Market Digest

Global financial markets shifted into consolidation mode after the latest U.S. inflation data met expectations, prompting investors to reassess the outlook for Federal Reserve policy. The U.S. Dollar retreated from recent 13-month highs as Treasury yields eased, allowing gold to recover above the important $4,000 psychological level. Although inflation remains elevated, the absence of an upside surprise reduced expectations for an immediate acceleration in monetary tightening.

Gold ended a four-session losing streak, supported by softer bond yields and a weaker dollar. However, the precious metal continues to face headwinds from the Federal Reserve's hawkish policy stance and improving investor appetite for higher-yielding assets. The broader outlook remains cautious unless gold establishes a sustained move above key resistance levels.

Crude oil also rebounded after renewed security concerns emerged around the Strait of Hormuz. Reports of a cargo vessel incident near the Omani coast revived fears of supply disruptions and encouraged short-covering across energy markets. Nevertheless, expectations of increasing Iranian exports and improving Middle Eastern supply continue to limit the upside, keeping the medium-term outlook balanced.

The Australian dollar remained under pressure despite stronger-than-expected employment data. Solid job creation and improving household spending failed to offset the impact of broad U.S. Dollar strength and growing expectations that the Reserve Bank of Australia may keep interest rates unchanged. Meanwhile, sterling stabilized after recent losses, although political uncertainty following Prime Minister Keir Starmer's resignation and reduced expectations for further Bank of England tightening continued to weigh on sentiment.

Investor attention now turns to Tokyo Core CPI and the University of Michigan Consumer Sentiment survey, both of which could provide fresh insight into inflation trends and influence expectations for future central bank policy.

Technical Analysis

AUD/USD – Downtrend Remains Intact

AUD/USD continues to trade under heavy selling pressure after breaking below several key support levels. The pair remains beneath its 20-day, 50-day and 100-day exponential moving averages, confirming that bearish momentum remains firmly in control. The RSI is approaching oversold territory while the MACD continues to signal accelerating downside momentum.

Immediate resistance is located at 0.6995, followed by 0.7070. On the downside, major support remains at 0.6850, with a sustained break exposing the longer-term target around 0.6735.

GBP/USD – Sellers Continue to Dominate

GBP/USD remains firmly bearish after failing to recover above the important 1.3320 resistance area. The pair continues trading below all major moving averages while the MACD and RSI both point toward persistent selling pressure. Sterling remains vulnerable unless buyers regain control above key resistance.

Resistance is located at 1.3320 and 1.3425, while support is seen at 1.3185 followed by 1.3060.

USOIL – Testing Critical Long-Term Support

WTI crude oil remains under pressure despite recovering from recent lows. Prices continue to trade below the 200-day moving average, indicating that the longer-term bullish structure has weakened significantly. Although oversold conditions could encourage further short-term rebounds, sellers remain in control unless prices reclaim higher resistance levels.

Major resistance is located at $84.00 and $87.75, while support remains at $70.30. A decisive break below this level could expose the next downside target near $62.30.

Economic News

Gold Recovers After Inflation Meets Expectations

Gold prices rebounded above $4,000 after the latest U.S. PCE inflation report matched market forecasts. The softer U.S. Dollar and lower Treasury yields encouraged renewed buying interest, ending four consecutive days of losses. However, expectations that the Federal Reserve will keep interest rates elevated continue to limit the upside, leaving the broader outlook cautiously bearish.

Oil Rebounds on Strait of Hormuz Concerns

WTI crude recovered after renewed security concerns near the Strait of Hormuz reignited fears of supply disruptions. Continued declines in U.S. crude inventories also supported prices. Despite the rebound, improving tanker activity and expectations of increased Iranian exports continue to cap gains and maintain uncertainty over the medium-term outlook.

Australian Dollar Ignores Strong Jobs Report

Australia reported stronger-than-expected employment growth and stable unemployment, highlighting resilience in the labor market. However, the Australian Dollar failed to benefit as investors remained focused on the stronger U.S. Dollar, softer commodity prices and expectations that the Reserve Bank of Australia will maintain a cautious policy stance.

Pound Stabilizes Amid Political Transition

Sterling recovered modestly after recent declines as the U.S. Dollar weakened following the inflation release. Nevertheless, political uncertainty surrounding the transition of government leadership and reduced expectations for additional Bank of England rate hikes continue to weigh on the currency's medium-term outlook.

U.S. Dollar Pulls Back After Inflation Data

The U.S. Dollar eased after inflation data matched expectations, prompting traders to reduce expectations for another immediate Federal Reserve rate increase. Strong GDP growth and resilient labor market data continue to support the U.S. economy, but profit-taking after the recent rally limited further gains. Markets remain focused on incoming economic data to determine the next direction for monetary policy.

Upcoming Economic Events

Japan will release Tokyo Core CPI, one of the country's earliest inflation indicators. A stronger-than-expected reading could reinforce expectations for further Bank of Japan policy normalization and support the Japanese Yen.

Later in the session, the United States will publish the University of Michigan Consumer Sentiment Index and Inflation Expectations. These reports will offer valuable insight into consumer confidence and future inflation trends, potentially influencing Federal Reserve expectations and driving volatility across the forex, commodities and precious metals markets.