AUD/USD looks to test the pre-pandemic low (as resistance) at 0.6680 as the pair holds up. The bullish momentum has appeared to slow down as price action has now made a series of slightly lower highs. In fact, price action has consolidated around 0.6680 and 0.6644.

For a fresh bullish move to be considered, prices would need to take out the swing high at 0.6714 and test the 0.6730 region that kept prices at bay momentarily in December and then again in January this year. 0.6644 could also serve as a tripwire for a pullback. In the event prices head lower from here, the blue 50 day simple moving average becomes dynamic support, followed by the April 2020 level of 0.6580 – which has provided a floor for prices since early May.

pandemic

AUD/USD HOLDS AROUND ELEVATED LEVELS BUT STRUGGLES TO PRINT NEW HIGH

The EUR/USD appears to have stabilized above the 1.0700 mark for the time being. Markets tend to get nervous when political uncertainty arises, but polls have consistently pointed to the same outcome – a fractured parliament, with Marine Le Pen’s party likely receiving the majority of the vote but falling short of achieving a parliamentary majority.

Despite recent consolidation, EUR/USD remains below the 200 SMA, with the lower bound of the pair’s broad range at 1.0643 and the April swing low at a flat 1.0600. Key events on the calendar include US GDP data and PCE on Friday, with PCE carrying significantly more weight as it could validate the recent encouraging CPI data in the US, which could be bearish for the dollar.

EUR/USD: A Softer Dollar May Limit Downside Risks for Now

Recent data from retail traders indicates a strong bullish sentiment towards gold, with 63.96% of traders holding net-long positions. The long-to-short ratio stands at 1.77 to 1, showing a clear preference for long positions. However, this dominant bullish sentiment could paradoxically signal potential downward pressure on gold prices.

Compared to yesterday, the number of net-long traders has increased by 2.36%, while net-short positions have decreased slightly by 0.47%. The weekly trend is even more pronounced, with net-long positions up by 11.72% and net-short positions down by 18.12%.

Based on our contrarian approach to market sentiment, this data suggests that gold prices may continue to decline. The combination of current positioning and recent shifts supports our bearish outlook on gold.

GOLD (XAU/USD) LATEST:

The yen continues its steady decline, reaching levels last seen before April's FX intervention. USD/JPY appears set to approach 160 as the yen weakens further. Although bond yields haven't favored the yen, recent increases have pushed the 10-year Japanese government bond yield back towards 1%.

While the US dollar, as measured by the US dollar basket, has fluctuated, USD/JPY has shown a consistent upward trend. The possibility of intervention has resurfaced following reports from Fiji that Japan's top currency official mentioned there's no limit to reserves in currency intervention and emphasized ongoing monitoring of the situation.

Yen Decline Continues Amidst Rising USD/JPY and Bond Yields

According to the latest IG retail trader data, 54.49% of traders hold a net-long position, with the ratio of long to short traders at 1.20 to 1. The number of net-long traders has decreased by 0.84% compared to the previous day but has increased by 34.83% compared to last week. On the other hand, the number of net-short traders has increased by 7.36% from yesterday but has decreased by 4.00% from last week.

Our approach typically contrasts with crowd sentiment, and the fact that traders are net-long suggests that EUR/USD prices may continue to fall. However, the current positioning is less net-long than yesterday but more net-long compared to last week. This combination of current sentiment and recent changes presents a mixed trading bias for the EUR/USD pair.

EUR/USD – MIXED OUTLOOK

Gold prices have experienced a modest increase since the non-farm payroll (NFP) low at the beginning of the month, but the overall downtrend remains unbroken. Following the all-time high of $2,450, prices have been trending downward in a choppy manner, characterized by lower lows and lower highs, culminating in the recent low on Friday, June 7th (NFP).

Since then, there has been a slight recovery, with prices rising above $2,320, but the momentum is weak, as evidenced by the narrowing pattern. If the blue 50-day moving average (DMA) holds as resistance, gold may continue to follow the medium-term downtrend and move lower.

Currently, gold drivers are lacking. There have been no significant escalations in conflicts in eastern Europe or the Middle East, and US economic data has not created a favorable environment for rate cuts. On the downside, gold bears will be watching the swing low at $2,287, which could trigger a more substantial decline if breached.

Gold Prices Show Little Movement as Short and Medium-Term Trends Clash

Retail trader data indicates that 25.87% of traders are currently holding long positions, with a short-to-long ratio of 2.87 to 1. The number of traders holding long positions is 11.66% higher than yesterday and 4.94% higher than last week, while the number of traders holding short positions is 5.87% higher than yesterday and 2.52% higher than last week.

Our approach usually contrasts with crowd sentiment, and the fact that traders are net-short suggests that USD/JPY prices might continue to rise. However, traders are less net-short compared to yesterday and last week. Recent shifts in sentiment indicate that the current trend in USD/JPY prices may soon reverse lower despite traders maintaining net-short positions.

USD/JPY TESTING MULTI-WEEK HIGHS

The Euro dollar experienced a turbulent week, initially rising due to encouraging US CPI data. However, upward revisions to both the Fed funds rate and inflation outlook propelled the US dollar higher heading into the weekend.

This volatility is driven by two main forces: a stronger US dollar following recent Fed forecast revisions and a vulnerable euro amid political uncertainty in France. This has resulted in a flight to safety within the European bond market, led by German Bunds, which has inflated the risk premium across Europe and historically led to a weaker euro.

This week, we are watching the 1.0700 level for a potential pause in the recent sell-off. Neither the euro nor the dollar has significant data releases scheduled for the week, potentially providing a reprieve for the EUR/USD. However, the RSI has not yet reached oversold conditions, which bears will note. The pair's movement will likely be influenced by political developments and the bond market this week.

EUR/USD REFLECTS THE INFLUENCE OF A STRONGER USD AND A WEAKER EURO

Yen depreciation and undesirable volatility have been persistent concerns for Japanese officials, but the latest US CPI data has provided some respite. The Bank of Japan (BoJ) is scheduled to meet early Friday morning, with expectations of a shift towards easing aggressive bond-buying policies. This would allow Japanese Government bond yields to rise freely above 1%, marking a step towards normalization without destabilizing markets.

Japan's economy faces significant challenges, complicating a more rapid rate-hiking cycle. There are ongoing doubts about the sustainability of inflation above 2% over the medium term, and officials have emphasized the need for wage pressures to persist beyond annual negotiations. A commitment to slowing bond purchases could support the yen, though market perception of BoJ's actions will be crucial in determining the yen's response.

USD/JPY is trending lower, with the 50-day simple moving average (SMA) and the psychological level of 155.00 in focus. Key resistance is at 157.70.

USD/JPY Pulls Back Ahead of the BOJ Meeting

European indices continue to feel the impact of last weekend's European Elections, where right-wing parties outperformed expectations. Following a significant defeat, French President Emmanuel Macron has called for a parliamentary election at the end of the month. Meanwhile, the Belgian Prime Minister has resigned, and German Chancellor Olaf Scholz’s center-left Social Democrats polled just 14%, marking their worst-ever result in a nationwide vote. European indices dropped on Monday, eventually recovering towards the session's end, but renewed selling pressure today has driven some indices to multi-week lows.

Gold is recovering some of its losses from Friday's post-NFP decline, nearing a significant support level around $2,280/oz. The precious metal remains below the 20-day and 50-day simple moving averages, at $2,355/oz. and $2,343/oz., respectively. To initiate a higher move, gold will need to break and open above these indicators.

Market Update – Risk Sentiment Slips, Gold Better Bid as US CPI and FOMC Near

Gold is attempting to push higher today, but the move lacks conviction. The recent trading range of $170/oz. ($2,280/oz. - $2,450/oz.) remains intact, and resistance is unlikely to be challenged in the near term. If support is breached, we could see a drop to $2,200/oz., with $2,193/oz. as the next target.

Retail trader data indicates that 69.35% of traders are net-long, with a long-to-short ratio of 2.26 to 1. The number of net-long traders is 4.98% higher than yesterday and 15.34% higher than last week, while the number of net-short traders is 3.94% higher than yesterday and 17.95% lower than last week.

We typically adopt a contrarian view to crowd sentiment, and the fact that traders are net-long suggests that gold prices may continue to fall. With traders more net-long than both yesterday and last week, the combination of current sentiment and recent changes gives us a stronger bearish contrarian bias on gold prices.

Gold Prices Struggle to Gain Momentum

GBP/USD is expected to record its fourth consecutive weekly gain, marking the longest streak since last March. The British pound is likely to rise 0.4% this week, nearing its highest level since March, after peaking at $1.28 earlier this week. However, this increase is largely due to a weaker dollar rather than a stronger pound.

The British pound is also close to its highest level against the euro since October 2023, primarily because investors do not expect the Bank of England to cut interest rates until later this year. Despite a significant slowdown in overall inflation, some indicators like wage growth and price pressures in the services sector remain above the Bank of England's "safe zone." This suggests that the UK is unlikely to cut interest rates twice this year.

Next week's UK employment and growth data will be crucial, as it may provide investors with guidance on what to expect from the Bank of England in the coming weeks.

Johan Sui

Johan Sui

Jun 27 2024

AUD/USD HOLDS AROUND ELEVATED LEVELS BUT STRUGGLES TO PRINT NEW HIGH

1

Johan Sui

Jun 25 2024

EUR/USD: A Softer Dollar May Limit Downside Risks for Now

1

Johan Sui

Jun 24 2024

GOLD (XAU/USD) LATEST:

1

Johan Sui

Jun 21 2024

Yen Decline Continues Amidst Rising USD/JPY and Bond Yields

1

Johan Sui

Jun 20 2024

EUR/USD – MIXED OUTLOOK

1

Johan Sui

Jun 19 2024

Gold Prices Show Little Movement as Short and Medium-Term Trends Clash

1

Johan Sui

Jun 18 2024

USD/JPY TESTING MULTI-WEEK HIGHS

1

Johan Sui

Jun 17 2024

EUR/USD REFLECTS THE INFLUENCE OF A STRONGER USD AND A WEAKER EURO

1

Johan Sui

Jun 13 2024

USD/JPY Pulls Back Ahead of the BOJ Meeting

1

Johan Sui

Jun 12 2024

Market Update – Risk Sentiment Slips, Gold Better Bid as US CPI and FOMC Near

1

Johan Sui

Jun 11 2024

Gold Prices Struggle to Gain Momentum

1

Johan Sui

Jun 07 2024

News for June 7: GBP/USD Set to Register Fourth Consecutive Weekly Gain

1