Article by: ETO Markets
This week, influenced by the hawkish comments from Federal Reserve Governor Michelle Bowman, the US Dollar Index (a measure of the dollar's value against a basket of major currencies) continued its upward trend from the previous three weeks, reaching a high of 105.75. Despite the continuous hawkish remarks from Federal Reserve officials, the market still generally expects about two rate cuts this year, with a higher likelihood of a cut in September.
Economic data in the United States remains mixed. On Tuesday, the CB Consumer Confidence Index exceeded the expected 100, reaching 104.4. However, the government's report on new home sales recorded the largest decline since September 2022, plummeting 11.3% in May to 619K. Currently, dollar bulls seem unaffected by these data points.
Additionally, the Australian dollar continued to strengthen following the release of robust CPI data. Despite signs of economic weakness, the higher-than-expected inflation data has limited the likelihood of rate cuts by the Reserve Bank of Australia (RBA). Consequently, the Australian dollar has been able to maintain its upward momentum even as the US dollar strengthens.
In contrast, the Bank of Japan (BoJ) has been reluctant to provide detailed plans for reducing bond purchases. Coupled with the Federal Reserve's hawkish comments, this has led to the US dollar strengthening and USD/JPY reaching a 38-year high. Although Japanese officials, such as Vice Finance Minister Masato Kanda, have reiterated the possibility of market intervention to support the currency, their efforts appear to have little effect so far. The Federal Reserve's reluctance to cut rates and the potential bullish tone in global equity markets may further weaken the safe-haven Japanese yen (JPY).
After the release of U.S. economic data on Thursday, the price of gold rose by over 1%. The first-quarter Gross Domestic Product (GDP) data met expectations, and initial jobless claims for last week were slightly lower than expected. However, the U.S. Dollar Index (DXY), which measures the dollar against a basket of other currencies, slightly declined after hitting a new monthly high near 106, triggering a rebound in precious metals. As a result, the price of gold settled around $2326. The Personal Consumption Expenditures (PCE) Index will be the key factor in determining investors' direction.
The gold/USD price rebounded at the neckline but did not break through the previous upward trend line, currently hovering around the 20-day simple moving average at $... However, this neutral trend seems unlikely to last long. If the neckline is broken, a bearish trend in gold could begin, with sellers pushing the price down to $…, and then to the March high near $…. Conversely, if the gold price rises above the 50-day simple moving average, the downtrend will be negated, paving the way for a return to around $...
During Thursday's Asian session, West Texas Intermediate (WTI) crude oil prices edged slightly lower to around $80.8 per barrel. Unexpectedly increased US crude inventories raised concerns about weakening demand from the world's largest oil consumer, putting pressure on oil prices. EIA data for the week ending June 21st showed a significant increase in US crude oil inventories by 3.591 million barrels, far exceeding the expected decrease of 3.0 million barrels and reversing the previous week's decline of 2.547 million barrels.
The price of WTI/USD appears to have encountered resistance near the Fibonacci 0.618 level around $…, prompting a retreat. The latest supports are the 100-day simple moving average and Fibonacci 0.5 at $…, followed by $… The April high of $… remains a recent resistance level for crude oil's upward movement.
