Gold buyers flex muscles even as US Dollar edges higher ahead of top-tier data/events

Market sentiment dwindled on Monday as a cautious mood ahead of top-tier data/events joined McDonald’s warning of a meaningful slowdown in business across the markets. Additionally, China’s rejection of publishing daily flow data and fears of fresh hurricane season in the US starting this weekend also challenged the risk profile. The same allowed the US Dollar to begin the week positively despite witnessing softer data at home.

The US Dollar’s gains joined dovish bias about the European Central Bank (ECB) and fears about the Eurozone to weigh on the EURUSD. On the same line, downbeat UK data and doubts about the Bank of England’s (BoE) hawkish bias lure the GBPUSD sellers ahead of Thursday’s monetary policy meeting. Further, USDJPY also pares the previous losses on mixed Japan data and indecision about the Bank of Japan’s (BoJ) next move.

AUDUSD, NZDUSD and USDCAD remain lackluster after losing heavily in the last week as Antipodean traders seek more clues to extend the previous momentum, especially amid the mixed performance of commodities.

Gold price benefits from the market’s lack of clarity and softer yields while ignoring the firmer US Dollar. Crude Oil, however, bears the burden of economic woes and receding geopolitical challenges to the demand-supply matrix.

BTCUSD reversed from a seven-week high and is pressured of late while the ETHUSD began the week on a firmer footing but is paring the previous day’s gains of late. While tracing the crypto market’s catalysts nothing major gains the seller’s attention than the consolidation of earlier rallies on hopes of Donald Trump’s election as the US President. It should be observed that the reactivation of previously dormant accounts and heavy inflow keep the Bitcoin and Ethereum buyers hopeful despite the latest pullback.

Following are the latest moves of the key assets:

• WTI Crude oil drops to a seven-week low, down for the third consecutive day to $75.40 by the press time.
• Gold reverses the week-start losses while posting mild intraday gains near $2,390 at the latest.
• The USD Index defends the previous day’s gains around 104.65 as we write.
• Wall Street closed mixed but the Asia-Pacific shares drifted lower. However, equities in Britain and Europe print mild gains during the initial trading hour.
• BTCUSD and ETHUSD both print mild intraday losses around $66,500 and $3,320 at the latest.

US Dollar rises ahead of top-tier data/events…

Monday’s Dallas Fed Manufacturing Business Index dropped more than the previous readouts of -15.1 to -17.5 in July. Even so, the US Dollar Index (DXY) marked the heaviest run-up in over a week while rising to the highest level since July 11, grinding higher to 104.60 by the press time. While tracing the US Dollar’s firmer position ahead of the key data/events, the month-end flows and challenges to sentiment could be linked. Additionally favoring the Greenback are the hopes of witnessing the Fed’s hawkish halt on Wednesday, especially after mostly steady inflation and employment clues from the US of late.

While the US Dollar was in a recovery mode, the EURUSD pair dropped the most among major currency pairs amid the latest shift in the European Central Bank (ECB) officials’ tone and the market’s preparations for EU GDP and inflation data. Most of the ECB policymakers have confirmed further rate cuts from the bloc’s central bank amid slower growth in price increases. The same renews concerns about the economic hardships of the “Old Continent” following a long period of higher rates and political pessimism at home, which in turn exerts additional downside pressure on the Euro.

GBPUSD was also on the lower side as the US Dollar’s run-up joined downbeat UK data and fears of higher taxes at home. On Monday, the UK’s CBI Realized Sales dropped to a three-month low while British Chancellor Rachel Reeves showed readiness to cut the heavy deficit in October’s budget.

Elsewhere, USDJPY also followed suit and began the week on a firmer footing, mildly bid at the latest, as mixed Japan data challenges the policymakers' push to the Bank of Japan (BoJ) for more rate hikes. Earlier on Tuesday, Japan’s Unemployment Rate eased to 2.5% for June from 2.6% prior but the Jobs/Applicants Ratio also marked a three-month fall while posting 1.23 figures versus 1.24 prior. News also broke that Japan’s top economic council urged the government and BOJ to be mindful of the weak Yen when guiding policy.

The Dollars of Australia, New Zealand, and Canada lick their wounds at the multi-month lows versus the US Dollar as fears surrounding China join concerns about the rate cuts from the respective central bank. Additionally, the downbeat performance of the Crude Oil provides additional fuel to the USDCAD buyers. Talking about the data, the economic calendar in New Zealand and Canada appears mostly light but Australia’s Building Permits for June flashed mixed results and the Weekly Consumer Confidence eased from a six-month high to 83.1 at the latest.

Crude Oil ignores fresh fears of hurricanes and drops to a seven-week low amid growing concerns about China’s energy demand and an absence of major geopolitical news from the Middle East.

Talking about Gold, the precious metal braces for a monthly gain despite lacking momentum on a week and the day. The bullion’s upside could be traced to the market’s indecision about the major central banks’ next moves and geopolitical tensions surrounding China and the Middle East. However, fears emanating from China’s economic tardiness and the resulting pause in the Gold buying challenge the XAUUSD bulls ahead of this week’s key catalysts. It should be noted that fears of global growth, as signaled by McDonald’s, and the hurricane woes join downbeat yields to also underpin the bullish bias about the yellow metal.

• Strong buy: USDCAD, USDJPY, US Dollar, Silver
• Strong sell: AUDUSD, NZDUSD, GBPUSD
• Buy: BTCUSD, ETHUSD, Nasdaq, Gold, DJI30, USDCNH
• Sell: DAX, FTSE 100, EURUSD, Crude Oil

Comparatively busy day ahead…

Unlike Monday, a comparatively more populated economic calendar will likely entertain the momentum traders. Among the key catalysts, the first readings of the Eurozone Q2 GDP and Germany’s inflation data for July will fuel liquidity during the European session. Following that, the US CB Consumer Confidence for July and JOLTS Job Openings for June will be the key to watch for clear directions of the market. It should be noted that the risk catalysts surrounding the US, China and the Middle East will also be important factors to observe.

Given the market’s dovish bias about the ECB and the economic fears about the Eurozone, downbeat prints of today’s data from the bloc and Germany will exert additional downside pressure on the EURUSD even if the US data may not impress the Fed hawks. Apart from that, the risk-negative headlines and a likely improvement in the US consumer sentiment, as well as the US job data, can provide more reasons for the US Dollar to extend the latest run-up and weigh on the riskier assets like equities, commodities and Antipodeans. Above all, the market’s cautious mood ahead of Wednesday’s FOMC and Friday’s US NFP could keep the momentum traders in check.

May the trading luck be with you!