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Gold Prices Rise Amid Fed Speculations

Solid ECN – Gold prices climbed to $2,310 per ounce on Monday, rebounding from a near one-month low. This surge is influenced by anticipation of upcoming remarks from Federal Reserve officials, which traders are eyeing for hints about potential interest rate cuts.

This keen interest stems from recent U.S. labor data that indicated a slowdown in job growth last April, suggesting that the Fed might start reducing rates later in the year.


Interest Rate Expectations and Gold's Appeal

The possibility of reduced interest rates, which decrease the opportunity cost of holding gold, has bolstered the metal's attractiveness. According to the CME's FedWatch Tool, a rate cut by September is 67% likely.

Furthermore, geopolitical tensions, such as the fading hopes for a Gaza ceasefire reported on Sunday, have heightened gold's status as a safe-haven asset.


Global Gold Demand Fluctuates

Despite the price drop, gold demand in India remained subdued last week, with buyers waiting for further price declines. In China, gold premiums decreased for the second consecutive week, reflecting reduced demand during the holiday period.

NZ Dollar Dips Amid US Stability

Solid ECN – The New Zealand dollar recently fell to $0.6 against a stabilizing US dollar. This shift came as fresh economic indicators suggested a potential cut in US interest rates later this year. Concurrently, the Kiwi mirrored the Australian dollar's downturn after the Reserve Bank of Australia opted to maintain its current interest rates, adopting a less aggressive stance than many anticipated.

Geopolitical Influences

Investors closely monitor the Middle East, where recent developments could impact global markets. Following Hamas's acceptance of a ceasefire in Gaza proposed by mediators, tensions remain as Israel did not agree to the terms, continuing military operations in Rafah and planning further negotiations.


New Zealand's Economic Outlook

In New Zealand, despite market expectations leaning towards an interest rate cut by October, fueled by recent weaker employment figures, the central bank has indicated it might hold off on easing monetary policy until 2025. This decision is based on persistently high inflation rates in the year's first quarter.

USDCAD - Canadian Dollar Surge

Solid ECN – The Canadian dollar recently hit a high of 1.36 USD, marking its strongest position since early April. This rise comes amid a widespread weakening of the U.S. dollar, driven by disappointing labor statistics from the U.S. The data showed only 175,000 new jobs created in April, well below the anticipated 243,000.

This underperformance, coupled with slower wage growth and a slight increase in unemployment, suggests that the Federal Reserve may cut rates as early as September.


Economic Indicators in Canada

In contrast, economic signals from Canada also hint at an upcoming rate adjustment, with several key indicators underscoring potential economic challenges. The Manufacturing PMI fell to 49.4, indicating continued contraction in factory activity for the twelfth consecutive month.

Furthermore, the Canadian economy's growth was a modest 0.2% in February, with expectations of stagnation in March, signaling a possible earlier rate cut by the Bank of Canada.

USDMXN - Banxico Rate Decision Looms

Solid ECN—The Mexican peso has shown remarkable resilience. It is trading at approximately 16.8 per USD, a significant recovery from its five-month low of 17.2 recorded on April 25th. This improvement is largely due to a weakened U.S. dollar, spurred by increasing indications that the Federal Reserve might implement two rate cuts later this year.

Contributing factors include moderated job growth and a rise in the U.S. unemployment rate in April, alongside Federal Reserve Chair Powell’s recent dismissal of potential rate hikes.


Economic Indicators and Policy Outlook

Amidst these currency shifts, Mexico’s central bank, Banxico, is expected to maintain its interest rate at 11% on May 9th, holding steady after a reduction in March. However, emerging economic data could spark discussions among Banxico’s Governing Council members about possible policy changes.

The Mexican economy showed signs of acceleration, expanding by 0.2% in the first quarter of 2024, outpacing the previous quarter’s growth and surpassing market expectations. Additionally, business confidence in Mexico is robust, remaining near an 11-year high, although inflation exceeds 4%.

Oil Prices Stabilize Amid Geopolitical Tensions

Solid ECN– WTI crude futures remained steady, trading at approximately $77 per barrel as of Tuesday. This stability comes despite the market being close to its nearly two-month low of $78.1, recorded on May 3rd. The current price balances ongoing geopolitical concerns and the global perception of an ample oil supply.

Impact of Middle East Tensions on Oil Prices

Despite escalating tensions in the Middle East, where the Israeli military cabinet has unanimously rejected a ceasefire agreement with Hamas, the situation has not severely disrupted oil shipments.

Notably, the absence of significant military escalations involving Iran has ensured that oil tanker movements through the critical Strait of Hormuz continue unimpeded. This situation has helped alleviate fears of potential new U.S. sanctions or disruptions in oil supply.

OPEC's Strategy and Global Oil Supply

In response to the current market conditions, Saudi Arabia has increased the official selling price of its Arab Light crude by 90 cents per barrel for June, exceeding market expectations by 30 cents.

This adjustment suggests that OPEC’s largest producer is likely to advocate for extending production cuts into the next quarter, aiming to stabilize prices and address the relatively loose supply on the global stage.

Silver Prices Bounce Back

Solid ECN – Silver prices have risen above $27 per ounce after a dip to one-month lows near $26.3 last week. This rebound aligns with other precious metals and reflects investor anticipation of a possible interest rate cut by the Federal Reserve in September.

The recent U.S. jobs report, which did not meet analysts' expectations, has further convinced traders that the Fed might reduce interest rates later this year. Such economic signals are critical for investors looking to understand potential market movements.

Additionally, silver's demand increased as investors sought safe-haven assets following a military operation in Rafah by Israel, prompting evacuation warnings to Palestinian civilians. This situation has added to the precious metal's appeal during geopolitical uncertainty.

Canadian Dollar Climbs as US Jobs Disappoint

Solid ECN – The Canadian dollar peaked at 1.36 per USD, marking its strongest position since April 9th. This surge comes as the U.S. dollar experiences widespread weakness triggered by disappointing labor market data.

The U.S. economy added 175,000 jobs in April, falling short of the anticipated 243,000. This underperformance, coupled with a higher jobless rate and slowed wage growth, fuels speculation that the Federal Reserve might implement its first rate cut in September.


Economic Slowdown Signals Potential Rate Cuts in Canada

In parallel, Canada's economic indicators suggest a similar downturn, hinting at a possible earlier rate adjustment by the Bank of Canada. The Manufacturing PMI in Canada dropped to 49.4 in April 2024, signaling continuous contraction in factory activity for a twelfth consecutive month and falling below the expected 50.2.

Furthermore, with the economy only growing by 0.2% in February and predictions of stagnation in March, pressures mount for monetary policy adjustments.

Economic Indicators Show Growth and Stability in Mexico

Solid ECN – The Mexican peso has rallied to approximately 16.8 per USD, marking a significant rebound from its five-month trough of 17.2 on April 25th. This upturn is primarily attributed to a widespread weakening of the U.S. dollar, spurred by indications that the Federal Reserve might implement two rate cuts within the year.

These speculations were fueled by a moderated growth in U.S. job numbers for April and a surprising increase in the unemployment rate, compounded by Federal Reserve Chair Powell's earlier dismissal of any forthcoming rate hikes.


Stable Monetary Outlook as Mexican Economy Grows

On the domestic front, Mexico's central bank, Banxico, is expected to maintain its interest rates at 11% in its upcoming May 9th meeting, consistent with its rate cut in March. However, emerging data might spark discussions among Banxico's Governing Council members about potential policy adjustments.

Additionally, Mexico's economic growth has accelerated, with a 0.2% expansion in Q1 of 2024 compared to 0.1% in the previous quarter, surpassing market expectations. Business confidence remains robust, near an 11-year peak, even as inflation persists above 4%.

BTC Bulls Eye Higher Targets Despite Price Dip

Solid ECN – Bitcoin broke out of the descending trendline (in blue), but the bulls failed to stabilize the price above the EMA 50 and the middle line of the Bollinger Band. Consequently, the pair formed a long-wick bearish candle on the daily chart. As of this writing, the BTC/USD pair has dipped and is currently testing the broken resistance at $61,896.

The technical indicators provide mixed signals. RSI hovers below 50, but AO is bullish, showing a green line.

From a technical perspective, the bullish outlook remains valid if the BTC/USD price remains above $61,896. In this case, the next target could be $67,333.

On the flip side, the downtrend will resume if the price falls below the support level, with $56,460 as the next support level.

NZDUSD: Fed Officials Hint at Prolonged Rates

Solid ECN – The New Zealand dollar (NZD) has shown a minor decline to $0.59, influenced by a slight rise in the US dollar. This movement comes as traders anticipate crucial US economic data that might hint at the Federal Reserve's timing for interest rate reductions. The US will soon disclose figures on jobless claims and consumer sentiment, with significant inflation data on the horizon.

Fed's Strategy on Interest Rates

Comments from Federal Reserve officials, particularly Fed Bank of Boston President Susan Collins, suggest a cautious approach to monetary policy. Collins indicated that high interest rates might persist longer than expected to mitigate inflation, affecting forex market dynamics.

Anticipation of NZ Central Bank

In New Zealand, the focus shifts to the upcoming central bank meeting scheduled for May 22nd. With inflation exceeding initial forecasts, the bank is poised to maintain the interest rate at 5.50%. This decision could shape the short-term trajectory of the NZD in forex markets.

USDJPY: Yen Holds Steady Amid BOJ Inflation Warnings

Solid ECN – The Japanese yen has shown relative stability, holding at about 155.6 per dollar following the release of the Bank of Japan's (BOJ) April policy meeting summary. During the meeting, the board highlighted potential inflation risks and deliberated on conditions that might necessitate future interest rate increases.

A significant focus was on the yen’s depreciation, which has been a key driver of escalating prices and draws particular scrutiny from the central bank.


BOJ’s Monetary Policy Outlook

Despite the inflation concerns, the BOJ plans to keep financial conditions accommodating and closely monitor the development of economic and price trends. This stance comes amid slowing wage growth in Japan for March, which complicates the BOJ’s projections of a positive feedback loop between rising wages and prices.

Furthermore, the yen's recent performance reflects a nearly 2% decline over the week, even amid indications of potential government interventions to stabilize the currency, following a sharp 5.2% rally from its lows, supported by about $60 billion in spending by the BOJ to defend its value.

EURUSD Bearish Outlook

Solid ECN – As of the latest trading session, the Euro continues to decline, trading at approximately 1.07 against the U.S. dollar, notably below the 38.2% Fibonacci retracement level. The current technical indicators support the bearish outlook; the Awesome Oscillator (AO) has dipped below zero, while the Relative Strength Index (RSI) remains under the median line, suggesting weakened momentum.

The EUR/USD downtrend appears poised to continue as it trades below a significant descending trendline. The primary resistance level is at the 50% Fibonacci level of 1.079.

If this resistance holds, the downtrend initiated on May 3rd will likely extend, potentially reaching a target of 1.069. This target aligns with the ascending trendline and the 23.6% Fibonacci level, providing a technical confluence that supports the bearish scenario.

Bitcoin Dips Below Key $61.9K Level

Solid ECN – Bitcoin dipped below $61,896 in today's trading session. The technical indicators are bearish, with the RSI hovering below 50 and the Awesome Oscillator bars in red.

From a technical standpoint, the downtrend momentum that started earlier this week will likely continue, with the median line of the Bollinger Band acting as resistance. If BTC/USD remains below this line, the next milestone for sellers will likely be $59,559.

Conversely, the bearish outlook could be invalidated if the price crosses and stabilizes above $62,702.

AUDUSD Analysis

Solid ECN – The AUD/USD pair has resumed its uptrend from 0.655 after testing the 50-day EMA. Currently, the Australian dollar is trading around 0.660 against the U.S. dollar, with bulls aiming to stabilize above the 23.6% Fibonacci retracement level.

The RSI is above 50, indicating momentum in favor of the upward move. Technically, 0.6557 serves as the primary support for the bullish trend. If the price holds above this level, the next target is likely around 0.664.

Key Reports to Influence Gold Prices

Solid ECN – Gold prices soared to $2,350 per ounce this past Friday, reacting to traders' expectations of a Federal Reserve rate cut. The anticipation grew after Thursday’s economic report showed a surprising increase in Americans filing for unemployment benefits, hinting at a potential cooling of the labor market.

Such economic indicators often lead to a softer approach to interest rates, benefiting assets like gold, which thrives in lower-rate environments.

Monitoring Future Economic Indicators
Investors and traders are now poised to closely analyze the upcoming Consumer Price Index (CPI) and Producer Price Index (PPI) reports. These indicators will provide further clarity on the Federal Reserve's stance.

Despite some Federal officials expressing caution about easing policies too quickly, the general sentiment leans towards reducing rates, especially with pressures from global economic uncertainties and market demand.

Influences on Gold’s Market Performance

Significant factors such as increased over-the-counter market investments, ongoing central bank acquisitions, and rising demand in Asian markets continue to push gold prices upward.

Additionally, geopolitical tensions in the Middle East and Ukraine are escalating, further increasing gold's appeal as a safe-haven asset. With these dynamics, gold is on track for a 2.2% weekly gain.

EURUSD Technical Analysis

EUR/USD rose from the 61.8% Fibonacci retracement level yesterday and is now testing the descending trendline near 1.07.

The technical indicators are bullish, but for the uptrend to resume, the price must close and stabilize above the trendline. If this happens, the euro will strengthen against the dollar, with the next milestone likely at 1.088.

We recommend closely monitoring price movements near the bearish trendline and checking lower timeframes, such as the 4-hour chart, for bearish candlestick patterns. If the bulls fail to close above the trendline, EUR/USD could face renewed selling pressure, potentially pushing the price down to the 50% Fibonacci support level.

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WTI Crude Drops Below $78, Eyes on OPEC

Solid ECN – WTI crude futures experienced a significant decline, dropping below $78 per barrel this Monday. This downward trend extended from last week when oil prices fell sharply by more than 1%. The drop is largely attributed to growing concerns about demand, influenced by economic indicators and policy signals from the U.S.

Economic Signals Affect Oil Demand

Recent statements by U.S. Federal Reserve officials suggest that high interest rates might persist, potentially slowing economic growth and reducing oil demand. This speculation is supported by a notable decrease in U.S. consumer confidence reported last Friday, signaling an economic slowdown. Additionally, increases in U.S. gasoline and distillate inventories ahead of the summer imply weaker-than-expected demand.

Looking Ahead: OPEC's Next Moves

Investors are now focusing on OPEC's policy meeting scheduled for early June. There is widespread anticipation that OPEC may continue its supply cuts into the latter half of the year, potentially influencing future market dynamics.

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Franc Strengthens, Dollar Weakens Post-Fed

Solid ECN—The Swiss franc has remarkably recovered, climbing to 0.91 against the US dollar from a seven-month low of 0.92 on May 1st. This rebound was sparked by unexpectedly high inflation data, which reduced the market's expectation that the Swiss National Bank (SNB) would further relax monetary policy.

In April, inflation surged to 1.4% from a low of 1% the previous month, significantly exceeding forecasts of 1.1%.

Inflation Concerns Shape Policy

The recent jump in inflation rates is noteworthy, especially since the SNB had warned that prices could be unstable due to global tensions and a relaxed stance on the franc. Although foreign currency reserves have increased, the rapid inflation has fueled worries about potential ongoing price rises.

These concerns have led to speculation about whether the SNB will reduce interest rates again in June.

Dollar's Influence on the Franc

A weakening US dollar bolstered the franc's strength after the Federal Reserve avoided strong indications of future rate hikes. This backdrop provides a complex landscape for forex traders and investors, suggesting a cautious strategy approach.

Bulls Eye Key Breakout for EURUSD Rally

Solid ECN – The EURUSD currency pair pulled back from last week's trading session's 61.8% Fibonacci support level. As of posting, the pair trades around the 1.078 mark, clinging to the descending trendline on the 4-hour chart.

Technical indicators suggest a bullish trend. However, for the uptrend to continue, the bulls must close and stabilize the price above 1.079. If this scenario comes into play, the European currency will likely gain more ground against the U.S. dollar, with 1.081 as the initial target, followed by the 1.083 mark.

Conversely, the downtrend will likely continue if the EURUSD price dips below the 1.075 minor support. In this case, bears would test the 1.073 level, followed by the 50% Fibonacci support.

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Key Technical Levels for Gold Traders

Solid ECN – Gold has declined from $2,378 against the U.S. dollar on May 10 and is currently trading around $2,340. With technical indicators signaling a bearish trend, the dip is likely to extend to the EMA 50, a level supported by the lower line of the bullish flag.

Given the primary bullish trend, the EMA 50 can provide a good opportunity for traders and investors to join the bull market.

However, if the XAUUSD price dips below the 38.2% Fibonacci level, the downtrend will likely extend to $2,306, followed by the 50% Fibonacci support level.

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