Market Analysis

XAUUSD

Prediction: Decrease

Fundamental Analysis:

Last Friday, Reuters reported that the People's Bank of China paused its gold purchases in May, following an 18-month streak of increasing reserves. China's gold holdings remained steady at 72.80 million ounces at the end of May, triggering an immediate drop in gold prices (XAU/USD) below $2,340, wiping out much of the weekly gains.

In the U.S. session, the Bureau of Labor Statistics (BLS) announced that Nonfarm Payrolls increased by 272,000 in May, well above the market expectation of 185,000. This stronger-than-expected employment data led to a sharp rise in U.S. Treasury bond yields, putting heavy selling pressure on gold and causing the precious metal to lose more than 2% in value on the day.

Technical Analysis:

The recent swing high has sparked bullish momentum, but mixed signals advise caution before positioning for further gains. Resistance around $2,395 may cap any upward move, though sustained buying could push gold towards $2,425 and challenge the May high of $2,450. On the downside, $2,060 appears to be critical support. A decline could be viewed as a buying opportunity around $2,337, limiting the fall to $2,315-$2,314 or the recent low. However, a breakdown below this support could confirm a move through the 50-day moving average, paving the way for deeper losses and a test of $2,280 support.

EURUSD

Prediction: Decrease

Fundamental Analysis:

The European Central Bank recently reduced interest rates by 25 basis points. However, this move was interpreted as hawkish, as it dampened expectations for additional rate cuts. The ECB also updated its economic projections, with slight upward revisions in GDP growth for 2024 and increased inflation forecasts for 2024 and 2025.

In the United States, employment data indicated a decline in job openings, a slowdown in private sector job creation, and an increase in initial jobless claims. Despite these trends, the May Nonfarm Payrolls report exceeded expectations, adding 272K new jobs. This robust labor market data, coupled with persistent inflation, suggests that the Federal Reserve is unlikely to cut rates in its upcoming meeting. Key forthcoming data includes the US CPI and the Michigan Consumer Sentiment Index.

Technical Analysis:

The EUR/USD pair is encountering immediate resistance at 1.0900, which is the midpoint of the ascending regression channel. If the pair manages to rise above this level and establish it as support, it could target 1.0950 and subsequently 1.0980. On the downside, the crucial support zone lies between 1.0860 and 1.0850, encompassing the 50-period and 100-period SMAs and the lower channel limit. Below this, the 1.0800 area, which includes the 200-period SMA and a static level, serves as another significant support.

USDJPY

Prediction: Increase

Fundamental Analysis:

The recent sharp rise in USD/JPY, driven by a robust US jobs report, might be overstated, given previous weaker employment data and the economic conditions in Japan. In Japan, real wages have been falling for 25 consecutive months as inflation outpaces wage growth, complicating the Bank of Japan's (BoJ) policy normalization efforts. The BoJ remains the sole major central bank still engaging in quantitative easing, leading to significant yen depreciation, which is concerning policymakers. However, there is a possibility that the BoJ could reduce bond purchases, potentially strengthening the yen. Additionally, Japanese authorities might intervene directly in the forex market to support the yen, as a weak currency is viewed as detrimental to the economy.

Technical Analysis:

USD/JPY has seen a notable rebound in early US trading but remains constrained by the 157.70 resistance level. The current bias is neutral. A breakout above 157.70 could revive the broader bullish momentum, targeting the 160.20 high. On the flip side, a drop below 154.53 would shift the focus to the downside, potentially exposing the 151.86 support and paving the way for deeper corrective movements.

US Oil

Prediction: Expected decrease

Fundamental Analysis:

Recent instability in the market has raised concerns about possible further declines in US oil prices. This followed a strong US jobs report, suggesting the Federal Reserve may delay interest rate cuts. This scenario typically strengthens the dollar, making oil more expensive for holders of other currencies and potentially reducing demand. Additionally, despite assurances from OPEC+ about potentially halting or reversing output increases, the market viewed the recent OPEC+ meeting as a sign of increased supply, contributing to bearish sentiment. Both Brent and WTI saw weekly losses as a result.

Technical Analysis:

In technical terms, oil prices face resistance levels at the $75.9 pivot and the $78.13 200-day moving average. Breaking above these levels could lead to further price increases. Conversely, a decline below $72.5 would indicate a continuation of the downtrend, potentially targeting $69.64. These key levels will likely influence the near-term direction of the asset.

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