EUR/USD Price Analysis – May 24, 2024
Daily Price Outlook
During the early European session on Friday, the EUR/USD pair has been losing traction and hit the intra-day low of 1.0805 level. However, the downward trend was largely driven by a stronger US dollar and weaker sentiment surrounding the Euro (EUR).
Traders are responding to the upbeat US economic data and increasing speculations about potential interest rate cuts by the European Central Bank (ECB). These factors have contributed to the bearish performance of the EUR/USD pair.
Notably, the shared currency (Euro) has been under pressure due to growing expectations that the ECB may cut interest rates in June.
This outlook is based on comments from ECB President Christine Lagarde, who expressed confidence in Eurozone inflation being under control. Apart from this, financial markets have priced in a 25 basis point (bps) rate cut, adding to the Euro’s weakness.
Upbeat US PMI Data and the Fed’s Hawkish Comments Support the US Dollar
On the US front, the broad-based US dollar has been gaining strength, supported by stronger-than-expected US economic data. Moreover, hawkish comments from Atlanta Fed President Raphael Bostic have further strengthened the dollar.
On the data front, the latest S&P Global flash May Composite Purchasing Managers Index (PMI) data showed significant improvement, climbing to 54.4 in May from 51.3 in April. This is the highest level since April 2022.
Similarly, the Manufacturing PMI rose to 50.9 from 50.0, and the Services PMI increased to 54.8 from 51.3, both exceeding market expectations.
Additionally, the weekly Initial Jobless Claims data was better than anticipated, dropping to 215,000 from 223,000, indicating a robust labor market. These positive economic indicators have boosted confidence in the US economy and supported the USD.
Atlanta Fed President Raphael Bostic suggested that the US central bank might delay cutting interest rates due to persistent inflationary pressures. His remarks have reinforced the market’s expectation of prolonged higher interest rates in the US. This put further pressure on EUR/USD pair by underpinning the US dollar.
Traders Bet on ECB Rate Cuts in June, Weighing on the Euro
On the other hand, the increasing speculation about potential rate cuts by the ECB has intensified, putting additional selling pressure on the Euro.
ECB President Christine Lagarde’s recent statements have increased market expectations for a rate cut, with financial markets now pricing in a 25 bps cut in June. This speculation is rooted in the belief that Eurozone inflation is under control, which might allow the ECB to lower rates sooner than previously anticipated.
As a result, the expectation of a rate cut has diminished the Euro's appeal to investors. They are now favoring the US Dollar, which offers higher interest rates and a stronger economic outlook. This change in investor sentiment has led to more selling of the Euro, pushing the EUR/USD pair further down.
EUR/USD - Technical Analysis
The EUR/USD pair is currently trading at $1.08102, down 0.07%. The technical outlook suggests a mixed sentiment as the price hovers around the pivot point of $1.0806. Immediate resistance is observed at $1.0828, followed by $1.0853 and $1.0882.
On the downside, immediate support is noted at $1.0784, with further support levels at $1.0767 and $1.0751.
The Relative Strength Index (RSI) is currently at 38, indicating that the pair is approaching oversold conditions. This suggests a potential for a reversal or stabilization in the near term.
The 50-day Exponential Moving Average (EMA) stands at $1.0846, which serves as a significant resistance level that the price needs to break to confirm a bullish trend.
For traders, an entry strategy would be to buy above $1.0806, aiming for a take-profit level of $1.08407 while setting a stop-loss at $1.07857. This approach leverages the potential for an upward movement while managing downside risks.
In summary, the EUR/USD is experiencing a slight decline, with mixed signals from technical indicators. The pivot point at $1.0806 is crucial for determining the next move, with resistance and support levels providing key areas to watch.
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GOLD Price Analysis – May 23, 2024
Daily Price Outlook
Gold's value (XAU/USD) struggled to reverse its decline, hovering near the $2,365 mark and hitting an intraday low of $2,355 during the day. However, the decline was mainly attributed to the hawkish stance of the US Federal Reserve, opting to prolong its restrictive monetary policy. This has led to a strengthening of the US dollar, adding pressure on gold priced in dollars. Traders are eagerly awaiting the initial figures of the US Manufacturing and Services Purchasing Managers Index (PMI) for May.
However, the weaker outcome could increase expectations of Fed rate cuts, providing support for gold. On the data front, the preliminary US S&P Global Manufacturing PMI is expected to remain at 50.0, indicating stagnant growth, while the Service PMI is forecasted to stay at 51.3 for May. These figures suggest that both sectors are experiencing minimal change, reflecting a stable but not improving economic situation.
Impact of the People's Bank of China's Gold Purchases on Gold Prices
On the other hand, the People's Bank of China (PBoC) has emerged as the leading purchaser among global central banks in the past year. Its acquisition of 225 tonnes of gold reserves in the previous year marked a record high since at least 1977. This notable increase in gold holdings by the PBoC reflects its strategic shift towards diversifying its reserve assets.
This move also signals China's intention to reduce its reliance on the US dollar and enhance the stability of its reserves. The PBoC's actions have contributed to the broader trend of central banks increasing their gold reserves as a means of diversification and risk management.
Consequently, the People's Bank of China's significant increase in gold reserves has bolstered market sentiment, contributing to upward pressure on gold prices.
Federal Reserve Minutes and Rate Cut Expectations
On the US front, the recent release of minutes from the Federal Open Market Committee (FOMC) meeting in the US highlighted concerns regarding inflation, which has not yet met the 2 percent target despite some easing in the past year. This has led to discussions about the potential delay in rate cuts. However, participants have agreed to maintain the current federal funds rate range, citing signs of ongoing solid economic growth.
On the other hand, investors are anticipating the possibility of the first rate cut occurring in September, with expectations of two quarter-point reductions before the end of the year. This sentiment is based on the CME FedWatch Tool, which currently indicates a nearly 60% probability of such moves.
As a result, the more hawkish tone conveyed in the Federal Open Market Committee (FOMC) minutes, signaling a potential interest rate hike or a more restrictive monetary policy, contributed to the downward pressure on gold prices. Furthermore, a hawkish stance led to the stronger US dollar, which has a negative impact on the price of gold.
GOLD (XAU/USD) - Technical Analysis
Gold prices (XAU/USD) are trading at $2,355.605, down 0.98% on the day. The 4-hour chart reveals a pivot point at $2,352.80. Immediate resistance levels are observed at $2,373.50, $2,395.78, and $2,416.08. On the downside, immediate support levels are $2,336.89, $2,322.69, and $2,304.97.
The Relative Strength Index (RSI) is currently at 23, indicating that gold is in oversold territory. This suggests potential for a corrective rebound. However, the 50-day Exponential Moving Average (EMA) stands at $2,410.20, well above the current price, highlighting the prevailing bearish trend.
Technically, gold is under pressure as it hovers just above the pivot point. A buy entry is recommended above $2,350 with a target of $2,375 and a stop loss at $2,335. This setup aims to capitalize on a potential bounce from oversold conditions while limiting downside risk.
Despite the bearish short-term outlook, the oversold RSI could trigger a short-term correction. If gold prices manage to break above the immediate resistance at $2,373.50, further gains towards $2,395.78 and $2,416.08 could be seen. Conversely, a break below $2,352.80 may lead to further declines, testing support at $2,336.89 and $2,322.69.
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- USD/JPY Price Analysis – May 23, 2024
USD/JPY Price Analysis – May 23, 2024
Daily Price Outlook
Despite the bullish U.S. dollar, the USD/JPY currency pair has been unable to break its downward trend, remaining well-offered around the 156.70 level and hitting an intraday low of 156.56. The bearish bias in the currency pair can be attributed to multiple factors, including Japan’s stable bond purchasing strategy, an improving manufacturing sector, and the Federal Open Market Committee's (FOMC) cautious approach to interest rate cuts. These factors collectively contribute to the recent performance of the USD/JPY.
However, the recent policy decisions by the Bank of Japan (BoJ) boosted the Japanese yen and contributed to the USD/JPY currency pair declines. The BoJ's announcement that it would maintain the amounts of Japanese government bonds (JGB) purchased in its latest operation reflects a deliberate strategy following a previous reduction in bond purchases of 5-10 year bonds over a month ago. This stability in bond purchasing signals a cautious or "hawkish" approach by the BoJ, indicating a reluctance to pursue further monetary easing measures.
On the other hand, the heightened geopolitical tensions, particularly those involving China and Taiwan, have fueled investor demand for safe-haven assets like the JPY. As a result, the USD/JPY pair has experienced bearish pressure.
Japan's Manufacturing PMI and Its Impact on USD/JPY Pair
Another factor impacting the USD/JPY currency pair is the recent improvement in Japan's Manufacturing Purchasing Managers Index (PMI). In May, Japan’s Manufacturing PMI rose to 50.5, up from April’s 49.6, according to data released by Jibun Bank and S&P Global. This rise marks the first expansion in manufacturing activity since May 2023, indicating a positive shift in Japan's economic outlook.
Meanwhile, the PMI surpassing market expectations of 49.7 suggests that manufacturing activity is recovering, which can boost investor confidence in the Japanese economy. As a result, a stronger manufacturing sector can lead to an appreciation of the JPY, exerting downward pressure on the USD/JPY pair.
FOMC Minutes and Their Impact on USD/JPY Pair
On the flip side, the broad-based US dollar has shown a bullish bias, particularly following the release of the latest Federal Open Market Committee (FOMC) minutes. These minutes unveiled that Federal Reserve policymakers have concerns regarding the persistent nature of inflation, which hasn't waned as swiftly as expected. This prolonged inflation has prompted the Fed to adopt a cautious stance toward interest rate cuts.
Therefore, the US dollar has strengthened due to the Fed's caution on inflation, but the JPY's strength, supported by Japan's improving economy and stable BoJ policies, counteracts, maintaining a bearish trend for USD/JPY.
USD/JPY - Technical Analysis
The USD/JPY is currently trading at $156.75, down 0.02% for the day. The 4-hour chart indicates a pivot point at $156.87. Key resistance levels are $157.97, $158.98, and $159.97, while immediate support levels are $155.80, $154.61, and $153.43.
The Relative Strength Index (RSI) is at 65, suggesting that the pair is approaching overbought territory. This could indicate a potential pullback in the short term. The 50-day Exponential Moving Average (EMA) is at $155.94, providing a key support level that, if breached, could signal further downside.
Technically, the USD/JPY shows signs of potential bearish movement as it trades just below the pivot point. A recommended strategy is to sell below $156.87, targeting a take-profit level of $155.80 and setting a stop loss at $157.75. This approach leverages the potential for a correction from the current overbought conditions while managing risk.
Despite the minor decline today, the overall sentiment appears cautiously bearish given the RSI and the proximity to the pivot point. Should the USD/JPY break below immediate support at $155.80, further declines towards $154.61 and $153.43 are plausible. Conversely, a break above $156.87 could test the resistance levels at $157.97 and $158.98.
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AUD/USD Price Analysis – May 23, 2024
Daily Price Outlook
Despite a bullish US dollar and a drop in consumer inflation expectations, the AUD/USD currency pair maintained its upward rally, remaining well-bid around the 0.6623 level and hitting an intra-day high of 0.6633. The reason for its bullish rally can be attributed to the risk-on market sentiment, the Reserve Bank of Australia's (RBA) decision to maintain a steady policy, and the acknowledgment of increased inflation risks.
Conversely, the bullish US dollar, driven by the hawkish Federal Reserve stance, was a key factor that limited additional gains in the AUD/USD pair. Another factor capping gains in the AUD/USD pair was the drop in consumer inflation expectations. The Consumer Inflation Expectation, released by the Melbourne Institute, showed consumer expectations
Impact on AUD/USD Pair Amid Economic Signals & Policy Decisions
The RBA meeting minutes from May 2024 revealed that the board considered raising interest rates but decided to keep them steady as policymakers found it difficult to predict future changes in the cash rate and noted that recent data increased the risk of inflation staying above the target for a longer period.
On the data front, consumer inflation expectations in Australia dropped to 4.1% in May from 4.6% in April, the lowest since October 2021. Meanwhile, the private sector grew for the fourth month in a row, with the Composite PMI dipping to 52.6 from 53.0 in April, driven by the services sector, though manufacturing remained weak with a PMI of 49.6.
Whereas, the ASX 200 Index fell below 7,800, hit by declining mining and energy stocks due to lower commodity prices, and weak performance on Wall Street after FOMC meeting minutes raised concerns about slow progress on inflation.
Therefore, the mixed economic signals and concerns about inflation likely put pressure on the AUD/USD pair, causing potential fluctuations. The decision to maintain steady interest rates, weak manufacturing data, and a decline in the ASX 200 could lead to AUD weakening.
Impact on AUD/USD Pair Amid Strong Dollar and Fed Caution
On the US front, the US dollar remains strong after the latest FOMC meeting minutes highlighted ongoing concerns about persistent inflation. Fed policymakers are hesitant to cut interest rates, expecting it to take longer for inflation to improve. The CME FedWatch Tool shows the probability of a 25 basis-point rate cut in September has slightly decreased to 50.7% from 51.6%.
Federal Reserve officials, including Boston President Susan Collins and Governor Christopher Waller, emphasized the need for patience and more favorable inflation data before considering easing policies.
Therefore, the strong Dollar and cautious stance of the Fed could lead to downward pressure on the AUD/USD pair, causing the Australian Dollar to weaken against the US Dollar.
AUD/USD - Technical Analysis
The AUD/USD is currently trading at $0.66191, unchanged on the day. The 4-hour chart highlights a pivot point at $0.66340. Immediate resistance levels are identified at $0.66531, $0.66822, and $0.67110, while immediate support levels are $0.66091, $0.65856, and $0.65589.
The Relative Strength Index (RSI) is at 33, indicating the pair is nearing oversold territory. This suggests potential for a short-term bounce, yet the broader trend remains bearish. The 50-day Exponential Moving Average (EMA) at $0.66634 acts as a significant resistance level, reinforcing the bearish outlook as long as the price remains below this mark.
Technically, the AUD/USD shows a weak bias as it hovers around the pivot point. The recommendation is to enter a sell position below $0.66336, targeting a take-profit level of $0.65970 with a stop loss at $0.66585. This setup leverages the potential continuation of the bearish trend while managing risk effectively.
Despite the neutral price movement today, the overall sentiment remains bearish given the proximity to the 50-day EMA and the current RSI level. If the AUD/USD breaks below the immediate support at $0.66091, further declines towards $0.65856 and $0.65589 are likely. Conversely, a move above the pivot point of $0.66340 could test the resistance levels at $0.66531 and $0.66822.
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GOLD Price Analysis – May 22, 2024
Daily Price Outlook
Gold price (XAU/USD) failed to stop its bearish bias and remained well offered around 2,417 level, hitting the intraday low of 2,426 level. However, the reason for its bearish trend could be attributed to the bullish US dollar, which gained traction on the back of the hawkish stance from Fed officials. The hawkish stance was reinforced after Federal Reserve members cautioned that they need stronger evidence of easing inflation before considering interest rate cuts, suggesting that they will likely maintain higher rates for an extended period.
On the flip side, the losses in the gold price could be short-lived as renewed US-China trade tensions and Middle East geopolitical tensions help the safe-haven gold price to limit its deeper losses.
Federal Reserve Caution Bolsters US Dollar, Dampens Gold Price
On the US front, the broad-based US dollar has been flashing green and edged higher as Federal Reserve members adopted a cautious approach towards easing inflation, indicating a probable continuation of higher interest rates. Fed Governor Christopher Waller wants to see strong data before considering rate cuts, while Atlanta Fed President Raphael Bostic prefers waiting to ensure inflation stays stable before adjusting rates.
Cleveland Fed President Loretta Mester noted that the strong job market eases concerns about keeping rates high. Boston Fed President Susan Collins highlighted that any rate cuts will happen slowly. Experts expect the first cut around September, with two more by year-end.
Therefore, the hawkish stance of the Federal Reserve and the probability of maintaining higher interest rates for longer boosted the US dollar, weighing on the gold price.
Escalating US-China Trade Tensions and Middle East Uncertainty Spark Market Concerns
On the flip side, the long-lasting tensions between the US and China gained momentum on Tuesday as the US announced tariff increases on various Chinese goods, prompting potential retaliatory measures from China, including higher temporary tariff rates on imported cars with large engines.
However, the tensions in the Middle East and the trade disputes between the US and China are creating a lot of uncertainty in the markets. This uncertainty is concerning because it impacts trade between the world's largest economies and makes global markets harder to predict. As a result, gold, which is often seen as a safe investment when things are uncertain, might start to look more appealing. This could lead to an increase in its price and help prevent it from falling too much.
GOLD (XAU/USD) - Technical Analysis
Gold is currently trading at $2,413.485, down 0.31%. The 4-hour chart highlights crucial price levels and technical indicators that offer insights into potential market movements. The pivot point stands at $2,419.363, serving as a key reference for traders.
Immediate resistance is noted at $2,434.115, with further resistance levels at $2,441.490 and $2,450.186. These resistance levels will be crucial for the bulls to breach if they aim to push prices higher.
On the downside, immediate support is observed at $2,406.392, followed by $2,397.421 and $2,386.129. These support levels are critical for determining the market's next direction, especially if bearish sentiment prevails.
The Relative Strength Index (RSI) is at 45, indicating neutral market conditions—neither overbought nor oversold. This neutrality suggests that significant market movements could depend on breaking either the support or resistance levels.
Additionally, the 50-day Exponential Moving Average (EMA) stands at $2,408.514, providing a dynamic support level that traders often use to gauge market trends.
The technical outlook for gold suggests cautious optimism. An entry price below $2,417 could present a selling opportunity, targeting $2,400, with a stop loss set at $2,430 to manage risk. Traders should closely monitor these levels and indicators to navigate the market effectively.
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- GBP/USD Price Analysis – May 22, 2024
GBP/USD Price Analysis – May 22, 2024
Daily Price Outlook
Despite the stronger US dollar, the GBP/USD currency pair maintained its upward trend and remained well-bid around the 1.2725 level, hitting an intraday high of 1.2763. The reason for its upward trend could be linked to the slower-than-expected decline in the Consumer Price Index (CPI) data for April. The slower decline suggests the Bank of England's measures are controlling inflation, boosting confidence.
This can lead to higher interest rates, attracting foreign investment and supporting the GBP. Apart from this, the bullish US dollar, backed by the hawkish Fed stance, was seen as another key factor that kept the lid on any additional gains in the GBP/USD pair.
Federal Reserve's Hawkish Stance Boosts USD, Potentially Impacting GBP/USD Pair
On the US front, the broad-based US dollar continued its upward trend, gaining momentum due to the Federal Reserve's hawkish stance on interest rates. The Fed plans to keep rates steady until there's evidence that inflation will consistently drop to the desired 2%. While there's been progress in reducing inflation after a three-month stall, policymakers want more evidence before considering rate cuts.
This stance has supported the dollar's strength, although speculation about rate cuts starting in September has limited its gains. Investors are now awaiting the Federal Open Market Committee's minutes from the May meeting for further details into the interest rate outlook.
Therefore, the cautious stance by the Federal Reserve, delaying rate cuts until inflation sustains at 2%, has strengthened the USD. This could weigh on the GBP/USD pair due to the dollar's strength.
UK Inflation Data and BoE Rate Cut Speculation Influence GBP/USD Pair
On the UK front, the Office for National Statistics reported that UK inflation declined slower than expected in April, indicating that the Bank of England's higher interest rates are effectively curbing inflation. This slower decline in inflation is likely to dampen expectations for BoE rate cuts, which were previously anticipated to begin in August.
In the meantime, speculation for rate cuts increased after BoE Deputy Governor Ben Broadbent suggested a possible cut in the Bank Rate during the summer if economic conditions align with their forecasts. This news has implications for the GBP as market expectations for rate cuts are shifting.
On the data front, the UK's Office for National Statistics reported higher-than-expected growth in consumer price inflation for April. Year-over-year, headline inflation reached 2.3%, surpassing expectations of 2.1%, but it dropped from the previous reading of 3.3%. Monthly headline inflation also beat estimates at 0.3%, but significantly decreased from March's 0.6%.
Meanwhile, the annual core CPI, which excludes volatile items, rose by 3.9%, exceeding consensus but slowing down from March's 4.2%. Although inflation surpassed expectations, it is still projected to return to the Bank of England's 2% target.
Therefore, the higher-than-expected UK inflation data and reduced likelihood of BoE rate cuts have supported the GBP, boosting the GBP/USD pair.
GBP/USD - Technical Analysis
The GBP/USD pair is currently trading at $1.27099, showing a modest increase of 0.01%. The 4-hour chart highlights critical price levels and technical indicators, offering valuable insights into potential market movements. The pivot point stands at $1.27011, serving as a key reference for traders.
Immediate resistance is noted at $1.27272, with subsequent resistance levels at $1.27476 and $1.27672. These resistance levels will be crucial for the bulls to breach if they aim to push prices higher.
On the downside, immediate support is observed at $1.26747, followed by $1.26457 and $1.26151. These support levels are critical for determining the market's next direction, especially if bearish sentiment prevails.
The Relative Strength Index (RSI) is at 54, indicating neutral market conditions—neither overbought nor oversold. This neutrality suggests that significant market movements could depend on breaking either the support or resistance levels.
Additionally, the 50-day Exponential Moving Average (EMA) stands at $1.26931, providing a dynamic support level that traders often use to gauge market trends.
The technical outlook for GBP/USD suggests cautious optimism. An entry price above $1.27018 could present a buying opportunity, targeting $1.27407, with a stop loss set at $1.26754 to manage risk.
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EUR/USD Price Analysis – May 22, 2024
Daily Price Outlook
During the European trading session, the EUR/USD currency pair failed to garner support from market expectations that the ECB may provide further monetary stimulus to bolster the Eurozone economy. It is currently trading around the 1.0829 level, having hit an intraday low of 1.0822.
However, the downward trend is attributed to the bullish US dollar, which gained traction due to the hawkish stance of Fed officials. This stance was reinforced after Federal Reserve members cautioned that they need stronger evidence of easing inflation before considering interest rate cuts, indicating they are likely to maintain higher rates for an extended period.
Impact of ECB Interest Rate Uncertainty on EUR/USD Pair
On the EUR front, the currency is holding steady against the USD, as there is uncertainty about whether the ECB will continue its interest rate cuts after June. Some ECB policymakers, including Joachim Nagel, Klaas Knot, Pierre Wunsch, and Martins Kazaks, suggest a rate cut might happen in June but caution against further cuts too soon.
Nagel mentioned that while there might be short-term increases in inflation, overall, he expects inflation to keep declining towards the 2% target and reach it by 2025. This uncertainty and mixed signals are keeping the Euro supported but not significantly strengthening against the US Dollar.
Therefore, the uncertainty surrounding the ECB's interest rate policy and mixed signals from policymakers are keeping the EUR/USD pair steady, with the Euro supported but not experiencing significant strength against the US Dollar.
Impact of Federal Reserve's Cautious Stance on EUR/USD Pair
On the US front, the US dollar is on the rise, boosted by the Federal Reserve's cautious approach to interest rates. The Fed intends to maintain rates until there's solid proof that inflation will consistently hit the desired 2%. Despite progress in curbing inflation after a three-month halt, policymakers await more evidence before considering rate adjustments.
This stance has upheld the dollar's strength, although speculation about potential rate cuts beginning in September has tempered its gains. Investors now eagerly await the Federal Open Market Committee's minutes from the May meeting for further insight into the interest rate trajectory.
Therefore, the US dollar's upward momentum, driven by the Fed's cautious stance on interest rates, has kept the EUR/USD pair subdued.
EUR/USD - Technical Analysis
The EUR/USD pair is currently trading at $1.08538, showing no significant change from its previous close. The 4-hour chart highlights critical price levels and technical indicators, providing insights into potential market movements. The pivot point is set at $1.08614, serving as a key reference for traders.
Immediate resistance is noted at $1.08747, with subsequent levels at $1.08842 and $1.08951. These resistance levels are crucial for the bulls to overcome if they aim to push prices higher. On the downside, immediate support is observed at $1.08455, followed by $1.08355 and $1.08215.
These support levels will be vital for determining the market's next direction, especially if bearish sentiment prevails.
The Relative Strength Index (RSI) is currently at 44, indicating that the market is approaching oversold conditions, but not quite there yet. This level suggests that significant market movements could depend on breaking either the support or resistance levels.
Additionally, the 50-day Exponential Moving Average (EMA) stands at $1.08638, providing a dynamic support level that traders often use to gauge market trends.
The technical outlook for EUR/USD suggests cautious bearishness. An entry price below $1.08616 could present a selling opportunity, targeting $1.08359, with a stop loss set at $1.08725 to manage risk.
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- GOLD Price Analysis – May 22, 2024
GOLD Price Analysis – May 21, 2024
Daily Price Outlook
During the European trading session on Tuesday, the Gold price (XAU/USD) failed to stop its early downward rally and remained under pressure around the 2,416 level, hitting the intraday low of 2,416 level.
The reason for its downward rally could be attributed to the bullish US dollar, which gained traction despite hopes for Fed rate cuts and a risk-on market sentiment.
This is because investors were waiting for more clues about US interest rates after cautious comments from Federal Reserve officials. Conversely, the ongoing geopolitical tensions were seen as key factors that capped further losses in the Gold price.
In the coming days, traders will be paying close attention to statements from several Federal Reserve officials, such as Waller, Williams, Barr, Bostic, Collins, and Mester.
In the meantime, the release of the FOMC Minutes is anticipated to be a significant event as hawkish remarks from these officials could bolster the US dollar, thereby exerting downward pressure on the price of Gold.
Federal Reserve Caution and US Dollar Strength Weighing on Gold Amid Rate Cut Speculation
Despite the ongoing hopes for Fed rate cuts and a risk-on market sentiment, the broad-based US dollar remained bullish on the day. Investors were curious about the Federal Reserve's plans for interest rates. Despite signs of cooling inflation, Fed officials were cautious.
Atlanta Fed President Raphael Bostic emphasized the importance of confidence in hitting the 2% inflation target.
Fed Vice Chair Philip Jefferson expressed uncertainty about inflation hitting the target, suggesting continued caution. Markets are pricing in potential Fed rate cuts this year, with a 76% chance of a 25 basis point cut in September. This comes amid ongoing debates about the pace of economic recovery and inflation.
Therefore, the cautious approach of Federal Reserve officials and uncertainty about inflation and potential rate cuts likely boosted the US dollar slightly, which may have pushed down Gold prices.
Escalating Geopolitical Tensions in Gaza Supporting Gold Prices
On the negative side, Israeli attacks continue on Gaza, with recent raids in Jenin causing at least five deaths. The ICC is seeking arrest warrants for Israel's PM, Defence Minister, and three Hamas leaders. UN reports indicate over 900,000 forcibly displaced in Gaza.
Recent Israeli air strikes killed 18 in Jabalia and Beit Lahiya. The death toll in Gaza has reached 35,562. This escalating tension could support safe-haven assets like Gold to limit its downward losses.
GOLD (XAU/USD) - Technical Analysis
Gold prices are currently trading at $2419.615, down 0.57% in the 4-hour timeframe. The technical landscape reveals pivotal price levels that traders should monitor closely. The pivot point is set at $2409.07, which serves as a key indicator for potential price movements.
Immediate resistance is identified at $2429.22, followed by $2440.25 and $2450.19. These levels suggest potential barriers that could hinder upward momentum.
Conversely, immediate support is located at $2396.18, with subsequent support levels at $2384.00 and $2375.09. These supports are crucial for preventing further declines in gold prices.
The Relative Strength Index (RSI) stands at 53, indicating a neutral position. This suggests that gold is neither overbought nor oversold, leaving room for price fluctuations based on market dynamics.
The 50-day Exponential Moving Average (EMA) is calculated at $2399.94. Prices trading above this level typically signal a bullish trend, while those below may indicate a bearish outlook. Given the current price, gold is trading just above its 50-day EMA, suggesting a tentative bullish bias.
Conclusion: The recommended entry strategy is to buy above $2410, with a take profit target at $2430 and a stop loss at $2400. This strategy capitalizes on the bullish trend while mitigating risks through a well-placed stop loss.
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AUD/USD Price Analysis – May 21, 2024
Daily Price Outlook
During the European trading session, the AUD/USD currency pair maintained its upward trend and remained well-bid around the 0.6669 level, hitting the intraday high of 0.6676. The reason for its upward trend could be attributed to the hawkish RBA minutes and a slight decline in the US Dollar.
The Reserve Bank of Australia recently discussed the possibility of raising interest rates further due to concerns that inflation might remain high for an extended period. This underpinned the AUD currency and contributed to the gains in the AUD/USD pair.
Furthermore, the risk-on market sentiment, backed by the belief that the Federal Reserve will cut interest rates in the US, was seen as another key factor that underpinned the riskier Australian dollar and extended gains for the AUD/USD pair.
Mixed Signals Impacting AUD/USD Amid Fed Rate Cut Speculations and Inflation Concerns
Despite hints from Federal Reserve (Fed) officials suggesting a more hawkish stance on interest rates, the US Dollar is still facing challenges and remaining under pressure. Traders are betting on rate cuts in September, with a 61% chance according to the CME FedWatch tool.
This probability has decreased from 65% recorded just a week ago. The AUD/USD pair may see upward pressure if the US Dollar weakens due to expectations of rate cuts in September, despite hints of a hawkish stance from Fed officials.
On the flip side, Cleveland Fed Bank President Loretta Mester warned that inflation risks are increasing, suggesting that reducing interest rates three times this year might not be the right move. She emphasized the importance of keeping interest rates the same and highlighted the need to gather more information before deciding on any changes.
Reserve Bank of Australia's Hawkish Tone Boosts AUD/USD Pair
Another factor boosting the AUD/USD pair was the Reserve Bank of Australia (RBA) minutes from the May meeting, indicating policymakers' discussions about potential interest rate hikes due to concerns over prolonged high inflation risks. This development strengthens the Australian dollar as it contrasts with expectations of US rate cuts.
The market perceives the RBA's consideration of further rate increases as a positive signal for the Australian economy, enhancing demand for the Aussie asset. However, global economic uncertainties and fluctuations in risk sentiment could temper the currency's strength.
AUD/USD - Technical Analysis
The AUD/USD pair is currently trading at $0.66614, down 0.15% in the 4-hour timeframe. This modest decline reflects the prevailing cautious sentiment in the market, as traders weigh the impacts of global economic data and central bank policies. Key technical levels are crucial for understanding potential price movements.
The pivot point is set at $0.6650, acting as a critical benchmark for traders. Immediate resistance levels are identified at $0.6682, followed by $0.6711 and $0.6746. These resistance levels indicate potential barriers to upward movement, suggesting areas where selling pressure might intensify.
On the downside, immediate support is noted at $0.6618, with further support levels at $0.6586 and $0.6559. These support levels are essential for preventing further declines, offering potential rebound points if the market faces downward pressure.
The Relative Strength Index (RSI) is at 43, indicating a slightly bearish sentiment but still within the neutral range. This level suggests that the AUD/USD is neither overbought nor oversold, allowing for possible fluctuations based on upcoming market data.
The 50-day Exponential Moving Average (EMA) is positioned at $0.6676. Currently, the price is trading below this level, hinting at a bearish outlook in the short term. However, if the price moves above the 50-day EMA, it could signal a shift towards a more bullish trend.
Conclusion: The recommended trading strategy is to buy above $0.66505, with a take profit target at $0.66923 and a stop loss at $0.66284.
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USD/CAD Price Analysis – May 21, 2024
Daily Price Outlook
During the early European session on Tuesday, the USD/CAD currency pair has experienced a bullish performance, edging higher to 1.3630, hitting the intra-day high of 1.3644 level.
This rise is attributed to the modest rebound in the US Dollar, driven by market sentiment and anticipation of more hawkish stances from the Federal Reserve (Fed) officials, who are likely to maintain higher interest rates for an extended period.
This outlook supports the USD, making it more attractive to investors compared to other currencies, including the Canadian Dollar (CAD).
Higher Bets on Rate Cuts from the BoC and Decline in Oil Prices Weigh on the Loonie
On the other hand, the Canadian Dollar, often referred to as the Loonie, has been under pressure due to increasing bets on rate cuts from the Bank of Canada (BoC). Markets are expecting the BoC to cut interest rates 2-3 times before the Federal Reserve's first rate cut. This expectation is bolstered by the forecasted cooling of Canada’s CPI inflation figures.
The Canadian CPI inflation figures for April are anticipated to show further cooling, with expectations of a drop to 2.7% year-on-year from the previous 2.9%, and a decrease to 0.5% month-on-month from 0.6% in March. This cooling of inflation is fueling speculation about potential rate cuts.
Furthermore, the decline in crude oil prices is also contributing to the weakening of the CAD. As Canada is a leading exporter of oil to the United States, lower oil prices reduce revenue from exports, exerting additional selling pressure on the commodity-linked CAD.
Cautious Stance of US Federal Reserve Officials and Its Impact on USD/CAD
On the US front, US Federal Reserve officials have maintained a cautious stance regarding the timing of their monetary easing cycle.
They emphasize the importance of keeping interest rates higher for a longer period to ensure that inflation is effectively managed and on track to meet the Fed’s objectives. This "higher-for-longer" narrative supports the USD, as higher interest rates attract more investment, increasing demand for the currency.
Therefore, the cautious approach of the Fed also helps cap the downside of the USD/CAD pair. Investors and market participants will closely watch upcoming remarks from FOMC members and the Canadian CPI inflation report for further insights into the future movements of this currency pair.
USD/CAD - Technical Analysis
The USD/CAD pair is currently trading at $1.36380, up 0.09% in the 4-hour timeframe. The pivot point is set at $1.3644, serving as a crucial reference for market participants. Immediate resistance levels are identified at $1.3687, $1.3726, and $1.3768. These levels mark potential hurdles for further upward movement, indicating where selling pressure may increase.
On the downside, immediate support is found at $1.3589, with additional support at $1.3552 and $1.3520. These levels are essential for maintaining the current price structure, acting as potential bounce points should the market experience downward pressure.
The Relative Strength Index (RSI) stands at 58, suggesting a moderately bullish sentiment. This indicates that while the market is leaning towards buying, it is not yet overbought, leaving room for potential upward movement.
The 50-day Exponential Moving Average (EMA) is positioned at $1.3619, just below the current price. Trading above this EMA generally signals a bullish trend. Given the current price is above this level, it reinforces the positive outlook for the USD/CAD pair in the near term.
Conclusion: The recommended trading strategy is to set a buy stop at $1.36519, with a take profit target at $1.36881 and a stop loss at $1.36189.
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