XAUUSD – Gold Slips Near Multi-Week Low, US PMI Data Ahead
The Gold prices are moving lower after the US Domestic data came at lower than expected in the recent days and the US President Joe Biden sent cease Fire deal to Israel and Hamas on last day created cool down over War tensions in the Middle east.
XAUUSD is moving in the Box pattern and the market has fallen from the resistance area of the pattern
During the Asian session on Monday, the price of gold (XAU/USD) faces challenges in gaining significant momentum and hovers near a three-week low reached on Friday. This lackluster performance is attributed to a mix of conflicting factors influencing the market. On one hand, there’s a growing consensus that the Federal Reserve (Fed) might initiate interest rate cuts later in the year, supported by indications of easing inflationary pressures in the United States (US), which continues to weaken the US Dollar (USD). This dynamic, coupled with ongoing geopolitical tensions, serves as key factors providing some support to the safe-haven precious metal.
However, the potential upside for gold remains limited amid an overall positive risk sentiment and optimism regarding a potential cease-fire in Gaza. Traders are also exercising caution and opting to await the release of significant US macroeconomic data scheduled for the beginning of the week, including the Nonfarm Payrolls (NFP) report due on Friday. Additionally, attention is drawn towards upcoming central bank events such as the Bank of Canada (BoC) decision on Wednesday and the European Central Bank (ECB) meeting on Thursday, both of which could impact the non-yielding yellow metal.
The latest US inflation report, which met expectations, reinforces the anticipation of a Fed rate cut this year, further pressuring the US Dollar and providing a tailwind for gold. The US Bureau of Economic Analysis (BEA) reported that the Personal Consumption Expenditures (PCE) Price Index rose by 0.3% in April, maintaining a steady 2.7% increase on a yearly basis, in line with consensus estimates. The Core PCE Price Index, excluding volatile food and energy prices, also matched expectations, rising by 2.8% annually. Moreover, Personal Income and Personal Spending both grew by 0.3% and 0.2% respectively.
These data points heighten expectations for an imminent Fed rate cut, leading to a further decline in US Treasury bond yields and keeping USD bulls on the defensive while bolstering support for gold. Furthermore, ongoing tensions in the Middle East act as another factor preventing a significant decline in the safe-haven XAU/USD, although the generally positive tone in equity markets serves to cap the potential upside.
The recent increase in China’s Caixin S&P Global Manufacturing Purchasing Managers’ Index (PMI) from 51.4 to 51.7 in May suggests stabilization in the world’s second-largest economy, boosting investor confidence. Additionally, optimism surrounding a new ceasefire plan for Gaza, announced by US President Joe Biden, tempers traders’ inclination to place aggressive bullish bets on the commodity.
Market participants are now eagerly awaiting the release of final global Manufacturing PMI prints for short-term trading opportunities ahead of the US ISM Manufacturing PMI later in the day. Furthermore, investors brace themselves for significant US macro releases throughout the week, including the NFP report and the aforementioned central bank events, which are poised to influence market sentiment and gold prices.
EURUSD – Euro Up on US Data Watch
The Euro pairs are losing against counter pairs after the ECB is planning to do rate cuts in this week. There is a possible 2-3 rate cuts from the ECB this year dragged Euro currency against counter pairs.
EURUSD is moving in an Ascending channel and the market has rebounded from the higher low area of the channel
Euro Gains Ground Before US Data, ECB Decision Looms
The Euro (EUR) is edging higher against the US Dollar (USD) on Monday, trading above 1.0850. This follows two key data points:
Cooler US Inflation: US PCE inflation came in as expected, providing some relief from inflation concerns and potentially paving the way for a more dovish Federal Reserve.
Stronger Eurozone Inflation: Eurozone HICP inflation was better than expected, indicating inflation pressures remain elevated.
Focus Shifts to US PMI and ECB Rate Decision
All eyes are now on the upcoming US ISM Manufacturing PMI for May, which could influence the Fed’s future policy stance.
Investors are also closely watching the European Central Bank (ECB) interest rate decision scheduled for Wednesday.
ECB Rate Cut in Doubt Despite Hotter Eurozone Inflation
While Eurozone inflation is higher than expected, it might not completely derail the ECB’s plan for a rate cut this week.
However, the ECB could signal a slower pace of rate reductions in the coming months due to the higher inflation figures.
Markets are currently expecting a 25 basis point cut in June, with further cuts priced in for later in 2024.
Lagarde’s Press Conference Key for Euro Direction
Statements from ECB President Christine Lagarde during her press conference will be critically watched for clues about the pace of future rate cuts.
Any dovish signals from the ECB could weaken the Euro and weigh on the EUR/USD pair.
Overall, the Euro is gaining some momentum ahead of key data releases and the ECB decision. The outcome of these events will determine the near-term direction of the EUR/USD pair.
USDJPY – BoJ’s Kato: No Immediate Plans to Unload ETF Holdings
The BoJ Executive Director Takashi Kato said there is no plan of Divestment of ETF Holdings from BoJ at currently now. It takes time to consider the unload the ETF Holdings in the BoJ.
USDJPY is moving in an Ascending channel and the market has rebounded from the higher low area of the channel
On Monday, Bank of Japan (BoJ) Executive Director Takashi Kato made a statement indicating that the BoJ currently has no intention of promptly divesting its holdings of exchange-traded funds (ETFs). Kato emphasized the importance of taking time to thoroughly assess the strategies for potential divestment of the BoJ’s ETF holdings in the future. He stated, “I hope to dedicate time to carefully consider the approach to unloading the BoJ’s ETF holdings in the coming period.”
USDCAD – Trades Lower, Eyes on Canadian/US PMI Data
The Canadian Q1 GDP Data came at 1.7% last week and weaker than expected 2.2% QoQ. The BoC meeting is scheduled this week and expected to rate cut of 25Bps due to weaker than expected reading in all sides of the economy.
USDCAD is moving in an Ascending channel and the market has reached from the higher low area of the channel
During the early European session on Monday, the USD/CAD pair is trading with a slight bearish inclination around the 1.3625 mark. This downward movement in the pair is underpinned by the weakened US Dollar (USD) following the release of the US Personal Consumption Expenditures (PCE) Price Index. Investors are closely monitoring the upcoming Canadian S&P Global Manufacturing PMI and US ISM Manufacturing PMI data for May, slated for release later in the day, for further market direction.
The US inflation rate remained stable in April, fostering expectations that the Federal Reserve (Fed) may implement interest rate cuts later in the year, consequently exerting downward pressure on the Greenback. According to data from the Commerce Department released on Friday, the US PCE saw a 0.3% month-over-month (MoM) increase in April, matching the previously unrevised gain in March. Meanwhile, the Core PCE, which excludes volatile food and energy prices, rose by 0.2% MoM in April, compared to a 0.3% increase in March. On an annual basis, the core PCE price index has climbed 2.8% for the third consecutive month. The market is now pricing in approximately a 53% probability of a Fed rate cut in September, up from 49% prior to the release of the inflation report.
On the Canadian front, weaker-than-expected Gross Domestic Product (GDP) data for the first quarter prompted the Bank of Canada (BoC) to enact its first interest rate cut of the year on Wednesday. The Canadian economy expanded at an annualized rate of 1.7%, falling short of the estimated 2.2% expansion as well as the central bank’s forecast of 2.8%. Apart from the disappointing GDP figures weighing on the Canadian Dollar (CAD), the currency is also pressured by the decline in crude oil prices, given Canada’s status as the largest oil exporter to the United States.
USDCHF – Dips Below 0.9050, US PMI Data in Focus
The Swiss retail sales came at 2.7% YoY in the April month from -0.20% printed in the March month. The Swiss national bank said inflation will be higher in the coming months So rate cuts is not possible in the next meeting. This consecutive positive reading shows Swiss Franc strengthened against counter pairs.
USDCHF is moving in the Descending triangle pattern and the market has reached the support area of the pattern
During the early European trading hours on Monday, the USD/CHF pair continues its downward trajectory, hovering around the 0.9020 level. This decline is attributed to a weaker US dollar (USD) following the release of the US Personal Consumption Expenditures (PCE) Price Index inflation data. The upcoming highlight in Switzerland is the release of the Consumer Price Index for May, scheduled for Tuesday, preceding the eagerly anticipated US employment data.
Uncertainties surrounding the timing of potential interest rate cuts by the US Federal Reserve (Fed) weigh on the US dollar (USD) in the aftermath of the recent PCE report, which indicated that US inflation remained stable in April. According to data released by the Commerce Department on Friday, the headline US PCE saw a 0.3% month-over-month (MoM) increase in April, matching the previously unrevised gain observed in March.
Furthermore, the Core PCE, considered the Fed’s preferred inflation gauge, rose by 0.2% MoM in April, a slight decrease from the 0.3% gain recorded in March. On an annual basis, the core PCE price index maintained a 2.8% increase, in line with expectations. Investors have priced in approximately a 53% probability of a Fed rate cut in September, up from 49% prior to the release of the inflation report. The upcoming release of the US ISM Manufacturing PMI for May, expected to improve to 49.8 from 49.2 in April, will be closely monitored by traders for potential market movements. A stronger-than-expected outcome could dampen expectations of a Fed rate cut this year and limit the downside for the Greenback.
On Friday, Swiss Real Retail Sales data showed an improvement, with a year-on-year (YoY) increase of 2.7% in April, rebounding from a decline of 0.2% in March. This better-than-expected figure provided support to the Swiss Franc (CHF) against its counterparts. Additionally, investors will closely monitor developments surrounding geopolitical tensions in the Middle East. According to the BBC, Israeli Prime Minister Benjamin Netanyahu’s administration reluctantly agreed to President Biden’s proposal for a Gaza cease-fire on Sunday. Any indications of escalating concerns could further boost safe-haven currencies like the CHF.
USD INDEX – Israel Accepts Biden’s Gaza Ceasefire Proposal, Needs More Work: Netanyahu Aide
The US President Joe Biden presented Ceasefire Deal between Israel and Hamas on Friday, Israel accepted the deal not with Full involvement, Israel PM Netanyahu said Full destroying of Hamas only we live freedom in the Israel, partial ceasefire deal will be accepted not with permanent deal. Hamas said Full evacuation of Israel forces from Gaza is Good for Palestinian people and our sovereignty, Hamas welcomed the deal from the US Side. Three phases of Deal is proposed from US Side to Israel and Hamas.
USD INDEX is moving in an Ascending channel and the market has rebounded from the higher low area of the channel
First small number of hostages released from Both sides, Second there is no arrest of any hostages after this deal, Third surrender the dead of Hostages between two sides. Six week phase deal is constructed and 4.5 pages deal is sent to Israel PM and Hamas.
Israel has accepted U.S. President Joe Biden’s proposal for a Gaza ceasefire but believes the framework deal needs significant revisions, according to an aide to Israeli Prime Minister Benjamin Netanyahu.
In an interview with Britain’s Sunday Times, Ophir Falk, Netanyahu’s chief foreign policy advisor, stated that while Israel agreed to the deal, it is not satisfied with its current terms but is eager to see all hostages released.
“There are many details to be addressed,” said Falk, emphasizing that Israel’s conditions, including the release of hostages and the dismantling of Hamas as a genocidal terrorist organization, remain unchanged.
Biden outlined a three-phase deal on Friday, asserting that Hamas is now incapable of launching another attack on Israel. The initial phase involves a truce and the release of some hostages, particularly women, the injured, and the elderly. The second phase proposes a permanent cessation of hostilities in exchange for all remaining living hostages, while the third phase includes returning the remains of dead hostages to Israel.
Biden has introduced several similar ceasefire proposals over the past months, all of which have failed, primarily due to Israel’s insistence on only considering temporary pauses in fighting until Hamas is eliminated.
Hamas has indicated willingness to consider the Biden initiative, with senior official Sami Abu Zuhri stating that Hamas cannot be sidelined by either Netanyahu or Biden. Another Hamas official, Osama Hamdan, noted that while Biden’s speech contained positive elements, Hamas seeks a comprehensive agreement that meets their demands, including an end to the Gaza offensive, withdrawal of Israeli forces, free movement for Palestinians, and reconstruction aid.
Israeli officials have rejected these demands, viewing them as a return to the pre-war status quo. The conflict, initiated by a Hamas attack on October 7, has resulted in significant casualties: over 1,200 Israelis killed and more than 250 taken hostage, according to Israeli reports, and over 36,000 Palestinians killed in the subsequent Israeli offensive, according to Gaza medical officials. Israel reports 290 of its troops have died in the fighting.
GBPUSD – GBP Stalls Before US PMI
The Inflation in the services area standing at 5.8%, inflation in headline stands at 2.2%. BoE have the plan to do rate cut in the August month due to inflation readings are near to 2% target. The GBP pairs are weakness in the market due to rate cut fears and Election driven market in this month.
GBPUSD is moving in the Symmetrical triangle pattern and the market has fallen from the top area of the pattern
Sterling Stalls on US Data Watch, Fed Cut Hopes Rise
Focus on US Manufacturing PMI
Investors await the ISM Manufacturing PMI for May, expected to show slight improvement but remain below expansionary territory.
Sub-components like New Orders and Price Paid indexes will be closely watched for inflation clues.
US Services PMI and Nonfarm Payrolls data later this week are also on investor radar.
Uncertainty Over Fed Policy Lingers
The US Dollar is directionless as investors weigh mixed US inflation and spending data.
While core PCE inflation remains elevated, weaker-than-expected personal spending data raises concerns about household finances.
Increased probability of a Fed rate cut in September (now at 52%) is boosting GBP slightly.
BoE Rate Cut Timing Unclear
UK inflation has cooled down, but slow service sector disinflation keeps the Bank of England cautious.
Higher wage growth is fueling UK service sector inflation, exceeding the desired 2% target.
Public inflation expectations have fallen to the lowest level since July 2021, easing pressure on the BoE.
Overall, GBP is in a holding pattern as investors await clarity on the Fed’s monetary policy path. Signs of a potential Fed rate cut this year are providing some support for the Pound.
AUDUSD – Aussie dips on risk, eyes US PMI
The Australian Wage price index soared to 3.75% and inflation is increased to 3.6% in the April month. So RBA did not expected to do rate cuts in the near term, But rate hike is possible inorder to control the inflation reading.
AUDUSD is moving in the Descending channel and the market has reached the lower high area of the channel
The Australian Dollar: Caught in a Tug-of-War Between Domestic Strength and Global Uncertainty
The Australian Dollar (AUD) is currently experiencing a period of volatility, caught in a tug-of-war between positive domestic developments and cautious global sentiment. This is evident in the recent price movements of the AUD, particularly against the US Dollar (USD).
Early Tailwinds: Minimum Wage Hike and Easing US Inflation
The AUD initially received support in early Asian trading hours. This can be attributed to two key factors:
Minimum Wage Increase: The Australian government announced a 3.75% increase in the minimum wage, aligning with market expectations. This injection of cash into the Australian economy could potentially boost domestic consumption and economic activity, ultimately strengthening the AUD.
Eased US Inflation Concerns: Data released on the US Personal Consumption Expenditure (PCE), the Federal Reserve’s preferred inflation gauge, showed a slight moderation in price pressures for April. This potentially signals that the Fed may not need to raise interest rates as aggressively, easing pressure on the global economy and providing some support to the AUD.
Domestic Inflation and China Woes: A Double-Edged Sword
However, the AUD’s upward momentum was countered by two other factors:
Rising Domestic Inflation: Australia’s monthly inflation rate accelerated to 3.6%, exceeding the Reserve Bank of Australia’s (RBA) target range of 1%-3%. This raises the possibility of the RBA tightening monetary policy through interest rate hikes, which could dampen economic activity and potentially weaken the AUD.
China’s Mixed Manufacturing PMI Reports: While the Caixin Manufacturing Purchasing Managers Index (PMI) in China, a crucial trading partner for Australia, posted a higher-than-expected reading for May, indicating expansion in factory activity, the official NBS PMI data came in lower than expected, suggesting a contraction in the manufacturing sector. This conflicting data raises concerns about the health of the Chinese economy, which could impact Australia’s export demand for commodities and exert downward pressure on the AUD.
The US Dollar: Finding Strength in Risk Aversion and Upcoming Data
Meanwhile, the US Dollar is edging higher, driven by a renewed sense of risk aversion amongst investors. This is reflected in rising US Treasury yields, which tend to attract investors seeking safe havens during periods of uncertainty. Additionally, upcoming key US economic data releases, particularly the ISM Manufacturing PMI on Monday and Nonfarm Payrolls report on Friday, are keeping investors on edge. Positive data on these fronts could further strengthen the USD as it could signal a robust US economy.
Looking Ahead: A Balancing Act for the AUD
In the coming days, the AUD’s fate will likely be determined by how these competing forces play out. Positive domestic developments, coupled with a dovish Federal Reserve, could provide support for the AUD. However, any signs of escalating inflation in Australia or a significant slowdown in the Chinese economy could lead to further depreciation. The upcoming ISM Manufacturing PMI will be closely watched as it could provide clues about the health of the US economy and the future trajectory of US monetary policy.
NZDUSD – Stalls Before US PMI
The China Caixin Manufacturing index came at 51.7 in the April month versus 51.5 is expected and 51.4 is printed in the March month. The China data is welcomed one for NZ Dollar against counter pairs.
NZDUSD is moving in the Box pattern and the market has fallen from the resistance area of the pattern
NZD/USD Waits on US Data Amidst Mixed Signals
The New Zealand Dollar (NZD) is trading in a narrow range near 0.6150 against the US Dollar (USD) on Monday, reflecting investor caution ahead of a data-heavy week in the US.
Risk Appetite Returns, But Uncertainty Lingers
Global risk appetite has improved, evidenced by strong gains in S&P 500 futures.
The US Dollar Index (DXY) remains subdued despite ongoing concerns about the Federal Reserve’s monetary policy path.
US Treasury yields have dipped, reflecting some doubt about the Fed raising rates as aggressively as previously anticipated.
China’s Upbeat Manufacturing PMI Boosts NZD
Positive manufacturing data from China, a key trading partner for New Zealand, is bolstering the NZD.
The Caixin PMI for May came in stronger than expected, suggesting expansion in China’s factory activity.
This points to a potentially brighter outlook for the global economy, which benefits the NZD.
US PCE Data Casts Doubt on Fed Rate Cuts
Recent US inflation data, specifically the core PCE index, remains elevated, dampening hopes for an immediate shift in the Fed’s stance.
While there are signs of inflation cooling on a monthly basis, it’s not enough to convince investors of a significant policy change by the Fed.
Focus Shifts to US ISM Manufacturing PMI
Market attention now turns to the US ISM Manufacturing PMI for May, a crucial indicator of economic health.
A reading above 50 indicates expansion, while below signifies contraction.
The PMI is expected to show slight improvement compared to the previous month, but a figure below 50 could still weigh on the NZD.
Overall, the NZD is in a wait-and-see mode, with investors cautious ahead of key US data releases. The outcome of the ISM PMI will be critical in shaping the near-term direction of the NZD/USD pair.
CRUDE OIL – WTI Above $77 as OPEC+ Extends Output Cuts to 2025
The OPEC+ meeting agreed to extend the output cuts of 3.66 Million Barrels perday to April 2025 and Quarter end September, Oil Output cut is 2.2Million Barrels per day. The US President Joe Biden sent cease Fire Deal agreement letter to both Israel and Hamas, Both leaders agreed to the letter for ceasefire today.
XTIUSD Crude oil price is moving in the Descending channel and the market has fallen from the lower high area of the channel
West Texas Intermediate (WTI) crude oil prices grapple with halting a three-day losing streak, hovering around $77.10 per barrel during Monday’s Asian trading hours. According to a report by Reuters on Sunday, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, collectively known as OPEC+, have reached an agreement to extend their oil output cuts into 2025. This decision aims to bolster prices amidst sluggish demand growth in the oil market. OPEC+ has opted to prolong the existing cuts of 3.66 million barrels per day (bpd) until the conclusion of 2025 and extend the cuts of 2.2 million bpd for an additional three months until September 2024.
Meanwhile, recent US Personal Consumption Expenditure (PCE) data for April indicated a moderation in price pressures. Despite this, the Federal Reserve (Fed) refrained from implementing a rate cut, suggesting a preference for additional time to achieve its inflation targets. The prospect of higher interest rates has cast a shadow on the economic outlook of the United States (US), thereby dampening demand for liquid gold.
In discussions last week, Federal Reserve (Fed) officials hinted at the likelihood of maintaining a restrictive monetary policy stance for an extended duration to attain the targeted 2% inflation rate. Atlanta Fed President Raphael Bostic emphasized in an interview with Fox Business that the decline in the inflation outlook is anticipated to be gradual, underscoring the necessity for the Fed to uphold its restrictive stance. Furthermore, New York Fed President John Williams expressed confidence in the current Fed policy’s ability to gradually steer price growth back to the desired target, despite persisting inflationary pressures.
In a separate development, Israeli Prime Minister Benjamin Netanyahu’s administration reluctantly accepted US President Joe Biden’s proposal for a cease-fire in Gaza on Sunday. This decision follows ongoing attacks in Rafah, subsequent to intense Israeli airstrikes over the weekend, as reported by the BBC. Investors are keenly monitoring these geopolitical tensions, as any indications of escalating risks could potentially lead to an uptick in crude oil prices.
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