Article by: ETO Markets

This week, the Forex market has been mainly influenced by the Fed's policy expectations, the weak performance of the US employment data and global geopolitical risks. The dollar was weak in the early stages after the Bureau of Labor Statistics released revised employment data showing the U.S. economy added fewer jobs in the year to March than previously thought. The data raised concerns about a slowdown in the US Labour market and reinforced expectations that the Federal Reserve would cut interest rates in September.

As bets on the Fed's dovish policy intensified, the dollar fell under pressure, falling to a low for the year. That pushed up non-U.S. currencies such as the euro and sterling as well as safe-haven assets such as gold, which briefly breached the psychological $2,500 level. However, despite the pressure on the dollar, the market's expectation that the Fed may cut rates by 50 basis points in September is still increasing, and the probability is now 38%, and the expectation of 100 basis points for the full year is still high. The Fed's upcoming rate-cutting cycle has provided uncertainty, keeping traders on the sidelines about future market movements.

Moreover, geopolitical risks have intensified. Stalled ceasefire talks between Israel and Hamas and continuing tensions in the Middle East added to market jitters about the global situation. The Russia-Ukraine conflict is still unresolved, and global political uncertainty has further boosted demand for safe haven assets and dampened risk appetite in the market.

Gold prices (XAU/USD) are mainly driven by expectations of Fed rate cuts and geopolitical risks. The growing likelihood that the Federal Reserve will cut interest rates at its September meeting has reduced the attractiveness of the dollar and supported non-yielding gold. The Fed minutes showed a growing number of policymakers were in favour of a rate cut, particularly as US inflation eased. At the same time, adjustments to U.S. jobs data indicated weaker job growth than previously reported, raising the likelihood of future interest rate cuts by the Federal Reserve In addition, global geopolitical tensions, especially in the Middle East, remain unsettled, providing additional support for gold as a safe-haven asset. In particular, the conflict between Israel and Hamas has failed to reach a ceasefire, raising concerns about potential risks in the region. China's economic weakness is also supporting risk aversion to some extent.

From a technical point of view, the gold price is hovering above the psychological level of $…and continues to show a bullish pattern. Although gold prices briefly fell to near $…, this level has become an important support. If gold continues to hold above this support, it will likely re-challenge the resistance in the $…-… area and eventually test the all-time high of $…-…. A break above this all-time high could further fuel bullish momentum and extend the uptrend.

On the other hand, an effective break below the $… level could trigger a fresh technical sell-off down to the next support at the $…-… area and possibly even a further pullback to the round $… mark near the 50-day Simple Moving Average (SMA). As a result, bulls remain dominant in the short term, but the market needs to keep a close eye on the performance of key support and resistance levels.

Oil prices have rebounded sharply this week, pulling away from earlier lows around $72, largely on news that Saudi Arabia's oil export revenue fell to a three-year low. According to the report, Saudi Arabia's oil sales fell to $17.7 billion in June, a sign of weak global oil demand. With export revenues falling, Saudi Arabia is likely to push for joint action by OPEC members at the September meeting to stabilize and boost oil prices.

In addition, revisions to U.S. labor market data and Federal Reserve minutes suggesting a September rate cut have weakened the dollar, providing support to oil prices. A weak dollar makes dollar-denominated crude cheaper for holders of other currencies, boosting demand for crude.

Technically, oil is looking for support around $… and is expected to remain firm above the key support level of $… in the short term, if it breaks below this level, it may further test the psychological level of $…; On the upside, $… becomes the first significant resistance, and a break will further challenge the resistance of $… and the 100-day SMA at $…. Overall, oil prices are currently in a volatile correction stage, and if the dollar weakens or inventories continue to shrink, oil prices may gain further upward momentum.