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United Overseas Bank’s (UOB) Quek Ser Leang highlights that EUR/USD remains in a short-term range, with flat momentum indicators pointing to intraday consolidation between 1.1415 and 1.1455. On a 1–3 week view, the bank keeps a mildly positive bias, but stresses firm resistance at 1.1470 and 1.1500 and a strong support at 1.1370. A break of 1.1390–1.1410 would expose 1.1210.

Euro holds mild upside bias

"24-HOUR VIEW: EUR briefly soared to a high of 1.1472 last Thursday. When EUR was at 1.1430 in the early Asian session on Friday, we indicated that “the brief rise did not lead to a clear increase in upward momentum, and instead of continuing to advance, EUR is more likely to rangetrade between 1.1410 and 1.1455.” Our view of range-trading was not wrong, as EUR traded between 1.1419 and 1.1462, closing little changed at 1.1435 (+0.04%). Momentum indicators are mostly flat, and we continue to expect EUR to range-trade today, most likely between 1.1415 and 1.1455."

"1-3 WEEKS VIEW: We revised our EUR view to mildly positive last Friday (03 Jul, spot at 1.1430). We highlighted that “the bias for EUR is tilted to the upside,” but we stated that “expect firm resistance at 1.1470 and 1.1500.” We will maintain this view as long as EUR holds above 1.1370 (no change in ‘strong support’ level)."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

• Gold bulls turn cautious as Hormuz risks help revive demand for the safe-haven US Dollar.
• Receding Fed rate-hike bets cap any meaningful USD appreciation and support the commodity.
• The technical setup, too, favors bulls and backs the case for the emergence of dip-buyers.

Gold (XAU/USD) recovers slightly from the daily low, albeit it retains the negative bias through the first half of the European session and remains below a two-week high touched earlier this Monday. The US Dollar (USD) attracts some safe-haven flows amid tensions over the Strait of Hormuz and undermines the bullion. However, receding US Federal Reserve (Fed) rate hike bets might hold back USD bulls from placing aggressive bets. Furthermore, persistent central bank buying turns out to be another factor that helps limit losses for the non-yielding yellow metal, which, for now, seems to have snapped a three-day winning streak.

Despite a fragile US-Iran interim agreement, tensions surrounding the Strait of Hormuz remain elevated as Iran seeks to tighten control over the strategic waterway. In fact, Iran’s ambassador to China said on Saturday that Tehran plans to introduce new service fees for ships passing through the strategically important waterway. The US, however, had rejected the idea of Iran charging vessels for using the strait. This keeps the geopolitical risk premium in play and helps the Greenback to regain positive traction at the start of a new week, which, in turn, is seen undermining the Gold.

Meanwhile, traders trimmed their bets for interest rate hikes by the US Federal Reserve (Fed) in the wake of unimpressive US monthly employment details, released last Thursday, which pointed to softening labor conditions. Furthermore, easing inflation fears in the face of the recent slump in Crude Oil prices could allow the US central bank to adopt a more patient stance, taking the edge off expectations for a prolonged higher-for-longer interest rates. This, in turn, might hold back the USD bulls from placing aggressive bets and limit any meaningful corrective fall in the Gold price.

Meanwhile, a World Gold Council survey highlighted last week that central banks are increasingly turning to Gold as protection against financial crises, inflation, and geopolitical risks. Moreover, almost 90% of respondents expect global central banks' gold reserves to increase over the next year. Adding to this, the latest reserve report published by the European Central Bank (ECB) revealed that Gold has officially overtaken US Treasuries in global reserve allocations. Furthermore, the People's Bank of China (PBoC) added another 320,000 ounces of Gold in May, marking its 19th straight month of increase in its Gold reserves.

Traders now look forward to the US economic docket, featuring the release of ISM Services PMI. Apart from this, speeches from influential FOMC members will drive the USD demand later during the North American session and provide a fresh impetus to the precious metal. Nevertheless, the aforementioned fundamental backdrop suggests that the path of least resistance for Gold is to the upside. Hence, the intraday pullback is likely to be bought into and remain limited, warranting caution before confirming that the recent recovery from the year-to-date low has run out of steam.

XAU/USD 4-hour chart

Gold needs to break 100-SMA support on H4 to back the case for deeper losses

Friday's breakout through the 100-period Simple Moving Average (SMA) on the 4-hour chart and a subsequent move beyond the 23.6% Fibonacci retracement level of the April-June fall were seen as key triggers for the XAU/USD bulls. Moreover, the still-elevated Relative Strength Index (RSI) around 63 and a positive Moving Average Convergence Divergence (MACD) reading hint that upside momentum remains constructive, even as the Gold consolidates just off recent highs.

Hence, weakness below the 23.6% Fibo. level around $4,164 is likely to find support near the 100-period SMA. The latter should provide a floor near $4,147, though a convincing break below would expose the structural low region at $3,940. On the topside, initial resistance is seen at the 38.2% retracement near $4,302, followed by the 50% retracement level at about $4,415 and the 61.8% Fibo. near $4,527. Further up, the 78.6% Fibo. at $4,686 defines the broader bullish extension zone ahead of $4,889, or the April swing high.

(The technical analysis of this story was written with the help of an AI tool.)

BNY’s Geoff Yu highlights that softer U.S. labor data and easing inflation have reduced pressure for further Federal Reserve (Fed) tightening, but upcoming US Services Purchasing Managers' Index (PMI) and ISM Services will be crucial for rate expectations. Yu notes that weaker prints could extend front-end yield relief, while firmer data would argue for caution.

Services data to test Fed path

"Markets have moved from relief to validation. Softer U.S. labor data and better inflation prints have reduced the urgency around further tightening, but they haven’t settled whether growth is slowing in a manageable way or whether policy expectations have moved too far."

"Last week’s weak NFP print was an indication that U.S. labor demand may be cooling more quickly after a string of recent strong payrolls, suggesting that market expectations for the Fed to hike may have been overdone. This week is lighter from a data perspective, but Monday’s S&P Global PMI and ISM Services will be the key reads, alongside a handful of Fed appearances that should keep markets attentive to the policy reaction function."

"The most important releases this week are the U.S. Services PMIs and ISM Services, as they will help determine whether last week’s payroll weakness is starting to show up in broader activity data or remains an isolated labor-market signal. A softer set of prints would strengthen the case that the Fed isn’t inclined to hike immediately and could extend the recent easing in front-end yields, while firmer readings would argue for more caution in extrapolating from one soft NFP report."

"Across emerging markets, the flow picture still looks more like rotation than retreat. Higher U.S. yields are forcing investors to reassess crowded bond exposure, but the adjustment is not yet a broad exit from risk."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

• AUD/USD pulls back to the 0.6920 area, from two-week highs at 0.6950.
• Soft Australian Inflation figures and a moderate decline in job advertisements have dented the Aussie's recovery.
• Iranian authorities' comments about the status of the Strait of Hormuz are weighing on risk appetite on Monday.

The Australian Dollar (AUD) is trading moderately lower against the US Dollar (USD) on Monday, as cooler Australian inflation figures have eased pressure on the Reserve Bank of Australia (RBA) to hike interest rates further. The AUD/USD pair retreated to the 0.6920 area, from the two-week highs around 0.6050 reached on Friday, with the three-month lows of 0.6865 still at a short distance.

Earlier on Monday, the Australian TD-MI Inflation Gauge, released by the Melbourne Institute, revealed that price pressures contracted at a 0.4% pace in June, following a 0.3% drop in May, and eased to a 3.9% year-on-year rate, from 4-4% in the previous month.

At the same time, the ANZ Commodity Price index, a forward-looking indicator of prices for exporting goods, showed a 1% contraction in June, reversing a 0.7% growth in May. A few minutes later, Job Advertisements, also for June, revealed a 0.2% fall after an upwardly revised 2% growth in the previous month.

Australian data cements hopes of a RBA pause

These figures ease concerns about the inflationary pressures stemming from the Middle East conflict and give some respite to the Reserve Bank of Australia (RBA) to extend the “wait-and-see” phase to assess the economic impact of the interest rate hikes delivered in the first half of the year.

Apart from that, comments by Iranian authorities about the status of the Strait of Hormuz have soured sentiment, in an otherwise calm start of the week, adding some pressure on the risk-sensitive AUD.

In the US, the focus on Monday will be on the ISM Services Purchasing Managers’ Index, which is expected to have shown healthy business activity despite a moderate slowdown since May. Later on, Federal Reserve (Fed) Governor Christopher Waller might provide some further insight into the central bank’s monetary policy plans.

• GBP/JPY scales higher for the second consecutive day as the JPY continues to underperform.
• The so-called carry trade counters intervention risks and continues to weigh heavily on the JPY.
• Burnham's commitment to stick to fiscal rules supports the GBP and contributes to the move up.

The GBP/JPY cross gains strong follow-through positive traction for the second successive day and rallies to mid-216.00s during the early European session on Monday, back closer to a multi-year peak set in late April.

Despite the recent Bank of Japan (BoJ) rate hike to 1%, or the highest since 1995, borrowing costs in Japan remain significantly lower compared to other Western economies, including the UK. In fact,  the Bank of England's (BoE) base rate is at 3.75%, leaving a gap of around 275 basis points (bps). This continues to fuel the so-called carry trade, which has been a key factor driving flows away from the Japanese Yen (JPY) .

Adding to this, Japan's expansive fiscal policies contribute to the JPY's historic underperformance and provide a strong boost to the GBP/JPY cross. In fact, Japan’s government gross debt-to-GDP ratio is the highest among advanced G7 economies. Adding to this, Japanese Prime Minister Sanae Takaichi's unprecedented ¥370 trillion public-private investment plan spanning over 14 years sparked severe fiscal worries.

Further, Japan’s heavy reliance on imported energy turns out to be another factor that has been pressuring the JPY amid tensions over the Strait of Hormuz. Iran’s ambassador to China said on Saturday that Tehran plans to introduce new service fees for ships passing through the strategically important waterway. This adds to worries about the economic fallout due to the continued disruption of Oil supplies through the Strait.

The aforementioned fundamental backdrop counters expectations of a possible intervention by Japanese authorities and favors the JPY bears. In fact, Japan’s Finance Minister Satsuki Katayama said on Friday that officials are ready to act appropriately to currency fluctuations. Moreover, Japan's Chief Cabinet Secretary Minoru Kihara reiterated that the administration is closely monitoring FX moves and is ready to intervene when needed.

Meanwhile, a modest US Dollar (USD) uptick exerts some pressure on the British Pound (GBP). This, however, does little to hinder the GBP/JPY pair's strong intraday move higher. Furthermore, hopes that Andy Burnham – the frontrunner to succeed Keir Starmer as UK Prime Minister – will adhere to his commitment to strict borrowing rules favor the GBP bulls and suggest that the path of least resistance for spot prices is to the upside.

ING’s Chris Turner highlights a sizeable downside breakout in EUR/GBP driven by stale Sterling shorts and lower FX volatility reducing appetite to pay carry. He sees that mindset persisting near term but warns UK politics could return later in July, with limited fiscal space and no Bank of England hikes expected, potentially prompting Sterling to give back some gains.

Sterling breakout and looming UK politics

"EUR/GBP delivered a sizeable downside breakout last week, which should be respected. Helping that move were stale sterling shorts and a view that if volatility was falling this summer, there was no point in paying away 2% per annum in carry by being short sterling if FX pairs were going to remain relatively static. It is hard to see that mindset being challenged this week."

"However, later this month UK politics will return to the market, where Makerfield MP Andy Burnham could become Prime Minister on 20 July and announce his new chancellor shortly thereafter. The favourite for the post of chancellor is Energy Secretary Ed Miliband, who stands further to the left and is being pushed by the party to avoid the incrementalism witnessed during the Starmer/Reeves years."

"The problem remains, however, that there is very little fiscal room for adjustment without raising taxes. This, along with our call that the Bank of England does not raise rates this year, could see sterling hand back some of its recent gains."

"Let's see if EUR/GBP support at 0.8545 can hold before politics returns to play a role in markets later this month."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

• Silver edges lower on prevailing odds of a Fed interest rate hike by the end of 2026.
• The CME FedWatch tool indicates that markets price around a 77% chance of year-end Fed rate hikes.
• Silver may regain ground as last week's weak US labor data forced markets to temper September rate hike expectations.

Silver price (XAG/USD) halts its four-day winning streak, trading around $62.30 per troy ounce during the European hours on Monday. The white metal edges lower as market expectations solidify around a Federal Reserve (Fed) interest rate hike later this year.

According to the CME FedWatch tool, financial markets are currently pricing in around 77% probability of a rate increase by year-end. Investors will likely closely monitor US ISM Services PMI due later in the day for immediate direction, though primary focus has shifted to Wednesday’s release of the Fed's June policy Meeting Minutes for clearer guidance on the future path of interest rates.

This minor decline follows a stellar previous week, where Silver surged over 5.55%. That rally was sparked by weak US labor data, which forced markets to temper expectations for a September hike. June's Nonfarm Payrolls (NFP) grew by just 57,000, well below the 110,000 forecast. While the headline unemployment rate unexpectedly ticked down to 4.2% from May's 4.3%, the aggressive slowdown in hiring underscores a broader economic cooling.

Meanwhile, easing oil prices have helped dampen the inflationary pressures that previously heightened fears of aggressive rate hikes. Energy markets moved lower due to recovering flows through the Strait of Hormuz and the prospect of increased OPEC+ supply. This cooling energy sector has mitigated a key macro headwind, providing some structural relief to non-yielding precious metals like Silver.