Market Analysis

XAUUSD

Prediction: Decrease

Fundamental Analysis:

Gold (XAU/USD) has recently been oscillating between $2,270 and $2,450, with price movements influenced by several economic factors. The May US Producer Price Index (PPI) data came in lower than anticipated, suggesting that the Federal Reserve (Fed) might consider cutting interest rates sooner, which would support gold by lowering its holding costs. However, the Fed's more cautious outlook on future rate cuts, as indicated in the Summary of Economic Projections (SEP), has dampened market optimism, causing a retreat in gold prices. Additionally, the cooler-than-expected Consumer Price Index (CPI) data triggered a decline in the US Dollar, which typically has an inverse relationship with gold. Despite a robust labor market and rising wages, the Fed's prudent stance has tempered expectations of imminent rate cuts, impacting gold's performance.

Technical Analysis:

Gold seems to be forming a bearish Head-and-Shoulders (H&S) pattern, suggesting a potential trend reversal. The structure, including the left and right shoulders and the head, along with decreasing trading volume, supports this pattern. A decisive break below the neckline at $2,279 would confirm the H&S pattern and activate downside targets at $2,171 and $2,106. On the other hand, a break above $2,345 could invalidate the H&S pattern, indicating a possible continuation towards the $2,450 peak.

EURUSD

Prediction: Decrease

Fundamental Analysis:

The EUR/USD pair continues to trade below 1.0800, influenced by a strong US dollar despite softer US inflation data. Recent Producer Price Index (PPI) and Consumer Price Index (CPI) reports suggest a moderated inflation outlook, but the Federal Reserve's hawkish stance outweighs these indicators. Investors are closely watching the outcome of the French parliamentary elections, concerned that a far-right victory could trigger a debt crisis. Meanwhile, the European Central Bank (ECB) has refrained from committing to a specific rate-cut strategy, citing persistent inflation driven by wage increases in the services sector. These mixed economic signals and policy uncertainties are weighing on EUR/USD, amidst navigating global monetary policies and political dynamics.

Technical Analysis:

EUR/USD has retreated to around 1.0800 after briefly touching a three-day high near 1.0850. Previously bouncing from a nearly five-week low near 1.0710, the pair broke above a Symmetrical Triangle pattern on the daily chart, suggesting a short-term improvement. It now targets a potential rise to around 1.0900, aiming for levels last seen two months ago.

Despite recent gains, the pair faces uncertainty near the 200-day Exponential Moving Average at 1.0800, indicating a cautious long-term outlook. The 14-day Relative Strength Index (RSI) has stabilized near 40.00, suggesting a consolidation phase with RSI expected to fluctuate between 40.00 and 60.00.

USDJPY

Prediction: Increase

Fundamental Analysis:

Following a softer-than-expected US CPI report, the US Dollar (USD) initially weakened, briefly strengthening the Japanese Yen (JPY). However, market sentiment shifted as expectations for only one Fed rate cut this year supported the USD, reversing its losses. The Japanese Yen's weaker performance against other major currencies suggests limited potential for a hawkish surprise from the Bank of Japan, maintaining a bearish stance.

Technical Analysis:

USD/JPY is currently trading around 156.90, showing bullish momentum within an upward channel pattern. The 14-day RSI indicates upward strength with levels above 50. Immediate resistance stands at 157.00; a breakout could propel the pair towards targets at 158.00 and 158.80. Further resistance levels include 160.32, a significant high over multiple decades. On the downside, support near the 50-day EMA at 155.09 may stabilize price corrections, while breaching below could increase selling pressure towards the 152.80 support zone.

Dollar Index (USDX)

Prediction: Expected Increase

Fundamental Analysis:

Despite a softer-than-expected May Producer Price Index (PPI), the U.S. dollar strengthened on Thursday due to a hawkish stance from the Federal Reserve. May's PPI showed an unexpected 0.2% decline following a 0.5% increase in the previous month. Earlier, dollar selling had been triggered by CPI data, but optimism over moderating inflation failed to dampen the dollar. The Fed's surprising projection of only one rate cut this year, delaying easing until December, spurred a rebound in the U.S. dollar index, which climbed 0.33% to 105.06, reaching a four-week high of 105.46 on Tuesday.

Technical Analysis:

After initially dropping around 0.8% against major currencies, the dollar has recovered approximately half of its losses. Technically, the dollar index found support at the 200-day moving average multiple times since April, attracting buyer interest. Currently, it is testing the 50-day moving average again, aiming to sustain its upward momentum.

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