Global stocks and commodities started the new week on a bearish note on inflation worries ahead of the FOMC meeting. On Friday, the latest US inflation data, showed consumer prices are still surging and hit a new 40-year high in May. The inflation accelerated to 8.6% in May from 8.3% a month before. Moving ahead, the inventors are anxiously awaiting Wednesday’s decision by the Federal Reserve on interest rates. Markets are already pricing in 50 basis point hikes at the Fed's next two meetings.
The precious metal slightly retreated from the previous session highs on Monday. At the time of writing, the metal trades near 1860. On Friday, the Gold price dropped to a fresh month low of 1825 but later the metal rebounded and bounced to more than 40$ as demand for the safe-haven metal continued to rise against soaring inflation.
Technically the overall momentum remains mixed. On the downside, 1840 is the crucial support area to watch. If the pair breaks below 1840, the slump will quickly extend toward the $1830/20 mark. On the upper side, if the metal break above $1880 it would open doors towards the next resistance area of $1895 and above that $1910 is next.
The U.S. Dollar Currency Index, which tracks the greenback against six major currencies, trades above 104.50 on Monday morning. The dollar registered strong gains against the Euro and British pound, lifted by safe-haven flows. Moving ahead, the future direction of the USD will depend on the FED decision which will release on Wednesday.
On the bullish side, the resistance stays above 105, and a break above this exposes the index towards the 106 level. On the flip side, rejection and pullback from the 105 resistance allow for a dip towards 103.90, with 103.30 and 103 forming additional downside targets.
The EURUSD fell back to below 1.05 on Monday as traders ditched the euro in favour of the safe-haven dollar. The Euro failed to regain upside momentum after the European Central Bank surprised markets by signalling that it was likely to raise rates by half a percentage point in September. For this week, the main drivers for the Euro remain the movement of the US dollar and inflation data from Germany and the Eurozone.
Technically If the bearish momentum continues then the next downside level is to watch at 1.0450 and 1.0400. On the flip side, a breakdown through 1.0640 would negate that bias and suggest a test of the 1.0700 and 1.0770 resistance regions.
The Dow Jones futures extended the decline on Monday. The strong bearish momentum is fueled by the enduring pressure from expectations of an aggressive US interest rate hike. Investors are also concerned that the central bank could cause a recession if it raises rates too high or too quickly.
The technical scenario is absolutely bearish after the last week's sell-off. While considering the recent bearish momentum the Dow may find strong support again below 30,700. On the upper side, in the short-term the first immediate resistance at 31,400 followed by 31,700/32,000.
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