Investing.com - The U.S. dollar inched up on Monday in Asia after falling last week following a speech from New York Federal Reserve President John Williams (NYSE:WMB) revived hopes of a large interest rate cut at the Fed’s next policy meeting.
Investing.com - Gold prices rose on Monday in Asia after landing a second-straight week of gains as traders expect a U.S. rate cut this month.
The key event that will likely drive the price action in gold this week is the European Central Bank’s (ECB) monetary policy decision on July 25. This is because it will also impact the U.S. Dollar Index. Since gold is a dollar-denominated investment, its direction will be determined by the movement in the greenback.
It’s a big week ahead for the markets. Earnings, economic data, Iran, trade war chatter, and the ECB are all in focus.
Investing.com - The European Central Bank’s policy meeting will be front and center this week as investors wait to see what action central bank head Mario Draghi may take to support the euro area economy.
Australian and New Zealand Dollars both benefited from expectations of a rate cut by the Fed. The Aussie also picked up strength after the release of the Reserve Bank of Australia Monetary Policy Minutes and steady employment data. The Kiwi was supported by consumer inflation data that met expectations.
Powell and Williams are on the same page. They both see the need for a rate cut at the end of July, and they both feel the Fed has to act quickly to support and attempt to steer the economy in the right direction. Their comments last week also indicate that they are both willing to override the models.
Gold remained underpinned by expectations of a 25-basis point rate cut by the U.S. Federal Reserve, and capped by low expectations of a 50-basis point rate cut by central bank policymakers. The speculative buying in crude oil came to a screeching halt last week when the U.S. announced that Iran was willing to talk about its nuclear program. The problem for bullish natural gas traders is the heat is moving too quickly to feed lingering periods of high demand.
The price action the last two sessions means that investors should look for heightened volatility from now until the Fed’s interest rate decision on July 31. The market should be especially sensitive to the ECB decision on July 25. If they are extremely aggressive then the Euro could plunge, the dollar index could spike higher and gold prices could tumble.
The May Japanese MoM All Industry Activity Index data release shocked the street analysts. The Kiwi pair kept lingering near its 3-month top vicinity on Friday.
Gold markets rallied significantly during the week, initially falling but then turning around to bounce from the $1400 level. That being said, the $1450 level continues offer resistance. We are testing the top of the market right now.
The US dollar went back and forth against the Japanese yen during the trading week, dancing around the ¥108 level. By forming a neutral candle stick, this shows that the market really doesn’t know where we are going next.
The British pound broke down during the course of the week, slicing through the 1.25 level underneath. That’s an area that shows a lot of support, and therefore it’s likely that we have a fight on our hands. Overall, the hammer that we formed is a bullish sign.
The British pound initially fell during the course of the week, reaching down towards the 134 young level before bouncing significantly to form a bit of a hammer. That being the case, although it does look very bullish, the reality is that this market is oversold.
The Euro continues to go back and forth overall for the week, as we are essentially in a 100 point range. This has been the case for two weeks now, as the market has no idea what to do next.
The Australian dollar spent most of the week rallying above the significant resistance barrier that had been keeping this market down for some time. The fact that we have pierced that level is of course very bullish overall.
Gold markets have gapped higher during the trading session on Friday, shooting towards the $1450 level. That’s an area that should be massive resistance, but I do think that we break out above it given enough time.
The British pound pulled back again during the trading session on Friday, reaching down towards the 1.25 level which of course is a large, round, psychologically significant figure. While this pullback after a very bullish candle stick on Thursday would typically be a sign to start picking up value, I a bit hesitant when it comes to the British pound.
The British pound rallied a bit during the trading session on Friday, reaching towards the ¥135 level. This is an area that was previous support, and now it is asking questions as to whether or not it’s going to be resistance. I must say that the candlestick looks good, but longer-term, this is a pair that could struggle.
The Euro has fallen again during the trading session on Friday, as we continue to see significant resistance at the 1.13 handle. However, this is a market that also has significant support, so at this point in time I feel that we are simply floundering, looking for direction.
The Australian dollar had originally broken out of major resistance during the trading session on Thursday, and on Friday pulled back a bit from those extreme highs based upon the daily candle stick on Thursday. That of course is typical, because we had pierced major resistance, so it should now be major support.