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• EUR/USD seesaws around five-week high after posting the biggest weekly gain since January.
• ECB out-haws Fed to keep Euro buyers hopeful amid sluggish session, upbeat sentiment.
• Mixed US data, hopes of Fed policy pivot supersede hawkish Fed talks and favor EUR/USD bulls.
• US stock and bond markets are off due to Juneteenth holiday and can restrict market moves.

EUR/USD remains sidelined near 1.0950 as bulls seek more clues while keeping control at the highest levels in over a week. That said, the Euro pair jumped the most since early January the previous week as the European Central Bank (ECB) out-hawked the Federal Reserve (Fed). Also favoring the Euro bulls were mostly mixed US data and receding fears of the economic slowdown. It should be noted, however, that Friday’s upbeat US data and hawkish Fed signals probed the pair buyers at the highest levels since early May, before the latest inaction at the top.

Juneteenth holiday in the US joins light calendar to restrict immediate EUR/USD moves even as the latest headlines surrounding China allowed markets to remain hopeful and weigh on the US Dollar.

That said, US Secretary of State Antony Blinken and Chinese Foreign Minister Qin Gang on Sunday held what both called candid and constructive talks on their differences from Taiwan to trade but seemed to agree on little beyond keeping the conversation going with an eventual meeting in Washington, reported Reuters. Further, news from the South China Morning Post (SCMP) quoting China State Council also flashes positive signals for the sentiment as it said, “The Council considered a batch of macroeconomic policies designed to expand ‘effective demand’, strengthen the real economy and defuse risks in key areas.”

On the other hand, German Chancellor Olaf Scholz faces a delicate balancing act this week at the German-Chinese government consultations in Berlin, per Reuters. The news also signaled that the German Leader is seeking to maintain good ties with Germany's largest trade partner while complying with a G7 pledge to "de-risk" from Beijing.

On Friday, the preliminary readings of the University of Michigan (UoM) Consumer Sentiment Index (CSI) for June improved but the US inflation expectations eased and tamed the US Dollar bulls. Further, Fed policymakers have been hawkish of late and challenged the EUR/USD bulls.

That said, the latest US Federal Reserve (Fed) Monetary Policy Report to the US Congress, published Friday stated, “Inflation in the US is well above target and the labor market remains very tight,” as per Reuters. The report also mentioned, per Reuters, “Outlook for funds rate is subject to considerable uncertainty.”

Additionally, Richmond Fed President Thomas Barkin said, “Raising rates further could create the risk of a more significant slowdown in the economy.” The policymaker, however, also added that the Fed can do comfortable more to slow the resilient US economy, which in turn triggered a jump in the 2-year Treasury bond yields to 4.75% and helped the US Dollar to get off the lows.

Elsewhere, “US economy is still ‘ripping along’,” said Federal Reserve Governor Christopher Waller on Friday while adding that everything seems to be calm in the US banking system, as reported by Reuters.

On the other hand, the ECB’s 0.25% rate hike and readiness to lift the rates in July allowed the Euro to ignore mostly downbeat data in the bloc, as well as in Germany, which in turn highlights this week’s preliminary PMIs for June for clear directions. Should the activity data ease, the EUR/USD may witness the much-awaited pullback. Additionally important to watch will be Fed Chair Powell’s testimony as concerns about July Fed rate hike being the last from the US central bank weigh on the US Dollar of late.

Technical analysis

Bearish spinning top candlestick at the multi-day high joins nearly overbought RSI conditions to challenge EUR/USD buyers.

Britain's main manufacturing trade body Make UK revised its outlook for this year on Monday, per Reuters. The news also cites demand for aircraft and electronics as the main catalysts while adding that it still expects production to fall over the year as a whole.

Reuters said, “Make UK said it expected factory output to fall 0.3% this year compared with a 3.3% contraction expected three months earlier, and kept unchanged its forecast for 0.8% growth in 2024.”

Together with the economic forecasts, the Make UK Senior Economist James Brougham said, "Manufacturers are seeing a gradually improving picture, but the word 'gradually' is doing a lot of heavy lifting."

Key quotes

GBP/USD struggles to cheer the good news

Despite the recent positive news, GBP/USD retreats from an intraday high to 1.2825 as the Cable bulls take a breather at the highest levels since April 2022.

Also read: GBP/USD Weekly Forecast: Eyes on 1.2870 key resistance ahead of BoE policy announcements

• AUD/USD picks up bids to reverse the previous day’s pullback from four-month high.
• US-China talks, Beijing’s likely stimulus underpin risk-on mood.
• RBA versus Fed divergence contrasts with mixed US data to favor Aussie bulls.
• Juneteenth US holiday restricts Monday’s AUD/USD moves ahead of a likely busy week.

AUD/USD begins the trading week on a firmer footing, picking up bid to around 0.6885 by the press time, as weekend news surrounding China joins receding hawkish hopes from the Fed to favor the Aussie pair buyers. However, the previously mixed US data and a Juneteenth US holiday limit the quote’s immediate moves ahead of an important week comprising the Reserve Bank of Australia (RBA) Monetary Policy Meeting Minutes and Fed Chair Jerome Powell’s Semi-Annual Testimony, not to forget the preliminary readings of the US and Australia Purchasing Manager Indexes (PMIs) for June.

During the last week, the US Dollar Index (DXY) failed to cheer the US Federal Reserve’s (Fed) hawkish pause to the rate hike trajectory as mostly downbeat data challenged hopes of the US central bank’s rate hike past July. Additionally, comparatively more hawkish moves of the European Central Bank (ECB) weighed on the US Dollar.

On the other hand, strong Australian inflation numbers and hopes of witnessing more stimulus from China added strength to the AUD/USD upside. Furthermore, the weekend news suggesting the improvement in the US-China ties and expectations of more stimulus from Australia’s biggest customer, namely China, allow the Aussie pair buyers to remain hopeful.

That said, the preliminary readings of the University of Michigan (UoM) Consumer Sentiment Index (CSI) for June improved to 63.9 from 59.2 prior and market expectations of 60.0. However, the year-ahead inflation expectations receded for the second consecutive month to the lowest since March 2021, falling to 3.3% in June from 4.2% in May, per the UoM report, while the five-year forecasts appear little changed to 3.0% versus 3.1% anticipated and prior. Previously, US Retail Sales and inflation data weren’t too impressive, which in turn flagged fears of the US economic performance and weighed on the US Dollar.

On the other hand, US Secretary of State Antony Blinken and Chinese Foreign Minister Qin Gang on Sunday held what both called candid and constructive talks on their differences from Taiwan to trade but seemed to agree on little beyond keeping the conversation going with an eventual meeting in Washington, reported Reuters. Further, news from the South China Morning Post (SCMP) quoting China State Council also flashes positive signals for the sentiment as it said, “The Council considered a batch of macroeconomic policies designed to expand ‘effective demand’, strengthen the real economy and defuse risks in key areas.”

Alternatively, Fed policymakers have been hawkish of late and challenged the AUD/USD bulls. “Inflation in the US is well above target and the labor market remains very tight,” as per the latest US Federal Reserve (Fed) Monetary Policy Report to the US Congress, published Friday. The report also mentioned, per Reuters, “Outlook for funds rate is subject to considerable uncertainty.” On the same line, “Raising rates further could create the risk of a more significant slowdown in the economy,” signaled Thomas Barkin, President of the Federal Reserve Bank of Richmond on Friday, per Reuters. The policymaker, however, also added that the Fed can do comfortable more to slow the resilient US economy, which in turn triggered a jump in the 2-year Treasury bond yields to 4.75% and helped the US Dollar to get off the lows.

Furthermore, “US economy is still ‘ripping along’,” said Federal Reserve Governor Christopher Waller on Friday while adding that everything seems to be calm in the US banking system, as reported by Reuters.

Against this backdrop, Wall Street closed positive and helped S&P500 Futures to print mild gains by the press time. Further, the US Treasury bond yields recovered on Friday but lacks upside momentum, which in turn probed the US Dollar price and put a floor under the AUD/USD price.

Moving on, a light calendar may allow the AUD/USD pair to grind higher but the risk-positive news may keep buyers hopeful as markets await RBA Minutes and Fed Chairman Powell’s testimony, as well as PMIs for June.

Technical analysis

The overbought RSI (14) line joins the 61.8% Fibonacci retracement of February-May downside, around 0.6895, quickly followed by the 0.6900 round figure, to challenge the AUD/USD bulls. The bears, however, have limited downside room to cheer as a two-week-old ascending support line, close to 0.6835 by the press time, restricts short-term declines of the pair.

US Secretary of State Antony Blinken and Chinese Foreign Minister Qin Gang on Sunday held what both called candid and constructive talks on their differences from Taiwan to trade but seemed to agree on little beyond keeping the conversation going with an eventual meeting in Washington, reported Reuters.

The news stated, “Making the first visit to China by a US secretary of state in five years, Antony Blinken stressed "the need to reduce the risk of misperception and miscalculation" in his talks with Foreign Minister Qin Gang, the China State Department said.”

Key statements

Apart from the US-China talks, news from the South China Morning Post (SCMP) quoting China State Council also flash positive signals for the sentiment as it said, “The Council considered a batch of macroeconomic policies designed to expand ‘effective demand’, strengthen the real economy and defuse risks in key areas.”

AUD/USD grinds higher

The news fails to impress AUD/USD bulls despite allowing the risk-barometer pair to grind higher towards 0.6900, up 0.05% amid early Monday’s Asian session.

• Gold Price struggles to keep bears on board after snapping two-week uptrend, retreating of late.
• XAU/USD fails to cheer US Dollar weakness amid economic fears surrounding China, US.
• ECB out-hawks Fed and weighs on USD amid mixed United States data, putting a floor under the Gold Price.
• Fed Chair Powell’s Testimony, preliminary PMI readings for June will be crucial for clear directions.

Gold Price (XAU/USD) remains depressed after posting the first weekly loss in three, bouncing off short-term key support confluence to around $1,950. That said, the XAU/USD begins the trading week on a dicey floor amid the US holiday on Monday, as well as a light calendar elsewhere. However, hoeps of the Federal Reserve’s (Fed) July rate hike joins mixed concerns about China and the US to weigh on the Gold Price, despite downbeat US Dollar. That said, Fed Chair Jerome Powell’s bi-annual Testimony and the preliminary readings of the US, UK and Japan PMIs for July will be the key to watch for clear directions during the week.

Gold Price holds lower ground despite downbeat US Dollar

Gold Price fails to cheer the downbeat US Dollar performance in the last week as mixed US data joined blurry concerns about the US and China economics.

US Dollar Index (DXY) dropped for the third consecutive week to the lowest level since early May, pressured near 102.30 at the latest.

That said, the US central bank kept the benchmark interest rate unchanged at 5.0-5.25%, matching market expectations of pausing the multi-month-old hawkish cycle after 10 consecutive rate increases. However, the upbeat FOMC Economic Projections and Federal Reserve (Fed) Chairman Jerome Powell’s speech backed the hawkish Fed bias surrounding the July meeting. Even so, mixed US data and comparatively more hawkish moves of the European Central Bank (ECB) weighed on the US Dollar.

On Friday, the preliminary readings of the University of Michigan (UoM) Consumer Sentiment Index (CSI) for June improved to 63.9 from 59.2 prior and market expectations of 60.0. However, the year-ahead inflation expectations receded for the second consecutive month to the lowest since March 2021, falling to 3.3% in June from 4.2% in May, per the UoM report, while the five-year forecasts appear little changed to 3.0% versus 3.1% anticipated and prior.

Previously, US Retail Sales and inflation data weren’t too impressive, which in turn flagged fears of the US economic performance and weighed on the Gold Price.

Additioally, Fed policymakers have been hawkish of late and exerted downside pressure on the XAU/USD. “Inflation in the US is well above target and the labor market remains very tight,” as per the latest US Federal Reserve (Fed) Monetary Policy Report to the US Congress, published Friday. The report also mentioned, per Reuters, “Outlook for funds rate is subject to considerable uncertainty.” On the same line, “Raising rates further could create the risk of a more significant slowdown in the economy,” signaled Thomas Barkin, President of the Federal Reserve Bank of Richmond on Friday that, per Reuters. The policymaker, however, also added that the Fed can do comfortable more to slow resilient US economy, which in turn triggered a jump in the 2-year Treasury bond yields to 4.75% and helped the US Dollar to get off the lows.

Furthermore, “US economy is still ‘ripping along’,”said Federal Reserve Governor Christopher Waller on Friday while adding that everything seems to be calm in the US banking system, as reported by Reuters.

China, Russia flash mixed signals to defend the Gold Price

As per the South China Morning Post (SCMP), the Council considered a batch of macroeconomic policies designed to expand “effective demand”, strengthen the real economy and defuse risks in key areas. However, the markets appear to have lost interest in announcement from China as the last week’s rate cuts have already signaled such measures but were mostly failed to inspire the markets much. On the same line, US Secretary of State and Chinese foreign minister on Sunday held what both called candid and constructive talks on their differences from Taiwan to trade but seemed to agree on little beyond keeping the conversation going with an eventual meeting in Washington, per Reuters.

Elsewhere, Russia rules out scope of extending Ukraine grain deal and flags more risk-off move, which in turn can weigh on the XAU/USD.

Amid these plays, Wall Street closed on the positive side, yields eased but the commodities traded mixed while the US Dollar dropped.

Moving on, Monday’s inaction, due to the US holiday, may allow traders to reassess the previous week’s mixed moves ahead of Federal Reserve (Fed) Chair Powell’s Testimony, which will be crucial for confirming July rate hike and may weigh on the Gold Price. Following that, Friday’s US Purchasing Manager Indexes (PMIs) for June will be eyed for clear directions.

Also read: Gold, the Chart of the Week: XAU/USD is coiled and breakout eyed

Gold Price Technical analysis

Gold Price portrays bearish consolidation above a convergence of the 100-DMA and 50% Fibonacci retracement of late February to early May upside, around $1,940 by the press time.

That said, the Moving Average Convergence and Divergence (MACD) indicator regains bullish momentum but the Relative Strength Index (RSI) line, placed at 14, steadies near the 50.0 level, suggesting a continuation of the bearish grind.

With this, the XAU/USD is likely to remain sidelined unless breaking the $1,940 support confluence.

Following that, a quick fall towards the 61.8% Fibonacci retracement, also known as the golden ratio, around $1,910, can’t be ruled out. However, the $1,900 round figure may offer breathing space to the XAU/USD bears afterward.

Meanwhile, the Gold Price recovery needs validation from the 50-DMA hurdle of around $1,985 by the press time.

Even if the XAU/USD crosses the $1,985 resistance, the $2,000 psychological magnet may check the further upside before directing the Gold Price toward a two-month-old horizontal resistance area of around $2,050 and then to the record high marked in May near $2,080.

Gold Price: Daily chart

Trend: Further downside expected