Gold remains directionless for a week as traders await US PCE Inflation data

The US Presidential Debate between Joe Biden and Donald Trump failed to inspire momentum traders as a cautious mood prevailed ahead of the Fed’s preferred inflation gauge, namely the US Core PCE Price Index for June. Also restricting the market momentum could be the mixed geopolitical headlines surrounding China, Russia, and the Middle East, as well as doubt about the major central banks’ next moves due to the recently mixed data from major economies. Above all, the month-end and quarter-end consolidation keeps the traders on the dicey floor.

With this, the US Dollar Index (DXY) edges higher while bracing for a four-week uptrend while EURUSD licks its wounds after a three-week losing streak. That said, GBPUSD remains directionless but USDJPY stays firmer at the highest level since 1986.

AUDUSD and NZDUSD hold lower grounds while USDCAD prints a four-day winning streak amid softer commodities and Antipodeans. That said, Gold price faded Thursday’s recovery from the key support line while Crude Oil rose to the highest level in two months.

BTCUSD remains on the back for the third consecutive week while ETHUSD braces for the first weekly gain in five amid mixed sentiment in the crypto markets ahead of the spot ETH ETF launch.

Following are the latest moves of the key assets:

• WTI Crude oil rises to the highest level in two months, up for the third consecutive day near $82.30 by the press time.
• Gold remains dicey around $2,325 after snapping a two-day losing streak with a bounce from the key $2,293 support.
• The USD Index braces for a four-week uptrend as bulls flirt with 106.00 at the latest.
• Wall Street closed with minor gains while the Asia-Pacific shares edged higher of late. That said, equities in Britain and Europe lack clear directions during the initial trading hour.
• BTCUSD prints mild losses near $61,500 but ETHUSD remains firmer around $3,450 as we write.

US Dollar stays in demand ahead of Fed inflation…

Thursday’s US Durable Goods Orders and the final readings of the Q1 GDP came in upbeat but the details about housing, inflation and employment were unimpressive and checked the US Dollar bulls ahead of today’s key data, namely the US Core PCE Price Index for May. It should be noted that Fed Governor Michelle Bowman mentioned, “We're not at a point yet to consider a rate cut.” However, Atlanta Fed President Raphael Bostic said that he sees a cut this year and 4 cuts in 2025.

In addition to the mixed US data and Fed talks, challenges to the previous risk-on mood also checked the US Dollar buyers ahead of teasing them for return.

Talking about the political risks, U.S. Deputy Secretary of State Campbell flagged fears emanating from China’s military moves in the South Sea whereas the NBS News conveyed the US readying the evacuations of Americans from Lebanon as tensions escalate. It should be noted that the first debate between US President Joe Biden and his competitor for General Elections Donald Trump failed to offer any major clues to the market but Trump’s push for anti-China policies gained attention and renewed the US Dollar while also exerting downside pressure on commodities and Antipodeans. Elsewhere, the second-largest US pharmacy chain signaled downbeat consumer spending and plans to close major stores while suggesting lower inflation ahead, signaling indirect support to the Fed’s current monetary policy.

With this, the US Dollar Index (DXY) braced for a four-week uptrend while making rounds to the highest level since early May.

While the US data was mostly upbeat, readings from the Eurozone weren’t impressive but could help the EURUSD to end the day on a positive side. Thursday’s Euro’s rebound could be linked to the US Dollar’s retreat ahead of today’s Fed inflation and hawkish comments from the European Central Bank (ECB) officials. However, the Greenback’s recovery and the sour sentiment, as well as doubts about the bloc’s economic transition and the hawkish ECB talks, weigh on the major currency pair. On Thursday, ECB policymaker Peter Kažimír conveyed expectations of witnessing one more rate cut but avoided confirming any other moves, which is the same as the market expects without major surprises from the Eurozone inflation. The final readings of Eurozone June Consumer Confidence, Economic Sentiment Indicator, and Business Climate failed to inspire optimism about the Old Continent.

On the other hand, the Bank of England’s (BoE) Financial Stability Report mentioned that many UK households are under pressure from higher living costs, and rates. The statement also added that the market prices are still vulnerable to a sharp correction. It should be noted that a former BoE policymaker Michael Saunders crossed wires on Thursday while conveying his expectations favoring one rate cut in August and a cash rate of 3.5% at end-2025. It should be observed that Friday’s upbeat prints of final readings of the UK Q1 GDP test the Cable pair sellers of late. Hence, mixed signals from Britain exert downside pressure on the GBPUSD even as the bears struggle to keep the reins.

USDJPY has risen to the highest level since 1986 despite upbeat Japan Industrial Production and Tokyo inflation data. With this, the Yen pair flags the market’s discomfort with the Bank of Japan (BoJ) rate hike concerns amid upbeat yields.

The US Dollar’s rebound amid cautious mood and dovish comments from Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser weighs on the AUDUSD as the policymaker plays down the hotter-than-expected May CPI report. That said, RBA’s Hauser said, “It would be a bad mistake to set policy based on one number.”

Further, the NZDUSD drops to a six-week low without major news at home amid China-linked woes and the US Dollar rebound, not to forget growing concerns about slowing New Zealand's economic transition. Moving on, USDCAD eyes the first weekly gain in three by rising for the fourth consecutive day to early Friday. In doing so, the Loonie pair ignores strong prices of Canada’s main export item, Crude Oil, as well as the mid-week release of upbeat Canada inflation, amid dovish bias surrounding the Bank of Canada (BoC) and the hawkish Fed concerns.

Crude Oil rises to the highest level in two months despite unexpected increases in the weekly inventories. The reason could be linked to the fears of supply crunch and China’s readiness for more stimulus. That said, Gold price marked a stellar rebound from the key support and braces for a weekly gain despite the US Dollar’s rebound.

• Strong buy: USDCAD, USDJPY, US Dollar, Silver
• Strong sell: AUDUSD, NZDUSD, GBPUSD
• Buy: BTCUSD, ETHUSD, Nasdaq, Gold, DJI30, USDCNH
• Sell: DAX, FTSE 100, EURUSD, Crude Oil

US Core PCE Price Index, political news in the spotlight…

Looking forward, all eyes will be on the Fed’s preferred inflation gauge, namely the US Core PCE Price Index data for May, as market players want to believe in the US Federal Reserve’s (Fed) hawkish dot plot and defend the US Dollar bulls. As a result, the expected softness in the outcome might challenge the Greenback buyers. Even so, a likely improvement in the Chicago PMI and final prints of the Michigan Consumer Sentiment Index for June could keep the USD on the bull’s radar. Additionally, the US market’s reaction to the Biden-Trump debate could also help the Greenback to remain firmer. Apart from that, fresh readings of inflation from France and Spain will join political headlines from the Eurozone and the UK, as well as bout China, Russia and the Middle East, to entertain momentum traders.

May the trading luck be with you!