- US indices underperform compared to global stocks as investors await the latest US inflation data.
- Oil is trading almost 22% higher in 2024 applying upward pressure on inflation and triggering a more cautious approach to tomorrow’s Consumer Price Index.
- The US Dollar declines and Gold rises in value despite the possibility of a more hawkish Federal Reserve.
- The head of the Federal Reserve Bank (FRB) of Dallas, Mrs Logan, advises it’s too early to think about lowering interest rates since the danger of inflation stabilizing above the target level remains.
XAUUSD – Buyers Maintain Control but Oscillators Point To The Assets Being Overpriced
The price of Gold trades steadily higher during this morning’s Asian session and is attempting to break yesterday’s all-time high. Gold has risen more than 15% since February 2024 as investors look at an alternative hedge against inflation. In addition to this, many countries including China and India look to lower exposure to the Dollar ahead of US elections. However, investors should note that if US inflation reads higher than expectation, demand for the Dollar may return.
Investors also should note that the inverse correlation between Gold and the US Dollar is slightly weaker than traditionally seen. Therefore, even with a more expensive Dollar, the price of Gold may simply retrace or correct, but retain the longer-term gains. According to Friday’s report from the US Commodity Futures Commission, the number of speculative positions for “sellers” remains weak. The latest report confirmed that only 0.719k more contracts were added for sellers and more than 21.200k added for buyers.
Technical analysis for Gold is two sided. Momentum-based indicators point towards an upward price movement as does price action. However, oscillators indicate the asset may be trading above its intrinsic value and may correct. A short-term correction may decline between 2,292.29 and 2,318.78. For another bullish impulse wave, technical analysts point at a target of 2,376 based on Fibonacci levels and the size of previous impulse waves.
EURUSD – ECB Rate Cut Upcoming According to Analysts
The Euro is gaining momentum since the start of the European Trading session. However, the price is trading slightly lower than the day’s open price. In addition to this, in the short-term the price is forming lower lows and lower highs. When monitoring each currency individually, the US Dollar is trading slightly higher while the Euro is unchanged.
No major economic data has been released in the past 24 hours or is due today. However, volatility is likely to significantly rise from tomorrow onwards. If US consumer inflation reads 3.5% or more, the price of the Dollar is likely to gain. If the monthly producer inflation on Thursday also reads higher than 0.3%, this will further fuel a potential bearish impulse wave.
However, another key factor will be the European Central Bank’s Rate Decision and Forward Guidance. If the ECB suddenly become more dovish, as analysts believe, the Euro may again struggle to hold onto its value, if the Fed are unlikely to adjust. Currently there is more pressure on the ECB to cut interest rates considering inflation has returned to normal levels amongst most state members and most countries are witnessing stagnation. Analysts currently expect the European regulator to be the first to cut interest rates and believe this will take place in June.
Michalis Efthymiou
Market Analyst
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