Articles

Top trending meme coins BOME, TRUMP, WIF: Bullish signs persist

Top trending meme coins BOME, TRUMP, WIF: Bullish signs persist

393175   May 31, 2024 23:29   FXStreet   Market News  

  • Trump price bounced 57% from its previous support level of $15.95.
  • Dogwifhat price is likely to pull back into the major support level between $3.22 and $3.04. 
  • Book Of Meme price could break out from a parallel channel pattern.

Prices of top trending meme coins Trump (MAGA), Dogwifhat (WIF) and Book Of Meme (BOME) increase on Friday, defying the mild losses seen among the main cryptocurrency assets. The technical outlook for the three coins hints at further gains ahead, particularly for MAGA and BOME, while a short-term correction in WIF is the most likely scenario before it can resume gains. 

Trump meme coin shows recovery

Trump (MAGA) meme coin crashed 35% on Thursday as former US President Donald Trump was found guilty on 34 felony counts related to falsifying business records and the case involving adult entertainer Stormy Daniels.

However, MAGA quickly bounced 57% to trade at $14.91 at the time of writing, from its previous support at $9.78.

If the overall crypto market sentiment and news about Donald Trump is positive, then MAGA could rally 30% to $19.92, the 127.2% Fibonacci extension level from swing high at $16.60 to swing low at $7.04.

MAGA/USDT 4-hour chart

MAGA/USDT 4-hour chart

On the other hand, if Trump’s price closes below $9.90, it would invalidate the bullish thesis by producing a lower low in the daily time frame, leading MAGA to crash an extra 30% and hitting the previous support level of $7.04.

Dogwifhat price eyes 13% gains 

Dogwifhat’s price, a Solana-based meme coin, crashed 20% from its Wednesday high of $4.08 due to recent fraud events involving IGGY and other celebrity-based meme currencies. Due to recent fraudulent incidents like IGGY, Solana-based meme coins are plummeting, with WIF 20% from its high at the $4.08 mark. Still, WIF pared some of the recent losses on Friday, increasing by around 3% on the day to $3.46 at the time of writing.

WIF could find support between the $3.22 and $3.04 levels, which also coincide with the 61.8% Fibonacci retracement line. From there, it could rally 13% to $3.66 level which is the previous bearish order block on May 30.

WIF/USDT 4-hour chart

WIF/USDT 4-hour chart

On the other hand, if Dogwifhat’s daily candlestick price closes below the $3 level, it would produce a lower low and signal a break in the market structure. This move would invalidate the aforementioned bullish thesis, potentially triggering an extra 7% crash to the high volume node of the volume profile at $2.81.

Book of meme price wants to move higher

BOME price is currently getting rejected by the resistance at the upper channel at $0.0159.

If BOME breaks out of the channel, then it could rally 22% to the $0.0207 level, which is the daily close of March 17 and also the technical target (distance between the parallel channel.) 

BOME/USDT 4-hour chart

However, if the Book Of Meme price breaks below the parallel channel range, it will crash 38% to test its daily support level at $0.008.


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Former Pres. Trump is back on the offensive after his guilty
Former Pres. Trump is back on the offensive after his guilty

Former Pres. Trump is back on the offensive after his guilty

393174   May 31, 2024 23:17   Forexlive Latest News   Market News  

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EUR/USD Weekly Forecast: Looming ECB rate cut, US employment data hint at volatile week

EUR/USD Weekly Forecast: Looming ECB rate cut, US employment data hint at volatile week

393171   May 31, 2024 23:05   FXStreet   Market News  

  • The European Central Bank will meet on Thursday, and rate cuts are priced in.
  • The focus in the United States will be on employment data ahead of the Nonfarm Payrolls report.
  • The EUR/USD pair’s long-term perspective turned neutral after spending three weeks below 1.0900.

 The EUR/USD pair spent most of the week within familiar levels, partially due to the lack of relevant macroeconomic data throughout the first half of the week and partly amid comments from different Federal Reserve (Fed) officials. American policymakers kept putting efforts into cooling down hopes for interest rate cuts, keeping markets in risk-averse mode. Across the pond, European Central Bank (ECB) representatives maintained their willingness to trim interest rates in June, but warned a July cut is far from granted.

But financial markets got some interesting clues beyond central banksÂ’ well-known messages. The focus was on inflation-related figures, which helped EUR/USD to near the 1.0900 threshold by the end of the week.

Inflation supporting central banksÂ’ stances

Germany reported that the Harmonized Index of Consumer Prices (HICP) rose 0.2% MoM, meeting expectations, while the annual HICP increased 2.8%, accelerating from the previous 2.4%  and above the market’s estimate of 2.7%. Also, the Eurozone HICP rose more than anticipated in May, as the annual figure resulted at 2.6%, higher than the previous 2.4%.

Finally on Friday, the United States (US) unveiled the April Personal Consumption Expenditures (PCE) Price Index. Most readings matched previous readings and forecasts, with annual inflation holding steady at 2.7%. On a positive note, the Bureau of Economic Analysis reported monthly inflation was up 0.3%, as expected, but the core reading was slightly below expected.

US April PCE inflation brought modest relief to financial markets, but make no mistake. Such numbers fall way short of twisting Fed officials’ hands. A rate cut in the United States before September is still out of the table.  

European Central Bank rate cut coming

Things can turn more interesting next week as the June ECB meeting arrives: The central bank will announce its decision on Thursday, and markets are eagerly awaiting confirmation of the monetary policy loosening process. The Governing Council is expected to cut 25 basis points (bps) for every one of the main refinancing operations, the deposit facility and the marginal lending facility. The latest Eurozone inflation figures support the case. It is worth adding the decision has been long ago priced in, but that does not mean financial markets wonÂ’t react to the announcement.

The rate cut itself could send the Euro roughly 100 pips down against the US Dollar as an initial reaction. The following movements will depend on ECB President Christine Lagarde’s words and policymakers’ views, as reflected by the accompanying statement. Whatever they anticipate for the future, or not, could determine the EuroÂ’s trend for the next week. The Fed, however, will meet just one week later, on June 12, which means speculative interest will quickly move into building expectations for such even after the ECBÂ’s decision is made.

Busy United States docket

Meanwhile, the US calendar will be flooded with employment-related figures. The country will release the April JOLTS Jobs Openings report on Tuesday, the May ADP survey on private job creation on Wednesday and Challenger Job Cuts alongside weekly unemployment figures on Thursday. All the readings come as an anticipation of the Nonfarm Payrolls (NFP) report to be out on Friday.  The Unemployment Rate stood at 3.9% in April, and market players will be looking for signs of a loosening labor market.

Other than that, the US will release the ISM Manufacturing PMI on Monday and the ISM Services PMI on Wednesday.

EUR/USD technical outlook

The EUR/USD pair has been trading below 1.0900 for a third consecutive week, confined to a quite limited range. The pair has remained below the level since mid-March, establishing a 2024 low at 1.0600 in April. The recovery from the latter has been tepid and painful ahead of June central banksÂ’ announcements.

As a result, the weekly chart offers a neutral stance. EUR/USD keeps hovering around a flat 20 Simple Moving Average (SMA), currently at around 1.0810. At the same time, the pair is midway between flat 100 and 200 SMAs, with the shorter one providing dynamic support at around 1.0640. Technical indicators, in the meantime, head nowhere around their midlines, reflecting the absence of directional momentum.

The EUR/USD pairÂ’s daily chart shows that it met buyers at around 1.0782, the 38.2% Fibonacci retracement of the latest bullish run measured between 1.0600 and 1.0894. Overall, the pair is bullish, as it is developing above all its moving averages, with the 20 SMA maintaining its bullish slope after crossing above the longer ones, which anyway remain directionless. Finally, technical indicators have bounced from around their midlines and aim higher with limited strength, still signaling buyers are in the driverÂ’s seat.

A break through the higher end of the range should encourage bulls and push EUR/USD towards the 1.0980-1.1000 region. Once beyond the latter, the advance can continue towards the 1.1120 price zone.

The aforementioned Fibonacci support level should contain declines and keep attracting buyers to maintain bullish hopes alive. Below it, however, the pair can fall initially towards the 1.0700 price zone before attempting a test of the year low.

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Canada budget balance for March -C$33.59B vs a surplus of C$8.34B last month
Canada budget balance for March -C$33.59B vs a surplus of C$8.34B last month

Canada budget balance for March -C$33.59B vs a surplus of C$8.34B last month

393170   May 31, 2024 23:03   Forexlive Latest News   Market News  

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US Dollar Weekly Forecast: DXY erases weekly gains, Nonfarm Payrolls in sight

US Dollar Weekly Forecast: DXY erases weekly gains, Nonfarm Payrolls in sight

393168   May 31, 2024 23:02   FXStreet   Market News  

Entering a consolidative phase?

The renewed upside momentum in the Greenback lifted the USD Index (DXY) back above the 105.00 barrier earlier in the week, although that move lacked follow-through as the week drew to a close, leaving the index navigating in the negative zone and fading the positive performance of the previous week.

Focus remains on data and Fedspeak

The DollarÂ’s weekly developments transited a bumpy road after collapsing to the 104.00 neighbourhood in the first half of the week, only to bounce markedly afterwards and eventually return to the bearish trend in the last couple of sessions, despite reclaiming the area beyond the 105.00 hurdle.

Although a rate hike by the Federal Reserve (Fed) in the next three meetings is seen with marginal probability, it still remains on the table, bolstered by hawkish Fedspeak, sticky inflation, and unabated tightness in the labour market. The release of another revision of Q1 GDP figures showed some loss of momentum in US economic activity, although nothing that was not anticipated.

Back to inflation, it is worth noting that the headline Personal Consumption Expenditure (PCE) Price Index matched estimates in April, rising by 2.7% over the last twelve months and by 2.8% YoY when it came to the Core PCE.

Overall, the CME GroupÂ’s FedWatch Tool now predicts a roughly 50% chance of lower rates in September, influenced by the hawkish tilt from the FOMC Minutes and the tighter-for-longer narrative around the Federal Reserve. Additionally, nearly 15 bps of easing are expected at the September 18 meeting, compared to about 35 bps in December.

Fed officials remained cautious

Bolstering the prospects of a resilient Dollar in the next few months, Fed policymakers maintained their prudent stance throughout the week: Minneapolis Federal Reserve Bank President Neel Kashkari suggested that the Fed should wait for significant inflation progress before considering interest rate cuts. He even suggested raising rates if inflation doesn’t decrease further. Additionally, Federal Reserve Bank of New York President John Williams stated there’s no immediate need to cut interest rates, stating the Fed has the flexibility to gather more data before making policy changes. Furthermore, Chicago Fed President Austan Goolsbee said further inflation improvement might lead to higher unemployment, while Dallas Federal Reserve Bank President Lorie Logan believes inflation is on track to reach the Fed’s 2% target.

US yields regain upward trend

The USD’s weekly performance aligned with a rangebound theme in US yields across various timeframes, driven by a changing macroeconomic backdrop that diminished rate-cut bets for the September meeting. That said, yields maintained their price action around the upper end of the monthly range.

G10 Central Banks: Anticipated rate cuts and inflation dynamics

Looking at broader trends among G10 central banks, the European Central Bank (ECB) is expected to cut rates next week, although uncertainty keeps running high regarding subsequent rate cuts. The Bank of England (BoE) is likely to reduce rates in the last quarter, while the Fed and the Reserve Bank of Australia (RBA) are expected to start easing at some point by year-end.

Upcoming key events

Next week, the release of MayÂ’s Nonfarm Payrolls will take centre stage, followed by the ADP report and the ISM Manufacturing and Services PMIs.

Technical analysis of USD Index

The USD Index (DXY) appears somewhat consolidative between 104.00 and 105.00 for the time being. In case the index breaks above the weekly high of 105.74 (May 9), it could then attempt a move to the 2024 peak of 106.51 (April 16). Breaking this level might lead to the November high of 107.11 (November 1) and the 2023 top of 107.34 (October 3). Conversely, renewed selling pressure could bring the DXY back to the May low of 104.08 (May 16). Further declines could see the index test the weekly low of 103.88 (April 9) and the March bottom of 102.35 (March 8). A deeper retracement might target the December low of 100.61 (December 28), the psychological barrier at 100.00, and the 2023 low of 99.57 (July 14).

Looking at the broader picture, the overall bullish bias is expected to persist as long as DXY remains above the 200-day SMA at 104.42.

Economic Indicator

Nonfarm Payrolls

The Nonfarm Payrolls release presents the number of new jobs created in the US during the previous month in all non-agricultural businesses; it is released by the US Bureau of Labor Statistics (BLS). The monthly changes in payrolls can be extremely volatile. The number is also subject to strong reviews, which can also trigger volatility in the Forex board. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish, although previous months’ reviews ?and the Unemployment Rate are as relevant as the headline figure. The market’s reaction, therefore, depends on how the market assesses all the data contained in the BLS report as a whole.

Read more.

US Dollar FAQs

The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.

The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the FedÂ’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.

In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the FedÂ’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.

Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.

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Colombia National Jobless Rate dipped from previous 11.3% to 10.6% in April
Colombia National Jobless Rate dipped from previous 11.3% to 10.6% in April

Colombia National Jobless Rate dipped from previous 11.3% to 10.6% in April

393167   May 31, 2024 23:02   FXStreet   Market News  

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OPEC+ to hold its June 2 meeting in person in Riyadh
OPEC+ to hold its June 2 meeting in person in Riyadh

OPEC+ to hold its June 2 meeting in person in Riyadh

393166   May 31, 2024 22:45   Forexlive Latest News   Market News  

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GBP/USD Weekly Forecast: Pound Sterling eyes acceptance above 1.2800 in US NFP week

GBP/USD Weekly Forecast: Pound Sterling eyes acceptance above 1.2800 in US NFP week

393163   May 31, 2024 22:45   FXStreet   Market News  

  • The Pound Sterling tested 1.2800 against the US Dollar but failed to resist at higher levels.
  • GBP/USD buyers hold the reins marching into the US Nonfarm Payrolls week.
  • The Pound Sterling needs acceptance above 1.2800 to sustain the bullish momentum.

The Pound Sterling (GBP) tested 1.2800 against the US Dollar (USD) this week, as the GBP/USD pair hit a new two-month high before sellers jumped back into the game.

Pound Sterling enjoyed a two-way business

GBP/USD set off the week on a bullish note, extending the previous weekÂ’s rebound amid US and UK market holidays on Monday. Thin trading helped the pair stay afloat as the Pound Sterling continued to capitalize on the hot UK inflation data, which revived expectations about a delay in the Bank of England’s (BoE) policy pivot.

Meanwhile, the US Dollar lost ground on a positive shift in risk sentiment from Friday. The Greenback bore the brunt of the renewed optimism in the Chinese economy after China announced several measures to prop up its property sector and the semiconductor industry.

Improved risk appetite and broad US Dollar weakness drove GBP/USD to a new two-month high of 1.2800 on Tuesday. But Pound Sterling sellers quickly fought back control amid resurgent demand for the US Dollar. Increased safe-haven flows combined with the hawkish commentary from Minneapolis Federal Reserve President Neel Kashkari saved the day for the US Dollar buyers.

Lingering geopolitical tensions between Israel and Gaza spooked investors’ sentiment, boosting the safe-haven demand for the Greenback. Israeli forces shelled a tent camp in a designated “safe zone” west of Rafah and killed at least 21 people, including 13 women and girls, in the latest mass killing of Palestinian civilians. The UN Security Council convened an emergency meeting over Israel’s ground invasion of Rafah as Spain, Ireland, and Norway formally recognized the state of Palestine.

Meanwhile, Kashkari said in a CNBC interview on Tuesday that the Fed should wait for significant progress on inflation before lowering the policy rate. Additionally, upbeat US Conference Board’s (CB) Consumer Confidence data also helped put a floor under the US Dollar. The US CB Consumer Confidence Index rose to 102.00 from 97.5 in April.

However, in the second half of the week, the US Dollar once again lost the upside impetus, following Thursday’s downward revision to the annualized first-quarter US Gross Domestic Product (GDP) data to 1.3% from 1.6% in the first estimate and a modest increase in the Initial Jobless Claims. Weak data raised concerns over a potential ‘soft-landing’ for the US economy this year, reviving expectations of a September Fed rate cut.

According to the CME FedWatch Tool, markets price in 49% odds that the Fed will hold rates in September, down from 53% seen earlier in the week. The probability of a November rate cut increased to 64% from about 60% previously. The revival in the dovish Fed expectations thrashed the US Treasury bond yields alongside the US Dollar on Thursday, allowing GBP/USD to stage a decent comeback to near 1.2750, having briefly fallen below the 1.2700 threshold on Wednesday.

GBP/USD, however, stalled its recovery momentum as buyers turned cautious early Friday, anticipating the high-impact US core Personal Consumption Expenditure (PCE) Price Index. The Federal ReserveÂ’s preferred inflation measure could offer cues on the timing of the Fed rate cut, significantly impacting the US DollarÂ’s performance against its six major currency counterparts, including the British Pound.

The USD came under modest bearish pressure in the American session on Friday and allowed GBP/USD to recover above 1.2750 after the data showed that inflation, as measured by the change in the PCE Price Index, held steady at 2.7% on a yearly basis in April. This reading matched March’s increase and came in line with the market expectation. The core PCE Price Index, which excludes volatile food and energy prices, rose 2.8% on a yearly basis, also meeting analysts’ estimates.

Eyes on US payrolls as the ‘blackout’ period kicks in

Another week, dominated by US economic data, awaits the Pound Sterling markets amid a data-sparse UK docket.

US ISM Manufacturing PMI will hog the limelight on Monday ahead of TuesdayÂ’s JOLTS Job Openings survey. Wednesday will feature the key US ADP Employment Change data, followed by the ISM Services PMI.

The weekly US Jobless Claims will drop on Thursday after the European Central Bank’s (ECB) policy announcements, which could have a EUR/GBP cross-driven ‘rub-off’ effect on the Pound Sterling.

Later on Friday, the US Nonfarm Payrolls and the Wage inflation data will stand out as the labor market report will be published.

There will be no communication from the BoE policymakers until the July 4 UK general election while the Fed enters its ‘blackout’ period on June 1 ahead of the June 11-12 monetary policy meeting.

GBP/USD: Technical Outlook

As observed on the daily chart, GBP/USD continues to range within a two-month-long rising wedge formation.

The pair briefly breached the upper boundary of the pattern, then at 1.2765, to challenge 1.2800 but failed to yield a daily closing above the latter.

The 14-day Relative Strength Index (RSI) has turned lower but holds well above the 50 level, currently near 60, suggesting that there is more room to the upside for the Pound Sterling.

Adding credence to the bullish potential, the 21-day Simple Moving Average (SMA) crossed the 100-day SMA for the upside on Wednesday, confirming a Bull Cross.

GBP/USD, however, needs to secure a daily close above the upper boundary of the pattern, now at 1.2775 to take out the March 21 high of 1.2804.

Acceptance above the latter would negate any near-term bearish bias, fueling a fresh uptrend toward the March 8 high of 1.2894. The next relevant resistance is seen at the 1.2950 psychological level.

However, if buyers face rejection at the upside hurdle of the potential rising wedge once again, the initial support could be seen near 1.2640, where the 21-day SMA and the 100-day SMA hang around.

Further south, the confluence zone of the lower boundary of the wedge and the 50-day SMA at around 1.2590 will also test the bullish commitments.

The last line of defense for buyers is seen at the critical support near 1.2540, the 200-day SMA.

Economic Indicator

Nonfarm Payrolls

The Nonfarm Payrolls release presents the number of new jobs created in the US during the previous month in all non-agricultural businesses; it is released by the US Bureau of Labor Statistics (BLS). The monthly changes in payrolls can be extremely volatile. The number is also subject to strong reviews, which can also trigger volatility in the Forex board. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish, although previous months’ reviews ?and the Unemployment Rate are as relevant as the headline figure. The market’s reaction, therefore, depends on how the market assesses all the data contained in the BLS report as a whole.

Read more.

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US Democratic Sen. Manchin (WV) registers at a independent
US Democratic Sen. Manchin (WV) registers at a independent

US Democratic Sen. Manchin (WV) registers at a independent

393162   May 31, 2024 22:40   Forexlive Latest News   Market News  

West Virginia Sen. Manchin has registered as an independent.Manchin has been more of an independent within the Democratic Party.

With the extremes being really extreme, at some point, perhaps more who don’t assimilate to the extreme policies of both the left and right will move toward the middle. Manchin has used his independence especially with a near 50-50 split, to gain more power from his vote.

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NZD/USD rallies to 0.6160 as US Dollar weakens after steady US PCE Inflation report
NZD/USD rallies to 0.6160 as US Dollar weakens after steady US PCE Inflation report

NZD/USD rallies to 0.6160 as US Dollar weakens after steady US PCE Inflation report

393161   May 31, 2024 22:33   FXStreet   Market News  

  • NZD/USD advances strongly to 0.6160 as the US Dollar slumps after US PCE Inflation grew as expected in April.
  • Stubbornly elevated US inflation would dent Fed rate-cut bets for September.
  • Investors shift focus to US ISM PMI and Employment data.

The NZD/USD pair soars to 0.6160 in FridayÂ’s New York session. The Kiwi asset witnesses significant buying interest as the US Dollar weakens after the United States (US) Personal Consumption Expenditure Price Index (PCE) report for April showed that price pressures grew in-line with estimates.

Monthly and annual headline inflation grew expectedly by 0.3% and 2.7%, respectively. The core PCE inflation, which is Federal ReserveÂ’s (Fed) preferred inflation gauge as it strips off volatile food and energy prices, rose by 0.2%, slower than the estimates and the former release of 0.3% on a month-on-month basis. However, annual core PCE Inflation rose expectedly by 2.8%.

Stubbornly elevated PCE inflation make unlikely for the Fed to start reducing interest rates from the September meeting. The scenario is generally favorable for the US Dollar, however, it is weak due to downwardly revised US Q1 Gross Domestic Product (GDP) data. Revised estimate for Q1 GDP shows that the economy expanded at a slower pace of 1.3% from the preliminary estimate of 1.6%.

The US Dollar Index (DXY), which tracks the GreenbackÂ’s value against six major currencies, is down more than 0.3% around 104.40.

Next week, investors will focus on the Manufacturing and the Services PMI, which will be published by the Institute of Supply Management (ISM) and the Nonfarm Payrolls (NFP) for May.

The New Zealand Dollar remains firm even though ChinaÂ’s National Bureau of Statistics (NBS) reported that the Manufacturing and Non-Manufacturing PMI for May missed estimates. In this situation, the New Zealand Dollar faces pressure, being a proxy for ChinaÂ’s economic prospects.

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Gold Weekly Forecast: Technical outlook turns neutral heading into NFP week

Gold Weekly Forecast: Technical outlook turns neutral heading into NFP week

393158   May 31, 2024 22:33   FXStreet   Market News  

  • Gold failed to make a decisive move in either direction this week.
  • The near-term technical picture highlights a neutral outlook.
  • Next weekÂ’s high-tier data releases from the US could influence GoldÂ’s valuation.

Following the previous week’s steep decline, Gold (XAU/USD) struggled to rebound this week, pressured by the broad-based US Dollar (USD) strength and rising US Treasury bond yields. High-tier macroeconomic data releases from the US next week could significantly influence the market pricing of the Federal Reserve’s (Fed) interest rate outlook and trigger the next big action in XAU/USD. 

Gold buyers remain on the sidelines

With the US markets remaining closed in observance of the Memorial Day holiday on Monday, Gold edged slightly higher and closed the day in positive territory. Meanwhile, reports of Israeli air strikes killing at least 45 people in Rafah on Sunday caused investors to adopt a cautious stance at the beginning of the week and helped Gold hold its ground.

On Tuesday, the data from the US showed that the Conference Board’s (CB) Consumer Confidence Index improved to 102.00 in May from 97.5 in April. Assessing the survey’s findings, “the strong labor market continued to bolster consumers’ overall assessment of the present situation,” said Dana M. Peterson, Chief Economist at the CB. “Views of current labor market conditions improved in May, as fewer respondents said jobs were hard to get, which outweighed a slight decline in the number who said jobs were plentiful.” Upbeat confidence data, combined with hawkish comments from Minneapolis Fed President Neel Kashkari, who argued that the Fed potentially could even hike interest rates if inflation fails to come down further, lifted US Treasury bond yields and supported the USD, limiting XAU/USD’s upside.

The benchmark 10-year US Treasury bond yield continued to push higher on Wednesday, and the bearish action seen on Wall Street helped the USD to gather strength. In turn, Gold came under renewed bearish pressure and lost nearly 1% on the day. With US stock index futures stretching lower during the European trading hours on Thursday, Gold extended its slide and touched its lowest level in three weeks near $2,320.

The Bureau of Economic Analysis (BEA) announced on Thursday that it revised the annualized real US Gross Domestic Product (GDP) growth lower to 1.3% in the first quarter from 1.6% in the initial estimate. The 10-year US yield turned south with the initial reaction to the GDP revision and opened the door for a modest rebound in XAU/USD.

The BEA report on Friday that inflation in the US, as measured by the change in the Personal Consumption Expenditures (PCE) Price Index, held steady at 2.7% on a yearly basis in April. This reading matched March’s increase and came in line with the market expectation. On a monthly basis, the PCE Price Index rose 0.3% as forecast. Finally, the core PCE Price Index, which excludes volatile food and energy prices, rose 2.8% on a yearly basis, also meeting analysts’ estimates. The 10-year US yield edged lower following these figures and allowed Gold to recover above $2,350.

Gold investors shift focus to US jobs report

The US economic docket features the ISM Manufacturing PMI data for May on Monday. Earlier this month, S&P Global reported that the preliminary May Manufacturing PMI climbed to 54.4 from 51.3 and helped the USD find demand. Hence, the USD could hold its ground and limit XAU/USDÂ’s upside on Monday in case the ISM Manufacturing PMI recovers back into the expansion territory above 50.

On Wednesday, the ADP Employment Change and ISM Services PMI data for May will be watched closely by market participants. The market reaction to these data could be straightforward, with an upbeat print supporting the USD and vice versa, but remain short-lived ahead of FridayÂ’s key jobs report for May.

Following the impressive 315,000 increase recorded in March, Nonfarm Payrolls (NFP) rose 175,000 in April. The USD came under heavy selling pressure with the immediate reaction as investors assessed this sharp decline in NFP as a sign of a loosening in labor market conditions. Nevertheless, Fed policymakers downplayed the disappointing jobs data and reiterated that they will look for several months of good inflation data before considering a reduction in the policy rate. Earlier in the week, Chicago Fed President Austan Goolsbee noted that the jobs market was the strongest part of the US economy and argued that inflation could continue to fall without a meaningful increase in the unemployment rate.

In case the NFP rises 150,000 or less in May, the near-term market reaction is likely to trigger a USD selloff, allowing Gold price to turn north. An increase between 200,000 and 250,000 could be seen as a ‘good enough’ number for the Fed to remain focused on inflation dynamics and fail to have a long-lasting effect on the USD’s valuation. On the other hand of the spectrum, a strong NFP increase of 250,000 or bigger could cause markets to lean toward a single 25 basis points Fed rate cut in 2024 and fuel a rally in the USD and US Treasury bond yields heading into the weekend. In this scenario, Gold could decline sharply.

Gold technical outlook

On the daily chart, the Relative Strength Index (RSI) indicator moves sideways near 50, reflecting GoldÂ’s indecisiveness.

The Fibonacci 23.6% retracement from the mid-February movement, the 50-day Simple Moving Average (SMA) and the lower limit of the ascending regression channel form strong support at $2,330. If XAU/USD falls below this level and starts using it as resistance, technical sellers could take action. In this case, $2,300 (psychological level, static level) could be seen as interim support before $2,260 (Fibonacci 38.2% retracement).

On the upside, the 20-day SMA aligns as the first resistance at $2,360 ahead of $2,400 (psychological level, static level) and $2,440 (static level).

Economic Indicator

Nonfarm Payrolls

The Nonfarm Payrolls release presents the number of new jobs created in the US during the previous month in all non-agricultural businesses; it is released by the US Bureau of Labor Statistics (BLS). The monthly changes in payrolls can be extremely volatile. The number is also subject to strong reviews, which can also trigger volatility in the Forex board. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish, although previous months’ reviews ?and the Unemployment Rate are as relevant as the headline figure. The market’s reaction, therefore, depends on how the market assesses all the data contained in the BLS report as a whole.

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Gold extends recovery after release of US PCE inflation data

Gold extends recovery after release of US PCE inflation data

393156   May 31, 2024 22:26   FXStreet   Market News  

  • Gold extends its recovery after the release of PCE inflation data shows price pressures cooling in April. 
  • Gold already gained following the second estimate for US Q1 GDP data which showed the economy expanded less than previously anticipated. 
  • Gold remains technically vulnerable after a breakout from the Bear Flag continuation pattern. 

Gold (XAU/USD) trades higher, rising into the $2,350s on Friday after the release of US Personal Consumption Expenditure (PCE) data for April showed cooling core price pressures. The PCE is the Federal Reserve’s (Fed) prefered gauge of inflation and Core PCE cooled to 0.2% month-over-month, from 0.3% previously, accoridng to data from the Bureau of Economic Analysis. Analysts had expected Core PCE to remain unchanged at 0.3%. 

The rest of the PCE data came out in line with analysts estimates, however, the undershoot in Core PCE suggests inflation may be cooling more quickly than previously thought in the US, and that as a consequence increases the likelihood of the Fed cutting interest rates. Lower interest rates tend to be positive for Gold as they reduce the opportunity cost of holding the non-yielding asset.

The gains come on the back of a recovery that started on Thursday after the release of weaker US growth data, suggested inflation would remain contained, also leading to lower interest rate projections.

Gold recovers after US growth slows

Gold rebounded on Thursday after the second estimate of US first-quarter GDP growth showed a downward revision to an annualized 1.3% from 1.6% in the first estimate. 

The slower growth came from lower consumer spending, which in turn is expected to keep inflation contained, and the Federal Reserve (Fed) on track to lower interest rates. In a reflection of changing expectations after the GDP release, the US 10-year Treasury Note yield dropped back to 4.55% from a four-week peak of 4.63%. 

Markets have been entertaining the possibility the Fed might even increase interest rates. However, commentary from several Fed officials on Thursday threw this idea out of the bag: 

  • Bank of Atlanta Fed President Raphael Bostic noted that he did not believe further rate hikes should be required to reach the Fed’s 2.0% annual inflation target. 
     
  • Bank of Chicago Fed President Austan Goolsbee noted that while housing inflation was still “well elevated” making it hard to get to 2.0%, he was “Still optimistic that housing inflation will slow.” 
     
  • Bank of New York Fed President John Williams said that he believed Fed policy was well positioned to slowly get price growth back to the Fed’s 2.0% annual target.

US Personal Consumption Expenditure (PCE) data for April, out on Friday, could impact interest-rate expectations further, in turn influencing Gold price. PCE is the Federal Reserve’s preferred gauge of inflation so it tends to carry more heft. Although, as several analysts have noted, the release is quite predictable, coming as it does after the CPI and PPI releases for the same month. That said, small deviations from expectations could still generate volatility.  

The probabilities of the Fed cutting interest rates before September are insignificant and are hanging in the balance at 50/50 in September, data from the CME FedWatch Tool shows. 

Gold and Asian demand as a currency hedge

US interest-rate expectations are not the only factor influencing the Gold price, according to Daniel Ghali, a Senior Commodity Strategist at TD Securities. 

Ghali’s research shows that Gold demand is being driven by Asian buyers who are hoarding the precious metal as a hedge as their currencies depreciate against a strengthening US Dollar (USD).  

“Precious metals are acting as a currency depreciation hedge. Case in point: fund flows into Chinese gold ETFs are rising once more at their fastest pace since the massive buying activity observed in April. US yields are surging, the dollar broke out of its lull, and yet precious metals prices have remained extremely resilient,” says Ghali. 

This suggests the strength of the US Dollar may not be as negatively correlated to Gold as it was in the past, and Gold prices could be capped in the event of an appreciation of USD. 

Technical Analysis: Gold poised for weakness after breakout from Bear Flag 

Gold price has broken out of a slanted rectangular formation (red-shaded area), probably a Bear Flag continuation price pattern which formed between May 24 and 27. 

The breakout activates the Bear Flag’s downside target zone of between $2,303 and $2,295. A break below Thursday’s $2,322 lows would provide further bearish confirmation. 

XAU/USD 4-hour Chart

Bear Flags look like upside-down flags composed of a sharp decline – the flagpole – and the consolidation phase or “flag square”. 

A more bearish move could even see Gold fall to $2,272-$2,277 (the 100% extrapolation of the move prior to the trend-line break and historic support and resistance). 

Gold’s 4-hour chart, used to assess the short-term trend, now exhibits a sequence of declining peaks and troughs, suggesting it is in a short-term downtrend and favoring short positions over longs. 

The precious metal’s medium and long-term trends are still bullish, however, suggesting the risk of a recovery remains high. That said, price action is not supporting a resumption hypothesis at the moment. 

A decisive break back above the trendline, now at around $2,385, would be required to provide evidence of a recovery and reversal of the short-term downtrend. 

A decisive break would be one accompanied by a long green bullish candle or three green candles in a row.  

Economic Indicator

Core Personal Consumption Expenditures – Price Index (MoM)

The Core Personal Consumption Expenditures (PCE), released by the US Bureau of Economic Analysis on a monthly basis, measures the changes in the prices of goods and services purchased by consumers in the United States (US). The PCE Price Index is also the Federal ReserveÂ’s (Fed) preferred gauge of inflation. The MoM figure compares the prices of goods in the reference month to the previous month.The core reading excludes the so-called more volatile food and energy components to give a more accurate measurement of price pressures. Generally, a high reading is bullish for the US Dollar (USD), while a low reading is bearish.

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