Title: US Dollar Price Action Forecast: Gold Breakout and Key Levels in EUR/USD, USD/CAD, and USD/JPY
Author: Adapted and expanded from original analysis by James Stanley, Forex.com
The U.S. Dollar (USD) has seen renewed volatility following recent economic data releases and mounting speculations about future monetary moves by the Federal Reserve. Key updates in price action reflect shifting market sentiment as traders weigh inflation data, employment numbers, and Fed commentary to forecast potential rate decisions. Against this backdrop, not only has the greenback experienced fluctuations, but related assets such as Gold, EUR/USD, USD/CAD, and USD/JPY are also evolving.
This article explores the latest setups across these major forex pairs and assets, providing a comprehensive breakdown of each instrument and its recent price behavior. We also add relevant updates from other prominent financial sources to present a well-rounded view of the U.S. Dollar outlook going forward.
Overview: Factors Driving US Dollar Volatility
Several developments have influenced the USD’s recent volatility, including:
– U.S. Non-Farm Payrolls (NFP): Recent NFP data showed a mix of high job creation and a slight uptick in unemployment. While job numbers were stronger than anticipated, wage growth and labor participation painted a less dovish picture.
– Inflation Trends: Both the Consumer Price Index (CPI) and Producer Price Index (PPI) releases have been critical in framing traders’ expectations around the Fed’s trajectory. Sticky inflation continues to complicate easing expectations.
– Federal Reserve Policy Outlook: Fed officials have struck a cautious tone. Although some policymakers hint at the possibility of future rate cuts, others emphasize that inflation needs to return sustainably to the 2% target.
– Global Safe-Haven Demand: Rising geopolitical tensions and concerns about global economic stability are providing support to the USD as a global reserve currency.
Given all these factors, technical setups across major USD forex pairs and Gold are at crucial levels, with potential for directional breakouts.
Gold (XAU/USD): Breakout Above Key Resistance
Gold has recently posted an upside breakout after another test of a key resistance zone above $2,350. The precious metal had been constrained for weeks, finding buyers on dips but facing consistent resistance near this zone.
Key Developments:
– As of June 2024, Gold has broken out to fresh all-time highs above $2,400, helped by ongoing global inflation concerns and central bank purchases, particularly from China and other emerging market nations.
– Technical Resistance Turned Support: Former resistance around $2,350 could now serve as support in case of a pullback.
– RSI Divergence and Momentum: While the breakout is significant, momentum indicators hint at overbought conditions. A short-term pullback could offer buyers a more favorable entry.
Support Levels to Watch:
– Initial Support: Around $2,375 to $2,350 zone
– Deeper Support: $2,325 followed by $2,300
Potential Upside Targets:
– $2,450 (psychological)
– $2,500 (round-number resistance and possible magnet level for further bullish flows)
According to analysts at ING and JPMorgan, Gold remains an attractive asset amid persistent inflationary pressures and elevated geopolitical risk. Goldman Sachs, for instance, recently raised its year-end gold target to $2,600 per ounce.
EUR/USD: Caught Between Diverging Central Bank Expectations
The EUR/USD pair has been volatile, trading within a wide range, with market participants weighing the divergent policy paths between the Federal Reserve and the European Central Bank (ECB). While the Fed is cautious, signaling data-dependent moves, the ECB, after cutting rates in early June, may become more hawkish if inflation rebounds in the Eurozone.
Technical Overview:
– Recent Price Action: EUR/USD failed to hold gains above 1.0900 and has dropped back below 1.0800, marking a key sell-off zone.
– Support: 1
Read more on USD/CAD trading.