Forex News
- NZD/USD pares previous losses and approaches two-week highs right above 0.5900.
- Fresh attacks between the US and Iran hammered risk appetite during the Asian session.
- The technical picture shows a neutral-to-positive immediate bias.
The New Zealand Dollar (NZD) holds minor losses against the US Dollar (USD) on Thursday, as it has retraced most of the daily losses during the London trading session. The pair has returned to levels beyond 0.5890 at the time of writing, approaching two-week highs, at 0.5913, as concerns about the fresh US-Iran hostilities abate.
News of fresh US attacks between the US and Iran crushed risk appetite during Thursday’s Asian session, pushing the US Dollar and Oil prices higher. The Greenback, however, has drifted lower during European trading as investors maintain their hopes of a negotiated end to the conflict.
New Zealand’s budget, released earlier on Thursday, showed a financial deficit of NZD 11.4 billion in the 2026/27 financial year, little changed from previous estimates. Treasury forecasts expect the shortfall to halve in the coming year and return to a surplus in 2028/29.
Technical Analysis: The immediate bias remains moderately positive
NZD/USD trades at 0.5893, holding above previous highs in the 0.5680 area for now. The 4-hour Relative Strength Index sits around 60 after bouncing from the key 50 line, and the Moving Average Convergence Divergence (MACD) shows a slightly positive reading, altogether hinting at a gently improving momentum.
On the topside, initial resistance emerges at a previous support area near 0.5920 (May 13 low) ahead of the May 8 and 11 highs near 0.5970 and May's Peak above 0.5990.
Bears, on the contrary, have been halted at 0.5864 earlier on the day. Any further depreciation below this level would entice sellers to retest the 0.5815-0.5830 area (May 19,20 and 27 lows) ahead of the April 13 low at 0.5800.
(The technical analysis of this story was written with the help of an AI tool.)
- Gold price faces significant selling pressure as renewed Middle East tensions prompt oil prices.
- Iran’s IRGC retaliates by attacking the US military bases after Washington struck near Bandar Abbas airport.
- Investors await the US PCE inflation data for April.
Gold price (XAU/USD) trades 1.43% lower to near $4,390 during the European trading session on Thursday, close to its fresh two-month low of $4.366.56 posted earlier in the day. The precious metal faces intense selling pressure as renewed Middle East crisis have prompted oil prices.
Earlier in the day, Iran’s Islamic Revolutionary Guard Corps (IRGC) said that it attacked US military bases in the Gulf region in retaliation to Washington’s strikes near Bandar Abbas airport and threatened a more decisive response if it attacks again.
Theoretically, escalating geopolitical tensions improve demand for safe-haven assets, such as Gold; however, it has been underperforming since the Middle East war started.
The reasoning behind the lower Gold price is elevated energy prices, which have prompted United States (US) inflationary pressures and have forced traders to pare dovish Federal Reserve (Fed) bets. As measured by the Consumer Price Index (CPI), the US headline inflation arrived higher at 3.8% Year-on-Year (YoY) in April, the highest level seen in almost three years.
According to the CME FedWatch tool, the odds of the Fed holding interest rates at their current levels this year are 43.1%, while the rest favor at least one interest rate hike this year. This is a sharp turnaround from two interest rate cuts anticipated before the Middle East war started.
The scenario of rising hawkish Fed bets bodes well for yields on interest-bearing assets, which eventually diminishes the appeal of non-yielding assets, such as Gold.
Meanwhile, investors await the US Personal Consumption Expenditure Price Index (PCE) data for April, which will be published at 12:30 GMT. Investors will pay close attention to the US PCE Inflation data to get fresh cues on the Fed’s monetary policy outlook.
The US PCE inflation is expected to have grown at a faster pace of 3.8% Year-on-Year (YoY) against the previous reading of 3.5%.
Gold technical analysis
XAU/USD trades lower at around $4,390, maintaining a bearish near-term bias as price holds below the 20-day Exponential Moving Average (EMA) at $4,567.61. The precious metal remains under persistent selling pressure after a series of lower closes, while the Relative Strength Index (14) slips toward oversold territory near 35, which hints that downside momentum is still dominant but could be nearing fatigue.
On the topside, the 20-day EMA at $4,567.61 is the first key resistance and needs to be reclaimed to ease the current downside pressure and open the way for a stronger recovery towards the May 15 high at $4,665. Looking down, the Gold price could have a fresh leg of decline towards the March 23 low at $4,098.88 if it closes decisively below the two-month low of $4.366.56.
(The technical analysis of this story was written with the help of an AI tool.)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
- The core Personal Consumption Expenditures Price Index is forecast to rise 0.3% MoM and 3.3% YoY in April.
- Headline annual PCE inflation is expected to rise to its highest level in three years at 3.8%.
- Markets see about a 50% chance of the Federal Reserve raising the policy rate at least once by end-2026.
The United States (US) Bureau of Economic Analysis (BEA) will publish the Personal Consumption Expenditures (PCE) Price Index data for April on Thursday at 12:30 GMT.
The PCE Price Index is closely watched by market participants because it is the Federal Reserve’s (Fed) preferred measure of inflation and could influence the policy outlook.
Anticipating the PCE: Insights into the Federal Reserve's key inflation metric
The core PCE Price Index, which excludes volatile food and energy prices, is expected to advance 0.3% month-over-month (MoM) in April, matching March’s increase.
In 12 months to April, the core PCE inflation is set to edge higher to 3.3%. Meanwhile, the headline annual PCE inflation is forecast to reach its highest level since May 2023 at 3.8%.
Markets will scrutinize the PCE Price Index data as Fed officials take this inflation gauge into account when deciding on the next policy move. Given the uncertainty created by the ongoing Middle East conflict, investors will assess the details of the PCE inflation report to see whether the US central bank is likely to opt for an interest rate hike before the end of the year.
According to the CME FedWatch Tool, markets are currently pricing in about a 50% probability that the Fed will raise the policy rate by at least 25 basis points by end-2026.
In an interview with Reuters on Wednesday, Minneapolis Fed President Neel Kashkari, who dissented at the April policy meeting and voted against the inclusion of the easing bias in the policy statement, noted that data released since the last meeting have shown that inflationary risks are higher. In the meantime, Fed Governor Christopher Waller, known for his dovish outlook, shifted his tone last week and said that he should remove the easing bias from the statement. Waller further added that he would not hesitate to support an increase in the policy rate if inflation expectations were to become unanchored.
Previewing the PCE inflation report, TD Securities said:
“We expect core and headline PCE prices moderated in April to 0.26% and 0.43% m/m, respectively. Tariff passthrough was moderate in the month, and a slowdown in supercore services offset strength in shelter. Our forecast translates to 3.3% and 3.8% y/y for core and headline, respectively. We also look for nominal and real personal spending to slow down in the month.”
How will the Personal Consumption Expenditures Price Index affect EUR/USD?
The US Dollar (USD) stays resilient against its rivals this week. Still, it struggles to gather strength as investors refrain from taking large positions due to the uncertainty surrounding the conflict between the United States (US) and Iran.
Earlier in the week, the US carried out what it called "self-defense strikes" on Iranian missile sites and mine-laying vessels. In turn, Iran's Islamic Revolutionary Guard Corps (IRGC) threatened to retaliate, calling the US's action a violation of the ceasefire. Nevertheless, the truce officially remains in place, while the sides are reportedly working toward finalizing a Memorandum of Understanding (MOU), specifically trying to resolve disputes over language regarding Iran's nuclear program and sanctions relief.
If the US and Iran reach an agreement to fully open the Strait of Hormuz, crude Oil prices could decline sharply and ease fears over global inflation running out of control. In this scenario, the USD could remain under bearish pressure and help EUR/USD turn north even if the PCE inflation data come in above analysts’ estimates.
In case the US-Iran issue remains unresolved by the time the inflation data is released, it could have a noticeable effect on the USD’s valuation. A stronger-than-forecast print in the monthly core PCE Price Index could boost the USD with the immediate reaction and hurt EUR/USD, as it would suggest that rising energy costs are lifting price pressures in the wider economy. Conversely, a soft print in this data could make it difficult for the USD to gather strength and allow EUR/USD to hold its ground.
Eren Sengezer, European Session Lead Analyst at FXStreet, shares a brief technical outlook for EUR/USD:
“The near-term technical outlook for EUR/USD points to a bearish bias but doesn’t show a buildup in momentum. The pair remains in the lower half of the Bollinger Bands on the daily chart and trades below the 20-day, 50-day, 100-day and the 200-day Simple Moving Averages (SMA).”
“On the downside, 1.1560, where the Fibonacci 23.6% retracement level of the late-January to mid-March downtrend meets the lower limit of the Bollinger Bands, aligns as key technical support. A daily close below this level could attract technical sellers and open the door to an extended decline toward 1.1400 (static level).”
“Looking north, a strong resistance area seems to have formed at the 1.1670-1.1700 region (20-day SMA, 100-day SMA, 200-day SMA) ahead of 1.1800 (Fibonacci 61.8% retracement, upper limit of the Bollinger Bands).
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
Brown Brothers Harriman’s (BBH) Elias Haddad notes that the Dollar Index (DXY) has rallied to its highest level since early April as markets react to shifting Iran war sentiment and firmer United States (US) data. Haddad argues resilient US growth and April Personal Consumption Expenditures (PCE) Price Index should support a more restrictive Fed stance, allowing DXY to overshoot its 96.00–100.00 range despite any improvement in risk sentiment.
DXY seen overshooting recent range
"The global stock market rally stalled, bond yields ticked up, and the dollar index (DXY) staged a kneejerk rally to its highest level since April 7.
"Regardless, risk-on sentiment should remain supported because both sides are still talking to work out a deal that would ultimately reopen the Strait of Hormuz. In our view, DXY can overshoot the upper end of its nearly one year 96.00-100.00 range. Resilient US economic activity in both absolute and relative terms outweigh the drag to USD from a potential improvement in sentiment tied to the Iran war."
"The PCE print is expected to reinforce the pricing for a more restrictive Fed stance and underpin a firmer USD. Both headline and core PCE inflation are seen overshooting the FOMC’s 2026 projection of 2.7%. Headline PCE is seen rising 0.5% m/m or 3.8% y/y vs. 0.7% m/m or 3.5% y/y in March."
"Nevertheless, the center of gravity on the FOMC has shifted from an easing to a more neutral bias raising the risk that Warsh becomes the first modern Fed chair to be outvoted on policy. Even dovish-leaning Fed Governor Christopher Waller pumped the brakes on cuts last week highlighting “I can no longer rule out rate hikes further down the road if inflation does not abate soon.”"
"We also get a fresh update of the Atlanta Fed GDPNow model that will incorporate today’s April PCE, durable goods orders, and new-home sales. As of May 21, the Atlanta Fed GDPNow model estimates annualized real GDP growth of 4.3% in Q2 vs. 2.0% in Q1."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- WTI Oil remains above weekly lows, yet so far it is failing to consolidate above $90.
- Reports of fresh US-Iran hostilities have pushed Cride prices up from lows.
- US Oil stocks declined for the sixth consecutive time in the week of May 22.
Crude prices are ticking up on Thursday, as Iran and the US exchange attacks, but upside attempts remain limited so far. The barrel of US benchmark West Texas Intermediate (WTI) Oil has failed to consolidate above the $90.00 level during the European session, although it remains about $3 above weekly lows, trading around $89.50 at the time of writing.
A new US attack on Iran, the second in three days, has added strain to a frail ceasefire and triggered a response by Tehran authorities, who said that they targeted a US base in the Gulf region. The Islamic Republic did specify its objective, but Kuwait has reported missile and drone attacks.
Fresh US sanctions complicate Hormuz transit
Beyond that, the US issued fresh sanctions against the recently created Persian Gulf Strait Authority, which regulates traffic through the Strait of Hormuz, further complicating navigation through the waterway. Vessels attempting to cross Hormuz are compelled to seek approval from these authorities, but doing so would now breach US sanctions.
Against this context, the Executive Director of the International Energy Agency (IEA), Fatih Birol, affirmed earlier on Thursday that the US-Iran war has triggered the “largest energy security crisis the world has ever faced.” Birol assessed that this crisis will reshape investment, leading to changes similar to those that followed the oil shocks in the 1970’s.
US Crude Oil Stocks data released by the American Petroleum Institute (API) on Wednesday showed that Crude inventories declined for the sixth consecutive time in the week of May 22. Oil stocks fell by 2.8 million barrels, following a 9.1 million barrels decline in the previous week, providing additional support to prices.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
ABN AMRO analysts note EUR/USD has been volatile within a range, driven by shifting expectations on reopening the Strait of Hormuz. They expect elevated Oil prices to persist, weighing on EUR/USD in coming months as the Eurozone relies on energy imports, with a possible move towards 1.14 near term. Later, lower energy prices and a relatively more hawkish European Central Bank (ECB) should lift EUR/USD towards 1.20 by end-2026.
Energy shock and policy divergence
"EUR/USD has moved volatile within a range depending on optimism about reaching an agreement to reopen the Strait of Hormuz."
"Even if a deal is reached, we think will take time for the supply to normalise."
"Therefore, we think oil prices will remain elevated."
"It is likely that this will weigh on EUR/USD in the coming months as the euro is dependent on energy imports."
"So, in the near-term EUR/USD could move towards 1.14."
"Later in the year we expect lower energy prices."
"This and a more hawkish ECB compared to the Fed should support EUR/USD higher."
"We still expect the EUR/USD rate to be 1.20 by the end of 2026."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
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