Global Economic Shifts Impact Currency Movements and Gold Prices
The dollar holds its gains against the pound and euro as weak US economic data raises concerns. The EUR/USD tests support at 1.0760. The yen strengthens on safe-haven demand amid US slowdown fears, with the USD/JPY near 149.5. Gold surges to $2,450 per ounce, driven by Middle East tensions and potential Federal Reserve rate cuts. The GBP/USD faces volatility following the Bank of England’s rate cut to 5%. Dive into our analysis for a closer look at these market movements.
Middle East Tensions Rise Gold’s Safe-Haven Appeal
Gold rose to around $2,450 per ounce on Friday, nearing record highs and poised for a weekly gain, fueled by recent weak US economic data that increased expectations for Federal Reserve rate cuts. Data released on Thursday indicated that US manufacturing activity contracted more than expected in July, with employment levels reaching lows not seen since 2020. Additionally, jobless claims rose to 249,000, the highest level in nearly a year. Investors are now awaiting the monthly jobs report for further insights later today. Meanwhile, the escalating risk of a broader conflict in the Middle East is rising gold’s appeal as a safe haven. Markets are closely monitoring Iran’s response to the assassination of Hamas leader Ismail Haniyeh, which followed the killing of Hezbollah’s top commander in a Beirut airstrike.
Before the important data releases, gold remains in a sideways trend, with the first support level at 2,435. If this level is breached, the next supports to watch will be 2,413 and 2,390. On the upside, the initial resistance is at 2,475; if this level is surpassed, the next targets will be 2,500 and 2,550.
Bank of England Cuts Rate to 5% Amid Inflation Concerns
The Bank of England cut its Bank Rate by 25 basis points to 5% during its August meeting, in line with the expectations of a small majority in the market. However, the bank emphasized that it would proceed cautiously with any further loosening of monetary policy until officials are more confident that inflation will remain subdued. This rate cut marks a decrease from 16-year highs that had been maintained for a full year. The decision was described as “finely balanced,” with four members of the Monetary Policy Council choosing to keep borrowing costs unchanged due to the slowdown in UK inflation, which was countered by rising services prices and lingering risks that second-round effects could undermine the central bank’s progress. Nonetheless, the Committee expressed its expectation that headline inflation will decline and inflation expectations will converge toward the target. Furthermore, the MPC indicated that a restrictive policy is necessary to bring GDP below potential and to continue softening the labor market, justifying a less restrictive policy stance.
For GBP/USD, the initial support lies at 1.2735, followed by 1.2660 and 1.2600 below. On the upside, the first resistance is at 1.2785, with subsequent levels at 1.2830 and 1.2870 if the pair breaks above this resistance.
Weak US Jobs Report Influences Major Pairs and Commodities
Today’s analysis covers key developments in major forex pairs and commodities, focusing on the impact of a weak US jobs report and subsequent market expectations for rate cuts by the Federal Reserve. The EUR/USD pair hit a 20-week low, driven by heightened recession fears and expectation of significant Fed rate cuts. USD/JPY strengthened on expectations of further rate hikes by the Bank of Japan, contrasting with anticipated Fed cuts. Gold prices pulled back from record highs as investors took profits amidst ongoing Mideast tensions. Lastly, we analyze key support and resistance levels for GBP/USD.
The dollar index fell to around 103 on Monday, marking its lowest point in 20 weeks. This decline followed a weak US jobs report, which heightened concerns about a possible recession and reinforced expectations for substantial rate cuts from the Federal Reserve. Data released on Friday revealed that the US economy added only 114,000 jobs in July, significantly below market expectations of a 175,000 increase. Additionally, the unemployment rate unexpectedly surged to a 2021-high of 4.3%, while wage growth slowed more than anticipated. Markets are now pricing in over a 70% chance of a 50 basis point rate cut by the Fed in September, with approximately 155 basis points of total easing expected for this year and next. In light of these developments, the EUR/USD pair started the week on a very positive note, maintaining the momentum from Friday’s drop.
In the pair, the first support level is at 1.0900. If this level is breached, the next supports to watch will be 1.0850 and 1.0800. On the upside, the first resistance is at 1.0950; if this level is surpassed, the next targets will be 1.1000 and 1.1050.
Gold dropped to around $2,430 per ounce on Monday, reversing earlier gains and pulling back from last week’s record highs as investors took profits. On Friday, the US economy added a net 114,000 jobs in July, falling short of the market expectation of a 175,000 increase. Additionally, the unemployment rate unexpectedly rose to its highest level since 2021, and wage growth slowed more than anticipated. This followed weak manufacturing data, with the ISM Manufacturing PMI showing a larger-than-expected contraction in factory activity, raising fears of a potential US recession. As a result, expectations for a dovish shift by the Federal Reserve increased, with markets now pricing in over a 70% chance of a 50 basis point rate cut in September and about 155 basis points of total easing anticipated for this year and next. Meanwhile, ongoing tensions in the Middle East continue to support demand for safe-haven assets like gold.
Before the important data releases, gold remains in a sideways trend, with the first support level at 2,435. If this level is breached, the next supports to watch will be 2,413 and 2,390. On the upside, the initial resistance is at 2,475; if this level is surpassed, the next targets will be 2,500 and 2,550.
Market Dynamics: Dollar Stabilizes, Yen Weakens, and Gold Holds Steady
The dollar index finds support around 102.8 as investors evaluate recession risks amid mixed economic signals, stabilizing against the euro. The yen weakens to 145 per dollar as carry trade unwinding slows and monetary policy divergences between the US and Japan become more pronounced. Gold steadies at $2,410 per ounce, maintaining its safe-haven appeal amid ongoing recession fears and Middle East tensions. Meanwhile, UK retail sales rebound, driven by consumer spending on fashion and beauty, as GBP/USD tests key resistance at 1.2790. Dive into our detailed analysis for more insights into these market movements.
Yen Weakens Amid Slowing Carry Trade Unwind and Diverging US-Japan Policies
The Japanese yen slipped toward 145 per dollar, retreating from seven-month highs as the unwinding of popular carry trades slowed and investors continued to evaluate the diverging monetary policies between Japan and the US. Earlier this week, the yen rallied to a peak of 141.69 per dollar amid increasing expectations that the Bank of Japan (BOJ) would raise interest rates further in the coming months while growing fears of a US recession prompted markets to price in larger rate cuts by the Federal Reserve. Last week, the BOJ raised its policy rate to 0.25% and indicated a willingness to hike rates further if the economy remains robust. Markets are anticipating two more rate increases this fiscal year, which ends in March 2025, with the next hike expected in December. The central bank also announced plans to halve its monthly bond purchases over the next couple of years. Additionally, data revealed that Japanese authorities spent 5.53 trillion yen to support the currency through intervention in July.
The first resistance level is at 146.00. If this level is surpassed, the next targets will be 147.00 and 148.00. On the downside, the initial support is at 143.60; if this level is breached, the next support levels to watch will be 141.70 and 141.00.
UK Retail Sales Recover, Driven by Consumer Spending on Fashion and Beauty
Retail sales in the United Kingdom rose by 0.3% on a like-for-like basis in July 2024 compared to a year earlier, rebounding from a 0.5% decline in June and aligning with market forecasts. This return to growth was primarily driven by increased consumer purchases of clothing and beauty products in anticipation of the holidays. Over the three months leading up to July, food sales rose by 2.6% year-on-year, while sales of non-food items fell by 1.7%. This latest improvement also coincided with the Bank of England beginning to cut interest rates, which has fueled expectations of stronger underlying spending growth in the second half of the year.
For GBP/USD, the initial support lies at 1.2735, followed by 1.2660 and 1.2600 below. On the upside, the first resistance is at 1.2790, with subsequent levels at 1.2830 and 1.2870 if the pair breaks above this resistance.
The Dollar Index has climbed to around 103.2, reflecting a scale-back in bets for an imminent Federal Reserve rate cut, despite earlier recession fears sparked by a weak US jobs report. Japanese yen weakens with the Bank of Japan’s cautious stance on rate hikes, even as market conditions remain unstable. Gold prices surge above $2,390 per ounce, driven by rate cut expectations and ongoing geopolitical tensions. The GBP/USD pair indicates potential bullish trends above 1.2730 and bearish movements below 1.2650, providing insights for traders navigating a volatile market.
USD/JPY Weakens with BoJ’s Cautious Stance on Rate Hikes
The Japanese yen weakened past 147 per dollar, moving further away from seven-month highs after Bank of Japan Deputy Governor Shinichi Uchida stated that they would not raise interest rates if market conditions were unstable. Nonetheless, markets still anticipate that the central bank will increase rates as rising local wages drive inflation higher. On Monday, the yen surged to a seven-month high due to recent currency interventions from Tokyo and a hawkish shift in BoJ monetary policy, which triggered a significant unwinding of yen carry trades. This move was further supported by growing fears of a US recession and disappointing tech earnings that led to a global selloff in risk assets, prompting speculation about an emergency rate cut from the Fed. However, market sentiment has since stabilized, with analysts suggesting that the recent global selloff may have been an overreaction.
The first resistance level is at 148.00. If this level is surpassed, the next targets will be 149.30 and 150.90. On the downside, the initial support is at 145.90; if this level is breached, the next support to watch will be 144.00 and 141.70.
For GBP/USD, the initial support lies at 1.2650, followed by 1.2600 and 1.2540 below. On the upside, the first resistance is at 1.2730, with subsequent levels at 1.2830 and 1.2870 if the pair breaks above this resistance.
Dollar Index Rises as Yen Stabilizes and Gold Climbs
The Dollar Index has experienced a resurgence, climbing to around 103.2 as traders scaled back expectations for an immediate Federal Reserve rate cut with recent weak US job data that hinted at potential economic slowdowns. The Japanese yen has stabilized at around 146.5 per dollar on mixed signals from the Bank of Japan regarding future interest rate policies. Gold has risen to approximately $2,400 per ounce, driven by US rate cut expectations and ongoing global economic uncertainties. Additionally, the GBP/USD pair is poised for potential significant price actions, with key support at 1.2650.
Gold strengthened to around $2,400 per ounce on Thursday, recovering losses from the previous session amid expectations of US interest rate cuts and ongoing assessments of recession fears. The recent weak US jobs report has led traders to predict nearly 105 basis points of rate cuts by the Federal Reserve by year-end, with markets fully pricing in a rate cut for September, according to the CME FedWatch Tool. Lower interest rates increase the appeal of non-interest-bearing precious metals like gold. Investors are now awaiting Thursday’s jobless claims to determine whether economic data, particularly employment figures, is indeed slowing down. At the same time, the risk of escalation in the Middle East conflict continues to support upward momentum for bullion. Additionally, official data released on Wednesday indicated that the People’s Bank of China did not add to its gold reserves for the third consecutive month in July.
Gold starts the day in a sideways trend, with the first support level at 2,387. If this level is breached, the next supports to watch will be 2,375 and 2,355. On the upside, the initial resistance is at 2,400; if this level is surpassed, the next targets will be 2,430 and 2,450.
For GBP/USD, the initial support is 1.2650, followed by 1.2600 and 1.2540, respectively. On the upside, the first resistance is at 1.2730, with subsequent levels at 1.2830 and 1.2870 if the pair breaks above this resistance.
Dollar Gains on Strong Data, Yen and Gold Adjust as Markets React
The dollar steadied around 103.2, bolstered by better-than-expected US jobless claims that eased recession fears and tempered expectations for significant Federal Reserve rate cuts. The yen approached a weekly low below 147 per dollar, as strong US data diminished its safe-haven appeal. Meanwhile, gold dipped to $2,420 per ounce, with geopolitical tensions providing support, though market uncertainty about the Fed’s next move kept prices in check. The GBP/USD pair tested key support at 1.2720 amid ongoing market volatility. Explore our detailed analysis for further insights into these market shifts.
Dollar Steadies Around 103.2 After Better-Than-Expected Jobless Claims
The dollar index maintained its recent gain, sitting around 103.2 on Friday, close to a one-week high, as better-than-expected US jobless claims data eased concerns about an economic downturn. Thursday’s data revealed that initial jobless claims dropped by 17,000 to a seasonally adjusted 233,000 last week, marking the largest decline in about 11 months and coming in below the anticipated 240,000. Following this data, markets scaled back expectations for Federal Reserve interest rate cuts, with the likelihood of a 50 basis point reduction in September decreasing from 69% to 54%. Overall, the dollar is set to close the week with little change as the market recovers from losses incurred during Monday’s selloff. Meanwhile, the safe-haven yen and Swiss franc have retreated from recent highs, reflecting an improving macroeconomic outlook.
In the pair, which has been trading sideways since the beginning of the week, the first support level is at 1.0900. If this level is breached, the next supports to watch will be 1.0850 and 1.0800. On the upside, the first resistance is at 1.0960; if this level is surpassed, the next targets will be 1.1000 and 1.1050.
Geopolitical Tensions Support Gold, But Prices Dip as Market Awaits Fed
Gold prices eased to around $2,420 per ounce on Friday after a nearly 2% increase in the previous session. The metal continues to benefit from ongoing geopolitical tensions and expectations of a Federal Reserve rate cut. Its safe-haven appeal has been strengthened by escalating conflicts, including anticipated retaliatory actions by Iran against Israel and a rare Ukrainian strike on Russia. While expectations for a Fed rate cut in September remain, investors have moderated their predictions. The market is now split on whether the US central bank will opt for a 50 basis point reduction or a more modest 25 basis points. This shift follows a significant drop in initial weekly jobless claims in the US, easing fears that a weakening labor market might signal a recession, and coincides with positive sentiment from a strong ISM services PMI for July. Overall, gold is poised to decline for the week, reversing the substantial gains made in the prior week.
In gold, first support level is at 2,410. If this level is breached, the next supports to watch will be 2,390 and 2,375. On the upside, the initial resistance is at 2,430; if this level is surpassed, the next targets will be 2,450 and 2,500.
Dollar Steadies Ahead of Key US Inflation Data, Yen Dips Amid Holiday-Thinned Trading
The dollar stabilized around 103.1 as markets await crucial US inflation data this week, which is expected to provide insights into the Federal Reserve’s next moves. The yen dipped toward 147 per dollar in light trading due to a Japanese holiday, while gold prices eased below $2,430 per ounce as investors anticipate the upcoming inflation reports. Meanwhile, the GBP/USD pair tests support at 1.2720, with key levels in focus if breached. Dive into our detailed analysis to understand these market dynamics.
Dollar Stabilizes Ahead of Key US Inflation Data After Recent Volatility
On Monday, the dollar index held steady around 103.1 as investors awaited key inflation data this week to confirm that price growth continues to stabilize. The US producer inflation data is due on Tuesday, with consumer inflation figures following on Wednesday. Additionally, US retail sales data will be released on Thursday. Last week, the dollar dropped to a seven-month low following a disappointing July jobs report, which raised concerns about a potential US recession and led to speculation about an emergency Federal Reserve rate cut. However, sentiment has since stabilized as subsequent US economic data eased recession fears, allowing the dollar to recover much of its previous losses. Although expectations for Fed rate cuts have been dialed back, markets still anticipate over 100 basis points of total easing this year.
In the EUR/USD pair, which has been trading sideways last week, the first support level is at 1.0900. If this level is breached, the next supports to watch will be 1.0850 and 1.0800. On the upside, the first resistance is at 1.0960; if this level is surpassed, the next targets will be 1.1000 and 1.1050.
