Market News Summary:
Last Friday (June 21), buoyed by positive US PMI data, the dollar index rose by up to 0.3%, momentarily surpassing 105.90 and setting a new seven-week high since May 1. For the whole week, it accumulated a gain of 0.2%, marking a three-week consecutive rise. The yen, on the other hand, hit its longest losing streak since March, declining for seven consecutive days until last Friday, approaching the 160 level. US Treasury yields dipped to a daily low before the release of PMI data but then rebounded. The two-year yield, more sensitive to monetary policy, climbed by 2 basis points to 4.75%, ending the week up by more than 2 basis points. The 10-year yield rose by a maximum of 3 basis points to 4.28%, climbing nearly 4 basis points for the week.
Although starting strong last week, gold fell before the weekend. Spot gold closed at $2321.19 per ounce last Friday, down 0.49% for the week.
Chantelle Schieven, Head of Research at Capitalight Research, stated that investors should brace themselves for increased volatility in the gold market. She explained that, traditionally, summer sees lower market liquidity, leading to heightened volatility. At the same time, market uncertainty remains extremely high as investors try to speculate on the Federal Reserve’s next move.
Last Friday (June 21), crude oil fell after entering an overbought zone. WTI crude dropped by 0.83%, closing at $80.96 per barrel, while Brent crude fell by 0.66%, closing at $84.32 per barrel. However, owing to signs of reduced US inventories and rising fuel demand, international oil prices still achieved a two-week consecutive rise, gaining more than 3% for the week.
Data and news published the day before:
Due to distinct divergences in macroeconomic data between the US and Europe, the dollar strengthened comprehensively against a basket of currencies on the 21st. The dollar index rose in the overnight market and consolidated narrowly during the day before closing higher. The index, which measures the dollar against six major currencies, increased by 0.2%, closing at 105.796 at the forex market close.
Preliminary data released by S&P Global in the morning showed that the US Manufacturing and Services PMI Composite Index for June was 54.6, higher than May's 54.5. The Manufacturing PMI was 51.7 and the Services PMI was 55.1, both higher than market expectations of 51 and 53.7, respectively, and higher than May’s figures of 51.3 and 54.8.
Preliminary data from S&P Global earlier that day indicated that the Eurozone Manufacturing and Services PMI Composite Index for June was 50.8, lower than market expectations of 52.4 and May's 52.2. The published preliminary data also showed that the UK Manufacturing and Services PMI Composite Index was 51.7, below the market expectation of 53.3 and May's 53.
Macquarie Global Forex and Rates Strategist Thierry Albert Wizman expects the dollar to continue strengthening due to potential political uncertainties in Europe, which may ultimately dent business and consumer confidence. Wizman noted that strong and sustained rises in the euro or pound are unlikely; it may be best to sell high and buy lower to cover positions.
Erik Nelson, Assistant Vice President for Investments at Wells Fargo Advisors, stated that the French election remains the primary focus in the European forex market.
Matt Weller, Head of Research at the online brokerage, indicated that the US Treasury’s designation of Japan as a potential currency manipulator on the 20th is a diplomatic warning against further official interventions in the forex market. The yen's moves next week should be closely observed.
Long-term, commodity analysts remain very bullish on gold. However, investors should not expect a significant rebound soon as the summer trading season begins.
Despite optimistic market sentiment, gold remains stuck in a relatively narrow trading range. Last Friday (June 12), gold failed to sustain its gains above $2350 per ounce. On the downside, it managed to hold the support level around $2300 per ounce.
Gold started strong last week but declined by the weekend. August gold futures closed last Friday at $2334.7 per ounce, down 0.58% for the week. Spot gold closed at $2321.19 per ounce, down 0.49% for the week.
Gold prices fell over 1% last Friday, weighed down by a strong dollar and rising bond yields after data showed robust US business activity. Conversely, palladium, used in auto catalysts, jumped as much as 11%.
The dollar rose by 0.2% last Friday, hitting a seven-week high of 105.92 during the day and closing at 105.83, making gold more expensive for holders of other currencies, while the 10-year US Treasury yield climbed after the US data release.
According to CME Group's FedWatch tool, traders currently see a 65% chance of a Fed rate cut in September, little changed from late last Thursday. Lower rates reduce the opportunity cost of holding non-yielding gold.
Capitalight Research’s Head of Research Chantelle Schieven suggested that investors prepare for increased volatility in the gold market. She noted that lower liquidity in summer traditionally leads to more volatility, and market uncertainty is extremely high as investors try to anticipate the Federal Reserve's next actions.
Although gold prices are stagnating, Schieven emphasized the importance of looking at the bigger picture. She pointed out that gold has established a solid base around $2280 per ounce. Despite high inflation pressures, she expects the Federal Reserve to cut rates in September to support the economy.
Naeem Aslam, Chief Investment Officer at Zaye Capital Markets, believes gold will remain well-supported in the short term as traders use precious metals to hedge positions before the summer holidays.
However, not all analysts are optimistic that gold can maintain its current highs. Barbara Lambrecht, a commodities analyst at Commerzbank, noted that the Federal Reserve is reluctant to signal the start of a new monetary easing cycle.
In a report last Friday, Lambrecht stated, “Since the US may not cut rates until the end of the year, the potential for further rises may be limited. Moreover, gold ETFs have seen recent outflows of funds. Consequently, speculative financial investors' net long positions rose to the highest since spring 2020 during the last reporting week, making their market positioning worth noting. This high level of optimism among investors could lead to a pullback in gold prices.”
Dollar Index Technical Analysis:
The dollar index faced resistance just below 105.95 last Friday and found support above 105.50, suggesting that after a short-term dip, the dollar could resume its upward trend. If the index stabilizes above 105.55 today, the target will be in the 106.00-106.15 range. Today's short-term resistance levels are 105.95-106.00, with crucial resistance at 106.10-106.15. Short-term support levels are 105.55-105.60, with crucial support at 105.35-105.40.
EUR/USD Technical Analysis:
EUR/USD found support above 1.0670 last Friday and faced resistance below 1.0720, indicating that after a short-term rise, it might continue to fall. If EUR/USD faces resistance below 1.0720 today, the target would be between 1.0670-1.0645. Today's short-term resistance levels are 1.0715-1.0720, with crucial resistance at 1.0740-1.0745. Short-term support levels are 1.0670-1.0675, with crucial support at 1.0645-1.0650.
Gold Technical Analysis:
Gold found support above 2316.00 last Friday and faced resistance below 2369.00, suggesting that after a short-term rise, it may continue to fall. If gold faces resistance below 2340.00 today, the target will be between 2302.00-2283.00. Today's short-term resistance levels are 2335.00-2336.00, with crucial resistance at 2354.00-2355.00. Short-term support levels are 2302.00-2303.00, with crucial support at 2283.00-2284.00.
CWG Market Forecast:
For the dollar today, the main strategy is to buy on dips, with a stop-loss for any breaks. Secure profits with gains of more than 30 points and withdraw all pending orders before the US market opens. This strategy is suitable for margin trading and can be used as a reference for spot trading.
Dollar Index: Buy near the lower end of the 106.00-105.60 range, with a stop-loss for any 25-point break, aiming for the upper end of the range.
EUR/USD: Sell near the upper end of the 1.0720-1.0670 range, with a stop-loss for any 30-point break, aiming for the lower end of the range.
GBP/USD: Sell near the upper end of the 1.2675-1.2620 range, with a stop-loss for any 30-point break, aiming for the lower end of the range.
USD/CHF: Buy near the lower end of the 0.8960-0.8920 range, with a stop-loss for any 30-point break, aiming for the upper end of the range.
USD/JPY: Buy near the lower end of the 160.05-159.35 range, with a stop-loss for any 40-point break, aiming for the upper end of the range.
AUD/USD: Sell near the upper end of the 0.6665-0.6625 range, with a stop-loss for any 25-point break, aiming for the lower end of the range.
USD/CAD: Sell near the upper end of the 1.3720-1.3675 range, with a stop-loss for any 30-point break, aiming for the lower end of the range.
Gold: Sell near the upper end of the 2336.00-2303.00 range, with a stop-loss for any $10 break, aiming for the lower end of the range.
