Commodities, Precious metals and stocks ended mixed last week despite the latest US CPI and PPI readings showing continued month-over-month inflation moderation. Investors and market participants remain concerned about the debt ceiling impasse, after the meeting between President Biden and congressional leaders planned for Friday was postponed to next week.
This week the investors should continue to focus on the results of the debt ceiling meeting. The US President is expected to meet with Republican House Speaker Kevin McCarthy and other congressional leaders early this week to resume negotiations on the debt limit. During the last week, a White House meeting between President Joe Biden and congressional leaders on Tuesday ended without a deal.
On the other hand, the important economic events to watch are the series of inflation numbers from Canada, Japan and the Eurozone, the US housing data and retail sales.
On the earnings front, the companies scheduled to release their last quarter financial results this week are Walmart, Target, Cisco and Alibaba.
Gold price responded positively to the April US Consumer Price Index report and reached a fresh weekly high of $2048 on Wednesday. While the bulls lost upside momentum after the metal formed a head and shoulder pattern near the $2048 area and retreated back to near the key support area of $2000. For gold, the week is littered with key U.S. economic figures and any market disappointment over the outcome of them could potentially support the metal.
The recent movement is sharp but still above the psycological support of $2000, which for now does not mean a downward movement but only a correction. Only a break and close below $1990 will give a more significant signal and amplify negative sentiment. In the short-term, we may see a further potential push down towards the $1993/90 area. On the flip side, a 4-hour close above $2030 invalidates the short-term bearish scenario for a squeeze up towards the next resistance at $2045.
The U.S. dollar appreciated against most currencies last week—the dollar index rose to its highest level in four weeks. The Greenback‘s ascent recovery has extended even though the leading economic indicators, US CPI and PPI readings showed signs of slowing inflation. The index gained strong momentum on Friday after Fed Governor Michelle Bowman said that rates may need to be raised further if inflation persists. Some of the key data points expected to dictate this week's dollar movements include the US retail sales data, which is due out on Tuesday and appearances by a number of Federal Reserve policymakers this week.
The technical scenario is absolutely bullish after last week's bullish sentiment. While considering the recently bullish momentum the USD may find strong resistance this week above 103. On the downside, any meaningful pullback now seems to find some support near the 102.40 zones, below which the slide could further get extended towards the 102.20/00 regions.
The currency pair fell heavily towards the end of the week and broke support during the process after the US dollar regain strong bullish momentum. However, the European Central Bank policymakers maintain a hawkish line. Looking forward, Euro traders should pay attention to the releases of Eurozone GDP and German Zew economic sentiment numbers on Tuesday.
For this week, 1.0830 is the immediate support level, followed by 1.0800 then 1.0780. On the flip side, 1.0870/80 now seems to act as an immediate resistance, which, if cleared, might trigger a short-covering bounce. Any subsequent move up, however, is likely to attract fresh sellers near the 1.0910/30 mark.
Dow Futures extended the losses on Friday after the May US Consumer Sentiment report showed worse expectations with a reading of 57.7 compared to a 63.5 reading last month. The bearish sentiment was also fueled after US Treasury Secretary Janet Yellen warned that a failure by Congress to raise the debt ceiling in the coming weeks could lead to a “constitutional crisis. This week, Dow investors primarily focused on the major retail earnings and the meeting between Biden and congressional leaders.
From a technical perspective, The 33,100 area of confluence has recently been held as a firm support, failure to defend the mentioned support levels has the potential to drag the pair further towards the 32,900/800 support zone. On the upper side, in case the index manages to regain upside momentum, it will head towards the immediate resistance of 33,400 and then 33,800.
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