Market Analysis
EURUSD
Prediction: Increase
Fundamental Analysis:
EUR/USD has seen a third consecutive day of gains, trading around 1.0750 in Asian markets on Monday. Speculation about potential US Federal Reserve interest rate cuts in 2024 has softened the US dollar, providing support for the EUR/USD pair.
Recent US economic indicators reveal a slowdown in inflation to its lowest annual rate in over three years. Mary Daly, President of the Federal Reserve Bank of San Francisco, suggested that while monetary policies are effective, it's premature to pinpoint the timing of rate cuts.
In Europe, ECB Governing Council member Olli Rehn hinted at the possibility of two interest rate reductions later this year. Mixed inflation data across European countries has been reported. Furthermore, the initial round of French legislative elections showed strong performance by Marine Le Pen's National Rally party.
Technical Analysis:
EUR/USD traded within a narrow range last Friday, encountering resistance from a Symmetrical Triangle pattern. A break below this pattern could drive further declines. The overall trend appears bearish, with EUR/USD trading below the 200-day Exponential Moving Average (EMA) around 1.0780. The Relative Strength Index (RSI) stands near 40.00; a drop below this level might signal increasing bearish momentum. Investors remain cautious, delaying decisive positions pending upcoming inflation data releases.
GBPUSD
Prediction: Likely to Increase
Fundamental Analysis:
GBP/USD is trading robustly around 1.2655 in early Asian trading on Monday. The US dollar is weakening following the US PCE Price Index for May, which hit its lowest annual rate in over three years, providing support to the major pair. Investors are eagerly awaiting the US June ISM Purchasing Managers Index (PMI) for further market direction. Meanwhile, the US core PCE inflation gauge cooled in May, sparking speculation about potential interest rate cuts by the Federal Reserve later this year.
The upcoming UK general election on Thursday adds to market volatility expectations for GBP/USD. Recent exit polls suggest that the Labor Party might outperform Prime Minister Rishi Sunak's Conservative Party.
Technical Analysis:
GBP/USD faces a critical resistance zone near 1.2640, where the 100-day and 50-day Simple Moving Averages intersect. Failure to breach this level could lead to a retracement towards psychological support at 1.2600 and the 200-day SMA at 1.2550. On the upside, immediate resistance lies at the 50-period SMA on the 4-hour chart around 1.2670, followed by the 200-period SMA between 1.2710-1.2720. Sustaining above 1.2640 will be pivotal for determining the short-term trend.
XAUUSD
Prediction: Increase
Fundamental Analysis:
Gold prices declined following a recent inflation report indicating progress in reducing inflationary pressures, which has raised expectations for potential Federal Reserve rate cuts in 2024. The US PCE Price Index met expectations, providing a positive economic outlook. Despite rising bond yields impacting gold negatively, the dollar remained relatively weak. Improved US consumer sentiment and a cautious stance from Fed officials regarding inflation and monetary policy have influenced market sentiment. Currently, there is a 69% probability of a 25-basis-point rate cut by September, with expectations of a 35-basis-point cut by the end of 2024.
Technical Analysis:
Gold is facing downward pressure, highlighted by a bearish Head-and-Shoulders chart pattern, suggesting further potential declines. The Relative Strength Index (RSI) indicates a bearish sentiment with limited buying momentum. If gold breaks below the $2,300 level, it may find support at the May 3 low of $2,277 and the March 21 high of $2,222, with downside objectives set between $2,170 and $2,160 as per the Head-and-Shoulders pattern. Conversely, a breakout above $2,350 could test resistance levels at the June 7 cycle high of $2,387 and potentially reach the $2,400 mark.
USDJPY
Prediction: Increase
Fundamental Analysis:
The Japanese Yen has recently reached historic lows despite the government's efforts to stabilize it, which have been largely ignored by traders. Concurrently, the US Dollar Index has strengthened due to the Yen's weakness, even as recent US economic indicators like Durable Goods and Pending Home Sales have shown mixed results. Moreover, Personal Consumption Expenditures data has aligned with a trend of disinflation, impacting market sentiment minimally. Overall, the Yen's decline and the Dollar's ascent against other currencies are pivotal developments in the forex market.
Technical Analysis:
USD/JPY has surged to new multi-decade highs amid Japan's struggles to intervene effectively. Despite warnings from the Finance Minister, market forces continue to drive the Yen lower, limiting the government's options. While the Relative Strength Index (RSI) indicates overbought conditions on the daily chart, a correction may be delayed. Focus could shift to key technical levels such as the 55-day and 100-day Simple Moving Averages (at 156.53 and 153.81, respectively) as potential support zones before potential retests of recent highs, challenging Japan's intervention efforts.
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