GBP/USD Price Analysis – June 18, 2024
Daily Price Outlook
The GBP/USD pair is currently trading at $1.26825, exhibiting bearish momentum as observed on the 4-hour chart. Despite the broader market sentiment showing some recovery at the beginning of the week, investors remain cautiously optimistic, eyeing a potential Federal Reserve rate cut in September as U.S. economic indicators begin to show signs of softening.
Anticipation for U.S. Economic Indicators
This week's focal point will be the release of U.S. Retail Sales data on Tuesday. Analysts expect a modest uptick in May's figures, with Retail Sales projected to rise by 0.2% month-over-month, recovering from a previous flat growth rate.
Similarly, Core Retail Sales are anticipated to remain steady at 0.2%. Additionally, the Purchasing Managers Index (PMI) figures, due for release on Friday, are predicted to show a slight decrease, reflecting a potential slowdown in manufacturing sector expansion.
Federal Reserve's Prudent Approach
Federal Reserve officials have been cautiously articulating their views throughout the week, underscoring that despite the faster cooling of recent inflation figures, the decision to cut rates prematurely remains unwarranted.
They stress the importance of additional economic data to support any rate adjustments, suggesting a very measured approach to future monetary policy.
UK Economic Outlook and Monetary Policy
On the UK front, Consumer Price Index (CPI) inflation data is expected on Wednesday, with predictions pointing to a slight increase to 0.4% month-over-month for May, up from April's 0.3%. Concurrently, the Bank of England (BoE) is poised to decide on interest rates, with the consensus leaning towards maintaining the current rate of 5.25%.
The Monetary Policy Committee (MPC) is projected to maintain a seven-to-two vote favoring unchanged rates, mirroring their previous stance.
GBP/USD - Technical Analysis
GBP/USD is currently trading at $1.26825, showing bearish momentum on the 4-hour chart. The pivot point at $1.27100 is a crucial level for determining the next move. Immediate resistance is seen at $1.27457, with subsequent resistance levels at $1.27645 and $1.28075. To confirm a bullish reversal, these resistance levels need to be breached. On the downside, immediate support is found at $1.26572, with further support levels at $1.26445 and $1.26132. The Relative Strength Index (RSI) is at 39.68, indicating bearish sentiment but not yet in oversold territory.
The 50-day Exponential Moving Average (EMA) at $1.27412 is currently acting as a resistance level. The price needs to break above this EMA to signal a potential shift to bullish momentum. The current price action suggests that a break above the immediate resistance could signal a bullish move, while a drop below the pivot point of $1.27100 may lead to further downside pressure. Monitoring these key levels and EMA crossovers will be essential for short-term trading strategies.
The 200-day EMA at $1.27412 also serves as a significant resistance point that the price needs to surpass to confirm a stronger bullish trend. Considering the current technical outlook, a sell position below $1.27100 is advisable with a take profit target at $1.26445 and a stop loss at $1.27457.
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GOLD Price Analysis – June 17, 2024
Daily Price Outlook
Gold prices surged on Friday, reaching $2,333 per ounce, as easing US inflation fueled hopes of Federal Reserve rate cuts later this year. This positive sentiment, coupled with risk aversion stemming from European political uncertainty, boosted the appeal of the safe-haven asset.
US Economic Data and Fed Outlook:
US consumer sentiment declined in June, but inflation expectations remain above the Fed's 2% target. Despite this, markets are pricing in 39 basis points of easing by December, suggesting that the Fed may cut rates more than once.
Dollar Index and Geopolitical Factors:
The US Dollar Index (DXY) rose to 105.53, capping gold's gains. However, geopolitical factors, such as China's pause on its bullion buying spree, could impact gold's future trajectory.
Upcoming Events:
Investors will closely watch upcoming G7 meetings and the Empire State Manufacturing Index on Monday for further clues on the economic outlook and potential impact on gold prices.
GOLD (XAU/USD) - Technical Analysis
Gold prices have rebounded from recent lows, surging above the $2,330 mark on Monday. The 4-hour chart reveals a bullish momentum, with the precious metal trading above its pivot point at $2,342.00.
The Relative Strength Index (RSI) reading of 56 indicates a strengthening positive sentiment in the market. Moreover, the 50-day Exponential Moving Average (EMA) provides near-term support at $2,326.93, further bolstering the bullish outlook.
Traders should watch key resistance levels at $2,342.55, $2,357.84, and $2,370.11. A decisive break above these levels could trigger further buying interest and propel gold towards higher targets.
However, should the upward momentum wane, immediate support lies at $2,308.16, followed by $2,295.93 and $2,287.04. A break below these levels might signal a temporary setback for the bullish trend.
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EUR/USD Price Analysis – June 17, 2024
Daily Price Outlook
The EUR/USD pair slipped to 1.0670 on Friday before recovering to 1.0700, as political tensions in Europe and disappointing US economic data fueled uncertainty. The recent shift towards right-wing parties in European elections, coupled with a snap election in France, has raised concerns about the region's stability and weighed on the euro.
US Economic Data Disappoints:
In the US, the University of Michigan's Consumer Sentiment Index fell to a six-month low of 65.6 in June, missing expectations of 72.0. Additionally, 5-year inflation expectations rose to 3.1%, indicating persistent price pressures and raising doubts about the Federal Reserve's ability to tame inflation.
Diverging Fed and Market Expectations:
The Fed's latest Summary of Economic Projections (SEP) revealed a more hawkish stance than the market anticipated, with only one rate cut projected for 2024. However, rate markets continue to price in a September rate cut, highlighting a disconnect between the Fed's outlook and market sentiment.
Upcoming Events:
Investors will closely monitor the upcoming G7 meetings and the release of the Empire State Manufacturing Index on Monday for further insights into the global economic landscape and its potential impact on the EUR/USD pair.
EUR/USD - Technical Analysis
The EUR/USD pair is struggling to maintain upward momentum, trading slightly below the 1.07 mark. The 4-hour chart reveals the pair is hovering just beneath its pivot point at $1.0726, signaling potential bearish pressure.
The 50-day Exponential Moving Average (EMA) at $1.0802 further reinforces this bearish outlook, acting as a significant resistance level.
The Relative Strength Index (RSI) reading of 34 indicates oversold conditions, hinting at a potential bounce in the near term.
However, traders should remain cautious as the overall trend remains bearish. Key resistance levels to watch include $1.0771, $1.0808, and $1.0847. A break above these levels could negate the bearish outlook and signal a potential reversal.
On the downside, immediate support lies at $1.0674, followed by $1.0650 and $1.0613.
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GBP/USD Price Analysis – June 17, 2024
Daily Price Outlook
The GBP/USD pair fell sharply below the 1.2700 mark, trading at 1.2683 as of writing, due to risk aversion and political turmoil in Europe.
The decline was exacerbated by easing inflation expectations in the UK, with the latest NanBoE/Ipsos survey showing a decrease from 3.0% to 2.8% in May. This is the lowest level since August 2021.
Political Uncertainty Adds Pressure:
The upcoming UK elections on July 4th are also adding pressure to the pound. Recent polls show the Reform party gaining momentum over the Conservatives, raising concerns about potential political instability.
US Economic Data and Fed Outlook:
Meanwhile, US economic data released on Friday painted a mixed picture. Import prices declined by 0.4% in May, exceeding expectations, while consumer sentiment fell to a six-month low of 65.6. However, 5-year inflation expectations remained unchanged at 3.3%, suggesting persistent price pressures.
Key Events and Levels to Watch:
Investors will closely monitor the Bank of England's monetary policy meeting on Thursday, where the central bank is expected to raise interest rates by 25 basis points to 5.25%. The release of UK CPI data on Wednesday and retail sales and PMI figures on Friday will also be closely watched for further clues on the economic outlook and potential impact on the pound.
GBP/USD - Technical Analysis
The GBP/USD pair is facing downward pressure, trading below its pivot point of 1.2678 on the 4-hour chart. The 50-day Exponential Moving Average (EMA) at 1.2758 is acting as a significant resistance, further solidifying the bearish outlook.
The Relative Strength Index (RSI) reading of 35 indicates oversold conditions, hinting at a potential bounce in the near term. However, the broader trend remains bearish, and traders should exercise caution.
Key resistance levels to monitor are 1.2723, 1.2765, and 1.2808. A break above these levels could negate the bearish bias and signal a potential reversal. On the downside, immediate support lies at 1.2645, followed by 1.2613 and 1.2581.
A decisive break below these levels could trigger further selling pressure, potentially leading to a deeper decline for the pound.
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S&P500 (SPX) Price Analysis – June 14, 2024
Daily Price Outlook
During the European trading session, the S&P 500 index has prolonged its fourth consecutive upward trend and still showing a bullish sentiment in the market.
It is currently trading around 5,433 level, hitting the intra-day high of 5,441 level. Investors have been buoyed by several factors contributing to this upward trajectory. Firstly, there has been upbeat economic data indicating easing inflation pressures.
Additionally, the Federal Reserve has adopted a supportive stance towards the market. Despite keeping interest rates unchanged, the Fed indicated progress in tackling inflation concerns and reduced its forecast for rate hikes in 2024 from three to one.
This shift towards a more accommodative approach has reassured investors that the central bank intends to sustain a supportive monetary policy, which is favorable for the growth of the equity market.
Furthermore, the corporate earnings have generally been robust, with many companies surpassing earnings expectations. This fundamental strength in corporate America has bolstered confidence among investors, driving stock prices higher.
Fed's Policy Shift and Economic Data and its Impact on S&P 500
On the US front, the Federal Reserve's policy decisions and economic data releases have had a strong impact on the S&P 500 index in recent days. However, the Fed's acknowledgment of easing inflationary pressures and its tempered rate hike expectations have provided a significant boost to market sentiment.
Investors interpret the Fed's cautious approach as a signal that the central bank will not prematurely tighten monetary policy, which would have otherwise weighed on stock prices.
Moreover, softer-than-expected inflation data, such as the producer price index (PPI) and consumer price index (CPI) reports for May, have reinforced the Fed's stance and contributed to the market's bullish outlook. These reports suggest that inflation may be transitory rather than persistent, alleviating one of the primary concerns for investors.
Geopolitical Tensions in the Middle East and Renewed Political Uncertainty in Europe and its Impact on S&P 500 Index
Despite the bullish momentum, geopolitical tensions in the Middle East and political uncertainties in Europe pose potential risks to the S&P 500 index. The ongoing conflict in Ukraine and tensions in the Middle East have the potential to disrupt global markets and affect investor sentiment negatively.
Any escalation in these regions could lead to volatility in oil prices, impacting energy stocks and broader market indices.
Moreover, renewed political uncertainties in Europe, such as the snap election call in France, add more risk into the market. Political instability can create uncertainty among investors, affecting their risk appetite and potentially leading to market fluctuations.
S&P500 (SPX) - Technical Analysis
The S&P 500 is showing signs of a potential pullback after reaching record highs. While the index is currently trading above its pivot point at $5,446.46, the technical indicators suggest caution is warranted.
The Relative Strength Index (RSI) reading of 69 indicates an overbought condition, which could precede a correction. Additionally, the 50-day Exponential Moving Average (EMA) is providing support at $5,303.01, well below the current price.
Traders should be mindful of key resistance levels at $5,478.89, $5,510.93, and $5,550.84. A break above these levels could fuel further upside momentum, but a rejection at these levels could trigger a deeper pullback.
On the downside, immediate support rests at $5,402.31, followed by $5,349.10 and $5,299.23. A breach of these levels could accelerate selling pressure.
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- EUR/USD Price Analysis – June 14, 2024
EUR/USD Price Analysis – June 14, 2024
Daily Price Outlook
During the European trading session, the EUR/USD pair has been experiencing a bearish trend and remained well offered around 1.0690 level, hitting the intra-day low of 1.0671 level. However, this downward movement can be attributed to several factors including the bullish US dollar and growing uncertainty surrounding the French elections.
The shared currency has weakened significantly amidst growing uncertainty surrounding the French elections. French President Emmanuel Macron's decision to call for snap elections following a defeat in parliamentary elections has heightened political instability.
The potential success of Marine Le Pen's far-right National Rally party in the French elections is causing concern for the Euro. Markets are worried that if her party gains more influence, it could lead to disruptions in the unity and economic policies of the Eurozone, which in turn negatively impacts the Euro's value.
Euro Under Pressure: French Political Uncertainty and ECB Monetary Policy Impact on EUR/USD Pair
On the EUR front, the shared currency continues to face pressure due to deepening political uncertainty in France ahead of the upcoming legislative elections. President Macron's call for snap elections after facing setbacks has injected volatility into the political landscape, unsettling markets and weakening the Euro.
The potential outcomes of these elections, including the rise of Marine Le Pen's National Rally and the prospects of coalition governments, have exacerbated concerns over political stability within the Eurozone.
Moreover, ECB's monetary policy stance has influenced the Euro's performance against the US Dollar. ECB policymakers have shown caution about the future of inflation, highlighting the difficulties in reaching stable inflation levels.
The potential for additional rate cuts to address low inflation (disinflationary pressures) highlights the Euro's weakness in currency markets.
Fed's Hawkish Outlook and Impact on EUR/USD Pair Amid Soft US Inflation Data
Despite soft inflation data from the US, the Federal Reserve (Fed) has maintained a hawkish stance, which has offset the impact on the EUR/USD pair. Fed Chair Jerome Powell noted positive signs in the May Consumer Price Index (CPI) report, showing cautious optimism about inflation trends.
However, Powell stressed that a consistent improvement in inflation is necessary before the Fed will consider cutting rates further. This aligns with the Fed's current forecast of only one rate cut in 2024, reduced from the earlier expectation of three rate cuts.
Hence, the market's reaction to Fed's policy outlook has been significant, influencing the strength of the US Dollar against the Euro. The US Dollar Index (DXY), which measures the Dollar's value against a basket of major currencies, has remained strong and reached monthly highs.
This strength is due to investors adjusting their expectations based on the Fed's guidance on interest rates and monetary policy.
Therefore, the Fed's hawkish stance has strengthened the US Dollar, causing the EUR/USD pair to decline as investors adjust their expectations based on the Fed's interest rate guidance and policy outlook.
EUR/USD - Technical Analysis
The EUR/USD pair is struggling to maintain upward momentum, currently hovering slightly above the 1.07 mark. On the 4-hour chart, the pair is trading below its pivot point of 1.0726, signaling potential bearish pressure.
The 50-day Exponential Moving Average (EMA) at 1.0814 reinforces this bearish outlook, acting as a significant resistance level.
The Relative Strength Index (RSI) reading of 32 indicates oversold conditions, hinting at a potential bounce in the near term. However, traders should remain cautious as the overall trend remains bearish. Key resistance levels to watch include 1.0766, 1.0798, and 1.0847.
A break above these levels could negate the bearish outlook and signal a potential reversal.
On the downside, immediate support lies at 1.0674, followed by 1.0650 and 1.0613. A break below these levels could exacerbate the downward pressure, potentially leading to further losses for the euro.
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GOLD Price Analysis – June 14, 2024
Daily Price Outlook
Gold price (XAU/USD) managed to halt its previous-day downward trend and regained positive momentum around the $2,318 level, reaching an intra-day high of $2,321. However, the uptick in gold prices can be attributed to the weakening US dollar, which retreated from recent highs amidst growing market optimism.
Investors are increasingly pricing in the likelihood of the Federal Reserve initiating a rate-cutting cycle as early as September, driven by signs of subdued inflationary pressures in the US.
Hence, the decline in the US dollar has bolstered gold prices, as lower bond yields and reduced rate hike expectations have diminished the dollar's appeal. In the meantime, the geopolitical tensions in the Middle East and political uncertainties in Europe have further supported gold as a safe-haven asset.
Impact of Fed's Policy Shift and Economic Data on Gold Prices
On the US front, the Federal Reserve's latest projections indicate a shift towards a more cautious approach on interest rates, scaling back expectations from three rate cuts to just one in 2024, which has strengthened the US Dollar and posed challenges for non-yielding assets like Gold.
Although, the softer inflation data released this week, including a Producer Price Index (PPI) increase of 2.2% year-on-year in May (below expectations), and a flat Consumer Price Index (CPI) for the same month, suggest mounting pressure on the Fed to consider rate cuts sooner, possibly as early as September according to the CME Group’s FedWatch Tool.
Additionally, the report on first-time unemployment claims rose more than expected to 242,000, up from 229,000 previously, indicating potential headwinds for the labor market despite other economic indicators showing resilience.
Therefore, the softer inflation data could support Gold prices by increasing the likelihood of earlier rate cuts, which typically weaken the US Dollar and enhance Gold's appeal as an inflation hedge and store of value.
GOLD (XAU/USD) - Technical Analysis
Gold prices are holding steady above the $2,300 psychological level, but the technical outlook suggests a potential bearish reversal.
The 4-hour chart reveals the metal is trading slightly above its pivot point at $2,327.33, while the 50-day Exponential Moving Average (EMA) provides near-term support at $2,327.47.
However, the Relative Strength Index (RSI) reading of 50 indicates a neutral sentiment in the market.
This suggests a potential consolidation phase before the next directional move. Traders should monitor key resistance levels at $2,341.65, $2,356.04, and $2,372.84 for potential selling opportunities if the bullish momentum stalls.
On the downside, immediate support rests at $2,299.09, followed by $2,287.04 and $2,271.29. A break below these levels could trigger further selling pressure.
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GOLD Price Analysis – June 13, 2024
Daily Price Outlook
Gold prices (XAU/USD) continued their bearish trend, staying around 2,315.81 after hitting an intraday low of 2,308.28. This downward movement can be attributed to improved market sentiment, reducing demand for safe-haven assets like gold. Additionally, expectations of fewer Fed rate cuts have strengthened the US dollar, further pressuring gold prices.
Looking ahead, traders appear hesitant to take strong positions as they closely monitor Thursday's US economic docket, which includes the Producer Price Index (PPI) and Weekly Initial Jobless Claims data, for short-term trading opportunities.
Hawkish Fed Stance and Stronger US Dollar Drive Gold Prices Lower Amid Unchanged CPI and Lower Core Inflation
On the US front, the broad-based US dollar has been gaining momentum due to a hawkish Fed stance on rate cuts. This bullish US dollar is seen as a key factor keeping gold prices lower.
The Federal Reserve's recent decision surprised markets by projecting only one interest rate cut in 2024, down from the three cuts expected in March. This hawkish stance overshadowed softer US consumer inflation figures and led to higher US Treasury bond yields, boosting the US dollar.
As a result, this shift drove investment away from non-yielding assets like gold, causing its price to drop. The Fed also raised its forecast for the neutral rate to 2.8% from 2.6%, further supporting the US dollar and diminishing the appeal of USD-denominated gold.
On the data front, the US Bureau of Labor Statistics (BLS) reported that inflation, measured by the Consumer Price Index (CPI), was unchanged in May for the first time since last June.
The annual inflation rate slightly decreased to 3.3% from 3.4%. The core CPI, which excludes food and energy prices, increased by 0.2% in May and rose 3.4% over the past year, down from a 3.6% increase in April and below the expected 3.5%.
Therefore, the hawkish Fed stance and stronger US dollar, alongside unchanged CPI and lower core inflation, have driven investment away from gold, resulting in a drop in gold prices.
Geopolitical Unrest Boosts Demand for Safe-Haven Assets like Gold
On the geopolitical front, ongoing tensions in the Middle East and Europe have supported the safe-haven appeal of Gold. Israeli attacks on two homes in the Nuseirat refugee camp killed five and wounded 17, while explosives were used to destroy buildings in Rafah. Gaza officials report 15,694 children killed and 17,000 left without parents after 250 days of war.
Hamas claims to have shown willingness to reach a ceasefire with Israel, though US Secretary of State Blinken says some proposals are unworkable. Since October 7, the conflict has resulted in at least 37,202 deaths and 84,932 injuries in Gaza.
Therefore, this geopolitical unrest tends to increase demand for safe-haven assets like gold and silver, providing a boost to their prices.
GOLD (XAU/USD) - Technical Analysis
Gold (XAU/USD) is trading at $2313.655, down 0.48% in today's session. The price action reveals a bearish sentiment as the metal continues to slide, approaching significant support levels. The key pivot point to monitor is at $2318.74, a crucial level that could dictate the next directional move for gold.
Immediate resistance is located at $2339.29, followed by $2354.43 and $2370.11. These levels represent potential hurdles for any bullish attempts to recover.
On the downside, immediate support is at $2299.69, with further supports at $2287.11 and $2271.29, which could act as critical levels where buying interest may emerge to counter the selling pressure.
The Relative Strength Index (RSI) stands at 46, indicating a slight bearish bias but not yet in oversold territory, suggesting there could be more room for downside movement.
The 50-day Exponential Moving Average (EMA) is at $2314.78, marginally above the current price, reinforcing the bearish outlook as gold trades below this key moving average.
In conclusion, the technical outlook for gold suggests a bearish trend below the $2319 level. An entry point for a sell position is advisable below $2319, with a target take profit level set at $2305. A stop loss should be placed at $2328 to manage potential upward reversals.
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USD/JPY Price Analysis – June 13, 2024
Daily Price Outlook
The USD/JPY currency pair has maintained its upward momentum and remained well bid around 157.09, hitting the intra-day high of 157.35 level. However, the upward trend was primarily driven by strength in the US Dollar.
The bullish trend in the USD can be attributed to the Federal Reserve's unexpectedly hawkish stance following its recent policy meeting. The Fed revised its projections, signaling a reduced likelihood of rate cuts this year due to expectations of higher inflation.
Fed’s Hawkish Outlook Supports USD/JPY Amid Soft US CPI
On the US front, the Federal Reserve's hawkish outlook has played a major role in supporting the USD/JPY pair. The hawkish stance overshadowing softer-than-expected US Consumer Price Index (CPI) data released recently.
The US CPI figures for May showed no change month-over-month and a slight decrease in the yearly rate to 3.3% from 3.4% in April. Moreover, the core CPI, excluding volatile food and energy prices, dropped to 3.4%, marking its lowest level in over three years.
Despite modest US Consumer Price Index (CPI) figures, the Fed's confidence has bolstered market expectations of a robust US economy and the possibility of future interest rate hikes. This positive sentiment has favored the USD over the Japanese Yen, contributing to the upward trend in the USD/JPY exchange rate.
Traders Await BoJ Decision Amid Reluctance in USD/JPY Directional Bets
Looking ahead, traders are exercising caution and hesitating to place significant directional bets on the USD/JPY pair as they await the outcome of the Bank of Japan (BoJ) policy meeting.
This decision is crucial because there's speculation that the bank might change how it handles its monetary policy, especially in terms of buying government bonds. Such changes could significantly affect the currency pair's direction in the market.
Meanwhile, the uncertainty surrounding the BoJ's stance stems from Japan's economic challenges, including sluggish growth and persistent deflationary pressures. Market participants are keenly watching for any signals that could impact the yen's safe-haven appeal and influence the USD/JPY pair.
USD/JPY - Technical Analysis
The USD/JPY pair is currently trading at $157.20, showing a modest gain of 0.24%. This upward momentum is notable as the pair edges closer to critical resistance levels. The pivot point to monitor stands at $157.72, a crucial level that could influence future price movements.
Immediate resistance is identified at $157.41, with subsequent resistances at $157.91 and $158.43, indicating potential targets for bullish traders. On the downside, immediate support is found at $156.31, followed by additional supports at $155.79 and $155.11.
These levels are significant as they highlight areas where buying interest might emerge to stabilize the price.
The Relative Strength Index (RSI) is at 55, suggesting a neutral to slightly bullish sentiment. The 50-day Exponential Moving Average (EMA) is positioned at $156.40, with the current price trading above this level, reinforcing the bullish outlook.
Technical indicators point towards a bullish trend as long as the price remains above the pivot point of $157.72.
In conclusion, the technical outlook for USD/JPY remains bullish above the pivot point of $157.72. Traders may consider a buy limit order at $156.765, aiming for a take profit level at $157.723. A stop loss should be placed at $156.305 to mitigate risk effectively.
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AUD/USD Price Analysis – June 13, 2024
Daily Price Outlook
Despite the upbeat Australian data, the AUD/USD pair failed to stop its downward trend and remained well offered around the 0.6643 level, hitting the intraday low of 0.6640.
However, the reason for its downward trend could be linked to the bullish US dollar, which gained traction in the wake of a hawkish stance from the US Federal Reserve (Fed).
In contrast to this, the previously released upbeat Australian data, including higher-than-expected Employment Change and Australia’s Unemployment Rate dropping to 4.0% from April’s 4.1% rate (as expected), was seen as a key factor that kept the lid on any additional declines in the AUD/USD pair.
Impact of Australian Economic Indicators and RBA Policy on AUD/USD Pair
On the AUD data front, Australia's Employment Change for May showed an increase of 39.7K employed persons, surpassing expectations of 30.0K and the previous month's 38.5K rise. The Unemployment Rate dropped to 4.0%, down from April's 4.1%, as anticipated.
However, Australia's NAB Business Confidence index fell to -3 index points in May, the lowest in six months and the first negative reading since last November.
Concurrently, Business Conditions decreased to 6 index points, slightly below the long-term average, indicating a mixed outlook for business sentiment despite the positive labor market data.
Moreover, National Australia Bank's Chief Economist Alan Oster noted concerns about economic growth alongside caution about rising inflation. He expects the Reserve Bank of Australia (RBA) to maintain current interest rates for the foreseeable future.
Meanwhile, RBA Governor Michele Bullock recently indicated that the central bank stands ready to raise interest rates if the Consumer Price Index (CPI) fails to return to the target range of 1% to 3%.
Therefore, the AUD/USD pair see support from strong employment data and a lower unemployment rate, but could face pressure from declining business confidence and potential RBA rate hike signals amid inflation concerns.
Impact of Hawkish Fed and US Economic Data on Gold Prices
On the US front, the broad-based US dollar has been gaining momentum due to a hawkish Fed stance on rate cuts. This bullish US dollar is seen as a key factor keeping AUDUSD pair lower. The Federal Reserve's recent decision surprised markets by projecting only one interest rate cut in 2024, down from the three cuts expected in March.
Meanwhile, this hawkish stance overshadowed softer US consumer inflation figures and led to higher US Treasury bond yields, boosting the US dollar. On the data front, the US Bureau of Labor Statistics (BLS) reported that inflation, measured by the Consumer Price Index (CPI), was unchanged in May for the first time since last June.
The annual inflation rate slightly decreased to 3.3% from 3.4%. The core CPI, which excludes food and energy prices, increased by 0.2% in May and rose 3.4% over the past year, down from a 3.6% increase in April and below the expected 3.5%.
Therefore, the AUD/USD pair faced downward pressure as the hawkish Fed stance bolstered the US dollar against non-yielding assets like gold, dampening demand for the Australian dollar amid mixed economic signals.
AUD/USD - Technical Analysis
The AUD/USD pair is currently trading at $0.66450, reflecting a 0.28% decline. The market is exhibiting bearish tendencies as it approaches crucial support levels. The key pivot point to watch is $0.67, a critical level that could dictate the next directional move for the pair.
Immediate resistance is found at $0.67, with subsequent resistances also aligned at $0.67, indicating a significant barrier for bullish attempts. On the downside, immediate support is at $0.66, followed by additional supports at $0.66 and $0.65. These levels are essential for identifying potential buying interest that may stabilize the price.
The Relative Strength Index (RSI) is at 53, suggesting a neutral stance but leaning slightly towards bearish momentum. The 50-day Exponential Moving Average (EMA) is positioned at $0.66, which the current price hovers around, indicating a potential consolidation phase or a pivotal point for future direction.
The current technical indicators suggest a cautious approach. The bearish sentiment below the pivot point of $0.67 indicates potential further downside if the price breaches immediate support levels. Conversely, a break above the resistance could signal a shift towards a bullish trend.
In conclusion, the technical outlook for AUD/USD remains bearish below $0.67. Traders may consider a buy limit order at $0.66271, aiming for a take profit level at $0.66678. A stop loss should be placed at $0.66007 to manage risk effectively.
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