News Summary:
On Monday (June 24), the US dollar index slightly retreated but remained near an eight-week high, ultimately closing down 0.32% at 105.41. The USD/JPY surged to 159.94 before a swift drop of over 80 points, with market analysts suggesting that Japanese officials might be conducting exchange rate checks. US Treasury yields fell, with the two-year yield, more sensitive to monetary policy, closing at 4.732%, and the 10-year bond yield rising to 4.23%.
Gold prices rebounded 0.56% on Monday (June 24), closing at $2334.16 per ounce, supported by the dollar's decline following statements from Fed officials warning of increasing unemployment risks. Investors are now awaiting US inflation data later this week, which could impact the Fed's monetary policy direction.
Boosted by strong summer driving demand prospects and concerns over supply due to Middle East tensions and a drone attack on a Russian refinery, both major crude benchmarks rose by more than 1% on Monday (June 24). WTI crude closed up 1.41% at $81.55 per barrel, while Brent crude rose 1.17% to $85.37 per barrel.
Data and News Released the Previous Day:
Due to market concerns over potential political risks in the US and Europe this week, the dollar weakened against a basket of currencies excluding the yen. The dollar index fell in overnight trading, expanded its losses in the morning, then partially rebounded, closing down. The dollar index, which measures the greenback against six major currencies, fell 0.31% on the day to 105.473.
Veteran forex analyst David Scutt noted that the daily chart for the dollar index surpassed 105.742 on the 21st. Given the momentum shown by the MACD and relative strength index, there is potential to retest the 106.50 resistance level. However, he does not believe the index will reach this point.
Scutt mentioned that the last time the dollar index hit such levels, it was amid expectations of significant interest rate cuts by the Fed in 2024, which is the opposite of the current scenario. While a major driver of this move is the increased uncertainty from the French elections commencing this weekend, it is now accounted for in prices. Considering the Bank of Japan's potential intervention to support the yen and the upcoming release of the US core personal consumption expenditures price index, which might indicate weakening inflation pressures, bull traders should not expect an easy ride.
Forex analyst Simon Harvey indicated a likely increase in defensive positioning in the run-up to the first round of the French presidential elections and the US presidential debate.
Brian Daingerfield, head of G10 FX strategy at NatWest Markets, part of the Royal Bank of Canada, noted significant interest in whether the US presidential debate would directly mention the dollar. Trump has repeatedly criticized the dollar for being too strong.
Earlier in the day, the USD/JPY exchange rate approached 160:1 before quickly reversing, though the decline was fully recovered by the end.
TradeX strategist Michael Brown commented that this did not appear to be an intervention but showed the market's nervousness over potential Japanese actions. As long as the yen's decline is neither rapid nor disorderly, Japan's Ministry of Finance is unlikely to intervene again.
Daingerfield mentioned that market participants are trying to determine if Japan's Ministry of Finance has set specific exchange rate levels for potential intervention.
Japan’s Vice Finance Minister for International Affairs, Masato Kanda, stated that if the forex market experiences excessive volatility, the Japanese authorities will take appropriate measures. Japan's inclusion on the US Treasury’s watchlist of potential currency manipulators does not restrict Japan's actions.
Early Tuesday (June 25) in Asian trading, spot gold slightly fell and is currently trading around $2330.89 per ounce. Gold rebounded 0.56% on Monday, closing at $2334.16 per ounce, supported by the dollar's decline following statements from Fed officials about rising unemployment risks. Investors are awaiting US inflation data to be released later this week, which could impact the Fed's monetary policy direction.
David Meger, director of alternative investments and trading at High Ridge Futures, stated that gold is in a consolidation phase with active buying on dips, as investors look for clues on future interest rate trajectories and potential rate cuts.
This week’s focus will be on Friday’s US personal consumption expenditures (PCE) price index data, the Fed's preferred inflation measure. Today's trading will also keep an eye on the US June Conference Board consumer confidence index.
According to CME's FedWatch tool, traders currently see a 67.3% chance of a Fed rate cut in September.
"We believe that within the next 12-18 months, gold prices could reach $3,000 per ounce, but the current market activity doesn't justify this price level," Bank of America said in a research report.
The report added: "Achieving this target would require a recovery in non-commercial demand from current levels, which would also require Fed rate cuts. Inflows into physically-backed ETFs and a rebound in LBMA clearing volumes would be the first encouraging signs."
From a daily chart perspective, daily-level moving averages and MACD are intertwined, indicating significant short-term volatility favoring a range-bound movement. Due to the KDJ forming a death cross, gold prices are likely to trend downwards unless they breach the 55-day moving average at $2341.03. Below, watch for support near the $2300 level and the June 7 low of $2286.68, with stronger support around the 100-day moving average at $2246.98.
If gold breaks above the 55-day moving average at $2341.04, it will generate a short-term bullish signal. Further resistance is expected around $2350 and last week's high near $2368.62.
US Dollar Index Technical Analysis:
The dollar index rose on Monday but encountered resistance below 105.90 and found support above 105.35, indicating that the index might maintain a downward trend after a short-term rise. If the dollar index faces resistance below 105.80 today, the subsequent target for declines will range between 105.25--105.05. Today's short-term resistance for the dollar index is at 105.75--105.80, with significant short-term resistance at 106.05--106.10. Short-term support for today is at 105.25--105.30, with crucial support at 105.05--105.10.
EUR/USD Technical Analysis:
The EUR/USD pair found support above 1.0680 on Monday and faced resistance below 1.0750, suggesting that it might maintain an upward trend after a short-term decline. If the EUR/USD stabilizes above 1.0695 today, the subsequent upside target will be between 1.0760--1.0785. Today's short-term resistance for EUR/USD is at 1.0755--1.0760, with key short-term resistance at 1.0780--1.0785. Short-term support for today is at 1.0695--1.0700, with vital support at 1.0660--1.0665.
Gold Technical Analysis:
Gold prices found support above $2317.00 on Monday and faced resistance below $2335.00, indicating a possibility of maintaining a downward trend after a short-term rise. If gold faces resistance below $2340.00 today, the subsequent target for declines will be between $2322.00--$2311.00. Today's short-term resistance for gold is at $2339.00--$2340.00, with key short-term resistance at $2345.00--$2346.00. Short-term support for today is at $2322.00--$2323.00, with vital support at $2311.00--$2312.00.
CWG Future Predictions:
Today's short-term strategy for the dollar is to short at highs, with a stop-loss for breakouts. Set a take-profit once there are more than 30 pips in profit and exit all pending orders before the US market opens. This strategy is suitable for margin trading and can serve as a reference for spot trading.
US Dollar Index: Sell near the upper limit of the 105.80---105.05 range, with a 30-pip stop-loss for breakouts, targeting the lower limit.
EUR/USD: Buy near the lower limit of the 1.0785---1.0695 range, with a 40-pip stop-loss for breakouts, targeting the upper limit.
GBP/USD: Buy near the lower limit of the 1.2740---1.2650 range, with a 40-pip stop-loss for breakouts, targeting the upper limit.
USD/CHF: Sell near the upper limit of the 0.8945---0.8910 range, with a 20-pip stop-loss for breakouts, targeting the lower limit.
USD/JPY: Buy near the lower limit of the 160.10---159.00 range, with a 40-pip stop-loss for breakouts, targeting the upper limit.
AUD/USD: Sell near the upper limit of the 0.6680---0.6635 range, with a 20-pip stop-loss for breakouts, targeting the lower limit.
USD/CAD: Sell near the upper limit of the 1.3690---1.3610 range, with a 40-pip stop-loss for breakouts, targeting the lower limit.
Gold: Sell near the upper limit of the $2340.00---$2322.00 range, with a $7 stop-loss for breakouts, targeting the lower limit.
