Gold gyrates within the short-term trading range on the Juneteenth holiday

Global markets remain cautiously optimistic during a lackluster start of Wednesday as the Juneteenth holiday in the US joins a jump in the equities and downbeat yields amid softer US data. As a result, the US Dollar Index (DXY) pauses a two-day losing streak but lacks recovery momentum.

EURUSD also remains defensive after rising in the last two consecutive days while GBPUSD prints a three-day uptrend. Further, USDJPY struggles to extend the four-day uptrend but the USDCAD remains pressured at a one-week low after falling in the last four days.

AUDUSD rises to a one-week high, up for the third consecutive day, whereas the NZDUSD fails to defend the previous day’s recovery from a three-week low.

Moving on, Crude Oil prods a three-day winning streak at the highest level since early May whereas Gold price gyrates within a weekly trading range.

BTCUSD and ETHUSD both lick their wounds while posting the first daily gains in three at the lowest level in a month. The latest optimism in the crypto market could be linked to an increase in active users and a jump in net inflows. However, fears about the US SEC’s pressure challenge the buyers.

Following are the latest moves of the key assets:

• WTI Crude oil prints the first daily loss in four at the highest level in seven weeks, mildly offered around $80.60 by the press time.
• Gold remains side-lined around $2,330 after posting mild gains the previous day.
• The USD Index pauses the two-day losing streak despite lacking upside momentum near 105.30 at the latest.
• Wall Street closed on the greenback but the Asia-Pacific shares dwindle of late. That said, equities in British and Europe remain indecisive during the initial trading hour.
• BTCUSD and ETHUSD both recover from monthly lows to $65,600 and $3,550 respectively as we write.

US Dollar pauses downside on Juneteenth holiday…

The US Dollar Index (DXY) dropped in the last two consecutive days before paring losses early Wednesday amid the dicey markets. In doing so, the US Dollar’s gauge versus the six major currencies justifies the traders’ doubts about the US Federal Reserve’s (Fed) hawkish bias, especially after the recently mixed data. That said, the DXY dropped the previous day despite upbeat prints of the US Industrial Production and hawkish comments from a slew of Fed officials. The reason could be linked to the softer-than-expected US Retail Sales growth for May. Additionally weighing on the US Dollar are the downbeat economic forecasts from the US Congressional Budget Office (CBO). The latest rebound in the Greenback, however, appears elusive as the US markets will be off on Wednesday due to the Juneteenth holiday.

On Tuesday, the US Retail Sales marked a 0.1% MoM growth for May versus 0.2% expected and -0.2% prior (revised from 0.0%). However, Industrial Production grew 0.9% on a monthly basis during the stated period compared to the market forecasts of 0.3% and 0.0% in previous readings.

Elsewhere, the US CBO projects a wider fiscal deficit of $1.915 trillion for 2024 while revising up the yearly GDP forecasts to 2.0% from 1.5% expected in February. It should be noted that the fears of witnessing higher deficits, the likely government shutdowns, and the bankruptcy woes have been challenging the US Dollar bulls in the last few months.

Talking about the Federal Reserve policymakers’ comments, Richmond Fed President Thomas Barkin said, “We are clearly on the back side of inflation,” which in turn suggests more than one rate cut from the Fed. However, president and CEO of the Federal Reserve Bank of Dallas Lorie K. Logan mentioned that the (Fed) will need to see “several more months” of better CPI numbers (to cut the rates) while defending the “higher for longer” rate bias.

Meanwhile, New York Fed President John Williams said that the rate cut path depends on data. Furthermore, Federal Reserve governor Adriana Kugler signaled that the (Fed) policy has more work to do while adding, “judgment will be guided by data”. On the same line, Chicago Fed Governor Alan Goolsbee mentioned that there is still a little bit of 'juice' left in last year's rapid inflation decline.

More importantly, St Louis Federal Reserve’s new President Alberto Musalem stated that the confidence to cut rates could take months and likely quarters to play out. Additionally, Boston Fed President Susan Collins warned against overreacting to the latest softness in inflation while citing scenarios for both one and two cuts in 2024.

On the other hand, European Central Bank (ECB) Governing Council member Francois Villeroy de Galhau showed dislike for the bigger deficits and tried to defend the European currency (Euro). Also likely to have favored the EURUSD buyers were upbeat ZEW survey data for the Eurozone. However, the disappointing prints of Germany’s ZEW figures for June and political pessimism in France, as well as in Germany, challenge the regional currency buyers.

Elsewhere, GBPUSD remains firmer for the third consecutive day even as the UK inflation data came in mixed for May. The reason could be linked to the market’s preparations for Thursday’s likely hawkish halt of the Bank of England (BoE).

USDJPY pauses a four-day winning streak while lacking momentum amid a holiday in the US bond markets. Also challenging the Yen pair buyers are fresh concerns about the Bank of Japan’s (BoJ) rate hike and a reduction in Japan’s trade deficit for May. However, the mixed outcomes of the Reuters Tankan survey for June challenge the Yen pair sellers.

AUDUSD remains firmer for the third consecutive day amid cautious optimism about China. However, NZDUSD reverses the previous day’s gains despite upbeat Q1 Current Account data as Reserve Bank of New Zealand (RBNZ) Chief Economist Paul Conway hints at inflation drop and flags rate cuts during late 2024. It should be observed that the USDCAD remains pressured for the fourth consecutive day even as the crude oil lacks upside momentum at a seven-week high.

Crude Oil rose to the highest level since early May the previous day despite a surprise build in the US weekly inventories per the industry report prepared by the American Petroleum Institute (API). Further, Gold price lacks upside momentum after rising the previous day, staying within a week-long trading range, amid dicey markets and a lack of major news, not to forget the US holiday.

• 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

No major data/updates to watch…

Given the Juneteenth holiday in the US and a light calendar elsewhere, traders are likely to witness a dull day ahead. However, the same raises the possibility of seeing a price spike governed by few players, which in turn requires market players to remain cautious. Overall, the US Dollar’s previous fall might be reversed as most Fed signals suggest only one rate cut in 2024 versus the previously anticipated three. This could weigh on the other major currencies and commodities.

May the trading luck be with you!