Overnight, the European Central Bank (ECB) convened its June interest rate decision meeting, opting to raise rates by 25 basis points. This decision pushed the deposit facility rate to a level of 3.5%, the highest it has been in over two decades.
The market had previously anticipated a pause in rate hikes, aligning with the stance of the Federal Reserve. However, the ECB’s forward guidance indicated no such pause, signaling a strong possibility of another rate increase in July.
This hawkish approach to monetary policy by the ECB resulted in a substantial surge in the EUR/USD exchange rate.
The U.S. Dollar Index experienced a significant technical breakdown, resulting in a sharp decline, while precious metal prices halted their decline and rebounded in a strong V-shaped recovery. As of the June 15th closing, the August COMEX gold futures settled at $1970.5 per ounce in the Asian market, recording a modest increase of 0.08%.
Although gold managed to surpass its daily moving average, it still faces substantial technical resistance. Key levels such as the short-term trendline at 1965, previous highs at 1970-1973, and the mid-term trendline at 1985 will all pose significant challenges. Gold alone may struggle to break through these levels, necessitating continued reliance on positive fundamentals and a weakening U.S. Dollar to sustain momentum.
- On the upside, the focus is on the level of 1960, with particular attention to the short-term resistance at 1965. If this resistance is successfully surpassed, further attention can be shifted to the resistance zone of 1970-1973.
- On the downside, if the market retraces, the focus will continue on the level near 1950, where a potential battle could ensue. The main support levels to monitor below are the previous trendline at 1943-1940.
Today, crude oil is trading near $70.50 per barrel as oil prices surged nearly 3% on Thursday, reaching a one-week high. The increase in oil prices can be attributed to a weak U.S. dollar, unexpected growth in U.S. retail sales for May, and anticipation of increased processing capacity in China, the largest crude oil importer.
Additionally, the European Parliament’s vote in support of Ukraine joining NATO or escalating geopolitical tensions has provided multiple bullish factors, boosting optimism for demand in the second half of the year. As a result, oil prices may embark on a new upward trend.
However, it is important to closely monitor the short-term uncertainty risk related to the recent attack on the Kakhovka hydropower dam.
Today, there was a retracement to $69.7, with a stop loss at $69.1. The target is set at $71, and a break above could lead to further gains toward $71.5.
- On the upside, attention should be given to the resistance at $71.8. If the price remains range-bound below $71, it may indicate a lack of upward momentum.
- On the downside, it is possible to consider a short position. If a break occurs, re-entry around $71.4 – $71.6 could be considered, with a defensive stance at $72.
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