EUR/USD Eyes Further Gains Amid Soft U.S. Inflation and Fed Caution
Market Overview
European
European stock markets are edging up, with the MSCI Europe index rising by 0.5%. Technology stocks, particularly from large companies like JD.com from China, have seen a strong increase after posting positive earnings results. The improvement in sentiment is attributed to the temporary trade war truce between the U.S. and China, with U.S. tariffs on goods reduced to 30% and Chinese tariffs on U.S. goods
reduced to 10%.
However, uncertainty about global trade conditions remains, keeping investors cautious. Major indices such as the Euro Stoxx 50 are up by 0.3%, while Germany's DAX index rose by 0.4%. Investors are awaiting key macroeconomic data, including U.S. CPI and PPI, along with the upcoming Fed policy decisions.
Cryptocurrency
The cryptocurrency market continues to maintain strong growth, particularly Bitcoin (BTC), which is currently trading around $104,271, just shy of its all-time high of $109,000. In the past week, Tether purchased 4,812.2 BTC worth $459 million, increasing the total amount of Bitcoin it holds. This reflects strong interest from institutional investors, who are looking for safer access to digital assets.
Additionally, improvements in macroeconomic factors, especially the reduction of tariffs between the US and China, have provided momentum for the growth of digital assets. It is forecasted that the total value of digital assets could reach $10 trillion by 2026, continuing to increase interest in Bitcoin and Ethereum.
XAU/USD
Prediction: Decrease
Gold prices have dropped to $3,240 in the recent trading session, after reaching higher levels previously. This decline is primarily due to positive signals from the trade negotiations between the U.S. and China, where both sides agreed to temporarily reduce import tariffs, diminishing gold’s appeal as a safe-haven asset.
However, the long-term trend for gold remains bullish, as key support levels have not yet been broken. Investors should monitor support zones to assess the likelihood of the trend continuing upward.
FUNDAMENTAL ANALYSIS
Monetary Policy and Fed Impact:
The U.S. CPI data for April shows that inflation has decreased to 2.3%, lower than the market's expectation of 2.4%. This opens up the possibility for the U.S. Federal Reserve (Fed) to lower interest rates further, which supports gold—a non-yielding asset.
Gold ETFs recorded an inflow of 115 tons in April, a sign that demand for gold remains strong.
Inflation and Market Drivers:
While inflation is trending downward, the Fed's low-interest-rate policies continue to make gold an attractive option.
The reduction in import tariffs between the U.S. and China helps improve market sentiment, but uncertainty around the sustainability of the trade agreement could continue to bolster demand for gold as a safe-haven asset.
Geopolitics and Market Sentiment:
Ongoing trade tensions between the U.S. and China continue to affect investor sentiment. Although the two countries have agreed to temporarily reduce tariffs, the uncertainty over the sustainability of this agreement could continue to strengthen gold's position as a safe asset.
TECHNICAL ANALYSIS
Key Resistance Levels
- $3,298.400: This is a strong resistance level. If the price breaks above this, it could aim for the $3,411 zone or higher.
- $3,411: The highest peak. If broken, gold could continue to rise sharply.
Key Support Levels
- $3,240: The current support zone. If the price holds above this level, gold could rebound and continue its upward trend.
- $3,212.249: A stronger support level. If gold breaks below this zone, we might see a deeper correction.
Technical Indicators:
The current RSI is 35.83, indicating that gold is in the oversold zone. This could signal a potential recovery if the price holds above key support levels.
EMA: The price is currently below the EMA 34 and EMA 89, indicating short-term bearish pressure. However, gold remains above the EMA 200, signaling that the long-term trend is still bullish.
Trading volume remains high, showing strong interest from investors in gold. However, if trading volume drops significantly, a deeper correction may occur.
EUR/USD
Prediction: Increase
The EUR/USD pair is in a strong upward trend, with higher highs and higher lows recently. Currently, the price is showing signs of correction after touching the recent high at 1.11903. If the price breaks this level, it could head towards 1.12753 or higher. However, if a strong correction occurs, key support levels will need to be monitored to assess the likelihood of the trend continuing upward.
FUNDAMENTAL ANALYSIS
Monetary Policy and Fed Impact:
The Federal Reserve (Fed) continues to maintain a cautious monetary policy despite signs of slight inflation decrease.
Although U.S. inflation data showed a 0.2% increase in April, which was lower than expected, investors still expect the Fed to implement rate cuts in 2025, especially if economic conditions and the impact of import tariffs persist. This continues to put pressure on the USD, causing it to depreciate against major currencies, including the EUR.
Trade Tensions and Market Sentiment:
Ongoing trade tensions between the U.S. and China remain a key factor affecting global financial markets. However, recently, a temporary trade war truce between the two countries has eased concerns about a global economic recession.
The uncertainty surrounding future trade deals may cause investors to maintain a cautious stance, which supports the EUR’s growth against the USD in the short term.
Impact of Inflation and Economic Growth Data:
U.S. inflation data showing lower-than-expected increases helps alleviate concerns about rising inflation in the near future. This data could reduce expectations for short-term rate cuts by the Fed. However, instability in trade agreements and the U.S.'s protectionist trade policies could increase import costs and maintain pressure on the U.S. economy, affecting the USD and supporting the EUR.
Global Economic Outlook:
Global economic conditions show slight improvement thanks to temporary trade agreements and soft inflation data from the U.S. However, uncertainty in trade policy and factors such as negotiations with China, the UK, and other countries will remain key for investor sentiment. Despite a slight recovery in risky assets, the USD remains under pressure from current economic and political uncertainties.
TECHNICAL ANALYSIS
Key Resistance Levels
- 1.13828: A strong resistance level. If the price breaks through this level, it could head towards 1.14842 or higher.
- 1.12753: The nearest resistance level, which may act as a stopping point if the price encounters a strong reaction.
Key Support Levels
- 1.10759: The current support zone. If the price holds above this level, the uptrend could continue.
- 1.09461: A stronger support level. If the price drops below this level, a correction signal may appear.
Technical Indicators:
RSI: The current RSI is at 47.88, not overbought or oversold, indicating there is no immediate reversal signal.
EMA: The price is currently above the EMA 34 and EMA 89, showing a strong short-term uptrend. EMA 200 is still below the price, supporting the long-term uptrend.
Trading Volume: Trading volume has increased significantly during price increases, showing strong investor interest. If the volume decreases, a correction may occur.
BTC/USD
Prediction: Increase
Bitcoin (BTC) has maintained a strong bullish trend recently, surpassing key resistance levels and reaching a high near $105,000. However, the price is currently in a mild correction phase, consolidating at key support levels. The long-term trend remains strong, with prices holding above support zones like $103,500, indicating the sustainability of the upward trend.
FUNDAMENTAL ANALYSIS
Fed's Monetary Policy:
The U.S. Federal Reserve (Fed) continues to maintain a cautious interest rate policy, which supports non-yielding assets like Bitcoin.
Factors such as the reduction in tariffs between the U.S. and China have created a favorable environment for the growth of risk assets, including Bitcoin.
Cryptocurrency Market Growth:
The partnership between FalconX and Standard Chartered is a positive signal for cryptocurrency adoption by traditional financial institutions, increasing demand for Bitcoin.
This demonstrates strong interest from major institutions, especially in offering fiat payment services and asset custody.
Institutional Investment:
Large investment funds, like Tether, have purchased significant amounts of Bitcoin, showing an increase in demand from institutional investors.
Tether's purchase of $459 million worth of Bitcoin indicates the sustainable growth of Bitcoin and the rise of institutional investment channels.
Geopolitical Situation:
The easing of trade tensions between the U.S. and China has improved market sentiment, increasing demand for digital assets.
Geopolitical factors still need to be monitored, as events such as conflicts or policy changes could affect investor sentiment.
TECHNICAL ANALYSIS
Key Resistance Levels
- $105,706 / $105,281: This is a strong resistance zone. The price has touched this level before retreating. If the price breaks through this zone, it could continue its strong upward movement towards the next resistance levels.
- $102,504: Another resistance zone where the price previously encountered resistance. This zone could still act as a barrier in the short term.
Key Support Levels
- $95,000: This is a key support level that coincides with the EMA 200, which could act as dynamic support if the price continues to pull back.
- $92,095: Another support level to watch if the price continues to decline.
- $85,593: This is a lower support level. A break below this could indicate a shift in market sentiment.
Technical Indicators:
RSI: The current RSI is at 54.35, indicating no overbought or oversold conditions, and the market could continue to rise.
EMA: The price is above the EMA 200, indicating a strong long-term uptrend. However, being below the EMA 34 and EMA 89 suggests that short-term corrections could occur.
Trading Volume: High trading volume indicates strong investor interest, but a drop in volume could signal a potential correction.
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