- The US dollar has been consolidating sideways as global risk appetite improves.
- Currently, the greenback is looking for a direction, and NFPs could prove a catalyst.
- Weaker-than-expected data could push the US dollar lower.
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Global risk appetite has improved following last week’s upbeat economic data. While the Federal Reserve is expected to hold rates steady this week, the market’s focus is shifting toward the potential for future rate cuts.
Stronger-than-anticipated GDP growth has fueled speculation of a soft landing, but the upcoming nonfarm payroll report will be crucial in determining the Fed’s next move. A weaker-than-expected jobs report could reinforce expectations for rate cuts later this year.
The US dollar index has come under pressure as investors price in a potential shift in monetary policy. The yield curve remains inverted, indicating uncertainty about the economic outlook. However, a steeper curve could emerge if the Fed signals a more dovish stance in the coming months.
Ultimately, this week's economic data and the Fed's policy decision will shape market direction for the rest of the year.
US Dollar Index Consolidates Near 104 Resistance
The Dollar Index (DXY) has recently traded sideways, hovering around the 104 level. Despite a brief dip to 103 last week, the index quickly rebounded, facing resistance at the 104.5 mark.
Short-term technical indicators suggest a potential consolidation phase, with the 104 level acting as immediate support.
However, a stronger-than-expected nonfarm payroll report on Friday could push the DXY towards 105.1. Conversely, weaker-than-expected jobs data might trigger a decline back towards the 103 level.
The upcoming week will be crucial for determining the DXY's next move, with the employment report being the key catalyst.
Gold Seeks Direction Amidst Market Pressures
Last week, U.S. data helped stabilize gold prices, which closed with a modest 0.6% loss following a 2% decline.
The new week began on a positive note as buying interest from the end of the previous week continued. Geopolitical tensions in the Middle East have increased gold demand, but upcoming interest rate decisions from the Fed and BOJ could add volatility.
Additionally, U.S. non-farm payroll data will significantly influence gold prices.
This week, investors will look for clues on a potential Fed rate cut, which could support gold if employment data meets expectations. Conversely, a BOJ rate hike and reduced gold demand from China might exert downward pressure. Despite these factors, geopolitical developments currently favor a gold recovery.
Gold, which dropped to $2,350 last week, found support at the Fib 0.618 level, suggesting an ideal correction. If it maintains daily closes above $2,390, it could test the $2,440-$2,450 range, with resistance at $2,420. Conversely, daily closes below $2,390 may signal a limited recovery and potential retreat to $2,350 or $2,330.
Given the recent reaction at a key support level, gold is more likely to stay above $2,390 in the near term.
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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, counsel or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple perspectives and is highly risky and therefore, any investment decision and the associated risk remains with the investor.