 
• Meanwhile, uncertainty ahead of UK elections and the timing of the Bank of England (BoE) rate cut will keep the Pound Sterling on its toes. According to the latest exit polls, the Opposition Labor Party is expected to win from the UK Prime Minister Rishi Sunak-led Conservative Party.
• For the BoE rate-cut timeframe, investors expect that the majority of officials will vote for reducing interest rates in the next monetary policy meeting, which will be held on August 1. Policymaker Swati Dhingra and Deputy Governor Dave Ramsden have been supporting rate cuts, and it will be crucial to see which members join them.
• The reason for the high probability of the BoE lowering borrowing rates in August is the return of annual headline inflation to the bankÂ’s target of 2%. However, price pressures in the service sector are still higher than what is required to make rate cuts appropriate.

Pound Sterling Price Today:

Technical Analysis: Pound Sterling remains aims to recapture 61.8% Fibo retracement support

The Pound Sterling holds key support near 1.2600 against the US Dollar. The GBP/USD pair trades inside Thursday’s trading range as investors prefer to remain sideways ahead of the release of the US inflation data. The Cable declines toward the 200-day Exponential Moving Average (EMA), which trades around 1.2590. 

The pair 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 a consolidation ahead.

Mexican Peso looks for direction after BanxicoÂ’s dovish hints

399104   June 28, 2024 21:02   FXStreet   Market News  

• The Mexican Peso recovers despite a dovish tilt to the Banxico policy meeting on Thursday. 
• A change in the distribution of voting and language of the statement suggests a higher change of interest-rate cuts. 
• USD/MXN trades in volatile ups and downs with no clear trend in the short-term.

The Mexican Peso (MXN) recovers roughly three quarters of a percent in its most traded pairs on Friday despite a dovish tilt to the Bank of Mexico (Banxico) policy meeting on Thursday. Banxico decided to leave interest rates unchanged at 11.00% and although the decision was widely expected, the change in the language of the statement and the division of voting were not. 

These changes suggest Banxico is more likely to cut interest rates in the future than was previously supposed (dovishness). This, in turn, had a moderately weakening effect on the Mexican Peso, since lower interest rates are generally bearish for currencies because they attract lower foreign capital inflows. 

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 23.14.

Mexican Peso weakens after changes to voting and Banxico language

The Mexican Peso recovers the losses incurred following the Banxico policy meeting. Several changes to the language of the accompanying statement and the inclusion of a single vote to cut interest rates – by Omar Mejia – were new developments that gave the meeting a dovish slant. 

The key changes to the statement were as follows: 

• At the previous meeting one member had voted to raise interest rates by 0.25%, in contrast at the June meeting a member voted to cut interest rates by 0.25%. 
   
• Overall it gave little weight to the PesoÂ’s devaluation, according to analysts at Rabobank.
   
• “Of note was the seemingly little weight the Bank placed on recent MXN depreciation filtering through to higher inflation. Overall, we would argue there is a dovish tilt that leaves the door wide open to further rate cuts this year,” Rabobank said in its note.
   
• Nevertheless, near-term inflation forecasts were revised up due to pass-through from the weaker Mexican Peso, however, longer-term forecasts were left unchanged.
   
• New language was added about economic activity slowing down, including “the balance of risks to growth of economic activity is biased to the downside”.
   
• The same mention of slowing activity preceded the interest-rate cut in March, according to economists at advisory service Capital Economics.
   
• Further, Banxico added that it saw scope for, “discussing reference rate adjustments”.
   
• “Our sense is that policymakers have opened the door to a 25bp cut at the August meeting,” said Capital Economics, adding “Even so, once the easing cycle is resumed, we expect that rates will be lowered more gradually than most anticipate.”
   
• Rabobank expects two 0.25% rate cuts from Banxico in 2024, with a policy rate of 10.50% to end the year.
   
• Capital Economics are more dovish, expecting four rate cuts and an end-of-year policy rate of 10.00%. 

Technical Analysis: USD/MXN displays volatility 

USD/MXN rose after the Banxico meeting to touch a weekly high of 18.60, however, it has since fallen back down to the 18.30s. 

The pair moved up after the formation of a three-wave ABC correction. This suggests the possibility the pair might not be correcting the short-term downtrend but instead has entered a short-term uptrend. 

USD/MXN 4-hour Chart 

However, the evidence is not strong either way and ultimately the direction of the short-term trend is unclear at the moment.  

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).

Alternatively, if USD/MXN rallies and breaks above 18.60 (June 28 high), it is likely to continue up to 18.68 (June 14 high), followed by 19.00 (June 12 high). A break above 19.00 would provide strong confirmation of a resumption of the short-and-intermediate term uptrend.

The direction of the long-term trend remains in doubt. 

Fed’s Daly: Fed is not done yet but PCE data is good news

399103   June 28, 2024 20:56   FXStreet   Market News  

Federal Reserve (Fed) Bank of San Francisco President Mary Daly told CNBC on Friday that cooling inflation shows that the Fed’s monetary policy is working, per Reuters.

Key takeaways

“Fed is not done yet but PCE data is good news.”

“Getting evidence that policy is tight enough.”

“It’s taking longer for policy to work but it is working.”

“If inflation stays sticky or comes down slowly, rates would need to be higher for longer.”

“If inflation comes down or labor market falters, can adjust policy.”

“Too early to tell on policy.”

“Will pay attention to both sides of Fed mandate.”

“Hearing from business CEOs they already feel uncertain.”

“Fed is apolitical, won’t talk about presidential debate.”

“Monetary policy is working.”

Market reaction

These comments failed to have a noticeable impact on the US Dollar’s valuation. At the time of press, the US Dollar Index was down 0.05% on the day at 105.85.

US Dollar sideways with PCE revealing no surprises

399101   June 28, 2024 20:56   FXStreet   Market News  

• The US Dollar has Trump and Suzuki to thank for its early recovery on Friday. 
• PCE fully falls in line of expectations.
• The US Dollar index hovers around 106.00, back to WednesdayÂ’s levels. 

The US Dollar (USD) is having difficulties in pricing in all events and elements that are moving in the markets. Traders are still digesting the Trump-Biden debate where nearly everyone saw former US President Donald Trump as the victor. Not much time though to fret over the event, with risk increasing that the Japanese Ministry of Finance might intervene later this Friday after the Japanese Yen hit a fresh multi-decade low against the US Dollar and snapped above 161. 

On the US economic calendar front, Personal Consumption Expenditures (PCE) came in fully in line of expecations. The disinflationary trajectory is in tact and is not facing any hiccups for now. Traders will now be on the lookout for the University of Michigan, ahead of the first round in the French elections over the weekend. 

Daily digest market movers: No summer surprises

• At 12:30 GMT, The Personal Consumption Expenditures for May was released:
  • Core Monthly PCE went from 0.2% to 0.1%.
  • Headline Monthly PCE headed from 0.3% to 0.0%.
  • Yearly Headline PCE faded a touch from 2.7% to 2.6%.
  • Yearly Core PCE eased from 2.8% to 2.6%.
• The Chicago Purchase Managers Index (PMI) is to be released at 13:45 GMT. Expectation is for the number to remain in contraction from 35.4 to 40.0.
• At 14:00 GMT, the University of Michigan will release its final reading for June:
  • Consumer Sentiment to remain quite stable at 65.8, coming from 65.6.
  • Inflation expectations locked in at 3.1%.
• Equities are trying to close this week off on a high note, with already several green closures in Asia, while European and US equities are in the green. 
• 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 57.9% for a 25-basis-point cut. A rate pause stands at a 35.9% chance, while a 50-basis-point rate cut has a slim 6.2% possibility. 
• The US 10-year benchmark rate trades near the weekly high at 4.27%.

US Dollar Index Technical Analysis: Weekend risks 

The US Dollar Index (DXY) may go where it wants to go in the coming days, though a sword of Damocles is hanging above its performance. The Japanese Ministry of Finance has repeated its state of emergency on the exchange rate and might intervene at any given moment as of now. That means a substantial move could unfold, which would knock out the Greenback for a moment. 

On the upside, the biggest challenge remains 106.52, the year-to-date high from April 16. A rally to 107.35, a level not seen since October 2023, would need to be driven by a surprise uptick in US inflation or a further hawkish shift from the Fed. 

On the downside, 105.53 is the first support ahead of a trifecta of Simple Moving Averages (SMA). First is the 55-day SMA at 105.27, safeguarding the 105.00 round figure. A touch lower, near 104.72 and 104.46, both the 100-day and the 200-day SMA form a double layer of protection to support any declines. Should this area be broken, look for 104.00 to salvage the situation. 

US Dollar Index: Daily Chart

Japanese Yen gets to keep Friday’s gains after US PCE

399099   June 28, 2024 20:51   FXStreet   Market News  

• The Japanese Yen started Friday with a fresh multi-decade low print.
• Some quick profit taking is happening ahead of the US session and before the weekend. 
• The US Dollar Index hovers around 106.00 again ahead of PCE inflation release. 

The Japanese Yen (JPY) sees traders taunting the Japanese government yet again, with another new historic low printed in the Yen’s performance. This Friday 161.27 was briefly hit before falling back to below 161.00. The move comes with Japanese Finance Minister Shun’ichi Suzuki repeated the same message  from Thursday that the Japanese cabinet is “watching the FX moves with a high sense of urgency”, which now has lost its impact and sees markets defying the Ministry in order to take action. 

Meanwhile, the US Dollar Index (DXY) – which gauges the value of the US Dollar against a basket of six foreign currencies – is of course in positive territory on the back of this action. Even if US data on Thursday did not allow the US Dollar to outperform, with Durable Goods flatlining and Pending Home Sales shrinking again for a second month in a row. The Personal Consumption Expenditures numbers falling in line, and in their disinflationary trajectory and are not creating any big waves. 

Daily digest market movers: PCE helps JPY

• At 02:30 GMT, Japanese Finance Minister ShunÂ’ichi Suzuki commented he is watching FX moves with a high sense of urgency. Though this time the impact resulted in a pickup in devaluation for the Japanese Yen. Markets expected to see action this Friday, not more words and same messages. 
• At 12:30 GMT, the Personal Consumption Expenditures (PCE) for May got released:
  • Headline PCE eased from 0.3% to 0.0%.
  • Core PCE faded a touch from 0.2% to 0.1%.
• At 13:45 GMT, Chicago Purchase Managers Index will be released. The number is expected to remain in contraction from 35.4 to 40.
• At 14:00 GMT the University of Michigan will release JuneÂ’s final reading:
  • Sentiment Index expected to head from 65.6 to 65.8.
  • Inflation expectations should remain stable at 3.1%.
• Equities have chosen to go out with a bang, and are printing green numbers across the globe. 
• 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 57.9% for a 25-basis-point cut. A rate pause stands at a 35.9% chance, while a 50-basis-point rate cut has a slim 6.2% possibility. 
• The Overnight indexed Swap curve for Japan shows a 57.9% chance of a rate hike on July 31, and a smaller 19.8% chance for a hike on September 20. 
• The US 10-year benchmark rate trades around the middle of this weekÂ’s range near 4.27%.
• The benchmark 10-year Japan Treasury Note (JGB) trades around 1.05%, and is easing a touch for this week.

USD/JPY Technical Analysis: Does this ever work?

The USD/JPY has just printed a fresh multi-decade high this Friday. The catalyst for the move was the same as the one that triggered a bit of a recovery on Thursday: the words from Japanese Finance Minister Shun’ichi Suzuki. It becomes clear that markets have bought one time into these comments, and now want to see action, which is pushing the Japanese government into a corner and interventions are really looking inevitable. 

Although the Relative Strength Index (RSI) is overbought in the daily chart, a correction could still take a few more days. Should PCE data come out further disinflationary, that would not be enough to drive USD/JPY down to 151.91. Instead, look at the 55-day Simple Moving Average (SMA) at 156.53 and the 100-day SMA at 153.81 for traders to quickly build a pivot on and try to test highs again, testing the Japanese deep pockets again. 

USD/JPY Daily Chart

Breaking: US core PCE inflation declines to 2.6% as expected

399098   June 28, 2024 20:51   FXStreet   Market News  

Inflation in the US, as measured by the change in the Personal Consumption Expenditures (PCE) Price Index, edged lower to 2.6% on a yearly basis in May from 2.7% in April, the US Bureau of Economic Analysis reported on Friday. This reading came in line with the market expectation. On a monthly basis, the PCE Price Index was unchanged in May.

The core PCE Price Index, which excludes volatile food and energy prices, rose 2.6% in the same period, down from the 2.8% increase recorded in April. Monthly core PCE Price Index rose 0.1%.

Other details of the report showed that Personal Income grew 0.5% on a monthly basis in May, while Personal Spending rose 0.2%.

Follow our live coverage of the US PCE inflation data and the market reaction.

Market reaction to US PCE inflation data

The US Dollar Index, which tracks the US Dollar’s valuation against a basket of six major currencies, edged lower with the immediate reaction. At the time of press, the index was down 0.1% on the day at 105.80.

This section below was published as a preview of the US PCE inflation report at 06:00 GMT.

• The core Personal Consumption Expenditures Price Index is set to rise 0.1% MoM and 2.6% YoY in May.
• Markets see a nearly 40% probability that the Federal Reserve will leave the policy rate unchanged in September.
• A hot PCE inflation report could provide a boost to the US Dollar heading into the weekend.

The core Personal Consumption Expenditures (PCE) Price Index, the US Federal ReserveÂ’s (Fed) preferred inflation measure, will be published on Friday by the US Bureau of Economic Analysis (BEA) at 12:30 GMT.

PCE index: What to expect in the Federal ReserveÂ’s preferred inflation measure

The core PCE Price Index, which excludes volatile food and energy prices, is seen as the more influential measure of inflation in terms of Fed positioning. The index is forecast to rise 0.1% on a monthly basis in May, at a softer pace than the 0.2% increase recorded in April. May core PCE is projected to grow at an annual pace of 2.6%, while the headline annual PCE inflation is also forecast to edge lower to 2.6%.

The US Bureau of Labor Statistics (BLS) reported earlier in the month that the Consumer Price Index (CPI) rose 3.3% on a yearly basis in May, while the core CPI increased 3.4% in the same period, down from 3.6% in April.

Previewing the PCE inflation report, “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,” TD Securities analysts said. “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%”, they added.

When will the PCE inflation report be released, and how could it affect EUR/USD?

The PCE inflation data is slated for release at 12:30 GMT. The monthly core PCE Price Index gauge is the most-preferred inflation reading by the Fed, as itÂ’s not distorted by base effects and provides a clear view of underlying inflation by excluding volatile items. Investors, therefore, pay close attention to the monthly core PCE figure.

The CME Group FedWatch Tool shows that markets currently price in a 37.7% probability of the Federal Reserve (Fed) leaving the policy rate unchanged in September. This market positioning suggests that the US Dollar (USD) faces a two-way risk heading into the event.

In case the monthly core PCE rises 0.2%, or more, in May, the immediate market reaction could cause investors to refrain from pricing in a rate reduction in September and help the USD outperform its rivals. On the other hand, a reading of 0.1%, or lower, could trigger a USD selloff ahead of the weekend and open the door for a leg higher in EUR/USD. 

Investors, however, could remain reluctant to bet on a steady recovery in the Euro ahead of the first round of French elections on Sunday, even if the PCE inflation figures make it difficult for the USD to find demand. In addition, the data will be released on the last trading day of the second quarter. Hence, quarter-end flows and position adjustments could ramp up market volatility and cause the USD to move irregularly.

FXStreet Analyst Eren Sengezer offers a brief technical outlook for EUR/USD and explains:

“Despite several recovery attempts seen in the last couple of weeks, the Relative Strength Index (RSI) indicator on the daily chart stays below 50, reflecting buyer’s hesitancy. Furthermore, EUR/USD remains within the descending regression channel coming from early June.”

“1.0740 (upper limit of the descending channel) aligns as first resistance. Once EUR/USD rises above this level and stabilizes there, 1.0790-1.0800 (100-day Simple Moving Average (SMA), 200-day SMA, psychological level) could be seen as the next resistance before 1.0900. On the downside, 1.0660 (mid-point of the descending channel) aligns as first support before 1.0600 (lower limit of the descending channel).”

US dollar slackens after PCE data, the recovers

399097   June 28, 2024 20:50   Forexlive Latest News   Market News  

The US PCE inflation numbers were mostly in line with estimates but there were some signs of cooling inflation and that led to some dollar selling. There was also some angst about a hot number in the report in light of higher Canadian and Australian data this week.

The main headline was 0.0% m/m but the unrounded number was -0.0081%, so the slightest deflation. Core rose 0.083% m/m.

The wage number was a tad hot up 0.7% but consumption at +0.2% compared to +0.3% and with a 0.1 pp downward revision to the prior was cool.

On net, the dollar dipped and then mostly recovered. That seems about right to me; the Fed should be a tad more optimistic but we’ve already had a good CPI report for May so that should be priced in. Eyes might shift to US politics and month end now.

Ripple President breaks silence on upcoming RLUSD stablecoinÂ’s impact on XRP

399095   June 28, 2024 20:50   FXStreet   Market News  

• Ripple President Monica Long commented on the upcoming stablecoin Real USD and its impact on XRP. 
• Long said stablecoin and XRP are complementary and additive, addressing the concerns over the RLUSD launch. 
• XRP edges higher and holds above $0.47 on Friday. 

Ripple (XRP) President Monica Long recently appeared on The Block Podcasts and addressed XRP trader concerns about the stablecoin’s launch. The payment remittance firm’s stablecoin is called Real USD (RLUSD) and is slated for launch in 2024. 

Long shared her views on the stablecoin, its role in the ecosystem, the Real World Asset (RWA) narrative, and the institutional pivot on crypto. 

Daily digest market movers: Ripple President answers burning questions on Real USD and XRP

• Ripple President Monica Long spoke about the firmÂ’s upcoming stablecoin, Real USD, and its relationship with XRP. 
• In the podcast interview, Long answered questions on the nature of the stablecoin and discussed the RWA narrative and shift in institutional investors and their stance on crypto. 

• When asked about RLUSD and its impact on XRP, Long said that the stablecoin “complements” Ripple and it is “additive.” 
• Therefore, RippleÂ’s stablecoin is designed to enhance the cross-border payment remittance narrative and seamless transfers rather than hamper XRPÂ’s utility. 
• Long explained that XRP will continue to play central in RippleÂ’s payment solutions, RLUSD will be introduced to complement the use of the altcoin. 
• The last update in the SEC vs. Ripple lawsuit is that the regulator is asking for $102.6 million in fines against RippleÂ’s proposed $10 million. 

Technical analysis: XRP could extend losses over the weekend

Ripple has been in a state of decline since March 11. The altcoin is struggling to break past resistance at $0.50 and could extend losses by 5%, dipping to support at $0.4508, the June 7 low. 

The red histogram bars on the Moving Average Convergence Divergence (MACD) momentum indicator supports this bearish narrative. 

XRP/USDT daily chart 

If Ripple begins recovery, XRP could climb toward the nearest Fair Value Gap between $0.4825 and $0.4841. Further up, in its rally towards the psychological barrier at $0.50, Ripple faces resistance at $0.4955, the 23.6% Fibonacci retracement of the drop from the March 11 top of $0.7440 to the April 13 low of $0.4188. 

Gold vulnerable to volatility after PCE inflation data

399093   June 28, 2024 20:49   FXStreet   Market News  

• Gold is likely to witness increased volatility after the US PCE inflation data release on Friday. 
• A lower PCE reading would support the yellow metal as it would, in turn, result in lower interest rates – a benefit to non-yielding Gold. 
• XAU/USD has broken above a key trendline, further invalidating the bearish H&S topping pattern that had been forming.  

Gold (XAU/USD) edges marginally lower, trading in the $2,320s on Friday, ahead of the main economic data event for the week, the US Personal Consumption Expenditures (PCE) – Price Index for May. 

The PCE is the US Federal Reserve’s (Fed) preferred inflation gauge, and since the Fed is in charge of setting interest rates, the result could influence their trajectory. 

Gold is a non-interest-bearing asset so the level of interest rates impacts its value. Higher interest rates make Gold less attractive to investors whilst the opposite is true of lower rates. 

Gold could see volatility from PCE data

Gold will probably experience volatility after US PCE data is released at 12:30 GMT. The consensus estimate is for PCE inflation to fall to 2.6% year-over-year (YoY) in May from 2.7% in April, and to stay unchanged at 0.0% month-over-month (MoM) after rising 0.3% in April.

Core PCE is expected to cool to 2.6% from 2.8% previously on a YoY basis and  0.1% from 0.2% on a MoM basis. 

“Our US economists think that core PCE should increase by +0.17% (MoM), based on the CPI and PPI data that we’ve already got. In turn, that would cut the year-on-year rate to 2.63% (YoY), the lowest in over three years,” says Jim Reid, Global Head of Macro at Deutsche Bank. 

Fed speakers sounding more optimistic

Commentary from Fed speakers regarding the outlook for interest rates also influences Gold prices, and these were mixed on Thursday.

Atlanta Fed President Raphael Bostic said the Fed had started penciling in future rate cuts, which suggests more concrete plans rather than the vague data dependency of previous Fed-speaker comments. 

Bostic expected an interest-rate cut in the fourth quarter as likely followed by four quarter-point cuts in 2025, adding that when the Fed starts cutting rates, it will be the “first in a series; that is a reason for the patience.” 

Bostic also dismissed concerns flagged regarding the weakening labor market, saying, “businesses say they see no cliff ahead for the job market.”

Another bugbear for the Fed has been high services-sector inflation. However, there are signs this is also cooling, according to the Atlanta Fed President. 

His colleague, Fed Board of Governors member Michelle Bowman, however, was more cautious on Thursday, saying, “The Fed is not at a point yet where it can consider making a rate cut.”

Market-based gauges of what the Fed will do next are a bit more optimistic, seeing a relatively high circa 64% probability of the Fed cutting interest rates at (or before) the Fed’s September meeting. The estimate is from the CME FedWatch tool, which calculates chances using 30-day Fed Funds futures prices. 

GoldÂ’s longer-term prospects look bright

Gold’s long-term prospects remain positive according to most analysts. Geopolitical uncertainty in the Middle East, Ukraine, from climate change and tech-driven economic challenges, are all risk factors that feed the demand for Gold as a safe haven.    

Gold also has a complex relationship with the US Dollar (USD). Whilst a strong US Dollar is negative for Gold because it is priced in USD, it has also lifted demand from mainly Asian central banks as a hedge against their own currencies’ devaluation against the US Dollar. 

The BRICS trade confederation is also using Gold as a replacement for the US Dollar as the primary medium for 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 domestic currencies. 

“The rest of the world is trying to make sure they’re not as dependent on the US Dollar. For them, gold offers another opportunity to hold an asset that is still a pretty significant store of value,” said Joy Yang, Head of Index Product Management & Marketing at MarketVector Indexes, in a recent interview with Kitco News. 

Yang thinks these “global trends” will push Gold higher in the future – back up to  $2,400, although the kicker will be the Fed’s decision to finally begin cutting interest rates. 

Technical Analysis: Gold breaks above trendline, further invalidating H&S

Gold makes another breach of the downsloping trendline that connects the “Head” and “Right Shoulder” of the now invalidated bearish Head and Shoulders (H&S) pattern that formed on the precious metal during April, May and June.

XAU/USD Daily Chart

 

Although the breaches have invalidated the case for an orthodox H&S reversal pattern forming, it is still possible a more complex “multi-shouldered” topping pattern may have formed that might still prove bearish. Overall, the probabilities are lower, however. 

If the upside trendline break holds, Gold will likely rise to the $2,369 level (high of June 21). A break above that would be an even more bullish sign, with the next target at $2,388, the June 7 high. 

Alternatively, assuming the compromised topping pattern’s neckline at $2,279 is broken, a reversal lower may still follow, with a conservative target at $2,171 and a second target at $2,105 – the 0.618 ratio of the high of the pattern and the full ratio of the high of the pattern extrapolated lower. 

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. 

United States Personal Spending came in at 0.2%, below expectations (0.3%) in May

399092   June 28, 2024 20:46   FXStreet   Market News  

United States Personal Income (MoM) above forecasts (0.4%) in May: Actual (0.5%)

399091   June 28, 2024 20:45   FXStreet   Market News