Article by: ETO Markets
This week, the forex market has been particularly focused on the Federal Reserve's (Fed) interest rate decision. Although the Fed decided to maintain the current interest rate levels, the US dollar showed a somewhat weak performance globally, which provided support to major currency pairs like the EUR/USD. Additionally, Fed Chair Jerome Powell hinted that a rate cut in September might be considered if inflation continues to remain near target levels, further influencing market sentiment.
In Europe, the latest inflation data shows that inflation levels are still rising, adding more uncertainty to the upcoming policy meeting of the European Central Bank (ECB). Investors remain cautious about the ECB's potential interest rate adjustments at its next meeting, especially against the backdrop of a slight increase in inflation.
In Australia, the latest economic data indicates that, despite a trade surplus that exceeded expectations, the impact on the Australian dollar has been relatively limited. The market adopts a wait-and-see attitude towards potential adjustments in monetary policy by the Reserve Bank of Australia (RBA), particularly after the release of inflation and employment data, anticipating that the RBA may not raise rates further in the short term.
Global geopolitical risks, including tensions in the Middle East and uncertainties in US-China trade relations, continue to affect market sentiment, leading to a reduced appetite for risk assets. Under these combined factors, the demand for safe-haven assets remains stable.
During Friday's Asian session, gold prices rose to $2,450 per ounce. Concerns about the U.S. employment data, continued economic weakness, and escalating Middle Eastern geopolitical tensions have driven safe-haven demand for gold. Dovish remarks from the Federal Reserve also support the likelihood of gold reaching new highs. Technically, breaking above $… seems inevitable, with bullish sentiment potentially extending to the $… -$… range. Each price dip is seen as a buying opportunity, with the recent low around $… now acting as a support level. In the short term, sellers are struggling to regain control.
West Texas Intermediate (WTI) crude oil prices edged higher during the Asian session on Friday. Despite ongoing global concerns about oil demand, the escalating geopolitical tensions in the Middle East, which pose supply risks, may support oil prices. Weak Purchasing Managers' Index (PMI) data from the U.S. and China have heightened concerns about oil demand. The U.S. July ISM Manufacturing PMI fell to an eight-month low of …, down from … and below the expected …. Similarly, China’s July Caixin Manufacturing PMI came in at …, lower than the expected … and previous …. Last week’s low of $… per barrel will act as a support level for XTI/USD in the near term, while the July 5 high of $… will serve as a significant resistance.
