Market Digest

Global financial markets ended last week with a shift in sentiment as easing expectations for immediate Federal Reserve tightening pushed the U.S. Dollar lower for a second consecutive session. Softer Treasury yields and inflation data that met market expectations encouraged investors to reduce long-dollar positions, allowing major currencies and precious metals to recover.

Gold rebounded strongly above the psychological $4,000 level after the dollar retreated from recent highs. Although the precious metal continues to face pressure from elevated interest rates, the moderation in Fed rate hike expectations supported renewed buying interest and helped bullion recover from recent seven-month lows.

Crude oil remained under pressure despite stabilizing near the important $70 support area. Increased tanker traffic through the Strait of Hormuz and Saudi Arabia's return to normal export operations eased concerns over supply disruptions, limiting upside momentum despite declining U.S. crude inventories. Traders continue to balance geopolitical risks against expectations of improving global supply.

In the currency market, the euro and British pound posted modest gains against the U.S. Dollar, while the Japanese yen found support after stronger Tokyo inflation data reinforced expectations for further Bank of Japan policy normalization. Meanwhile, the Australian dollar remained subdued as global risk sentiment and broad dollar strength continued to outweigh encouraging domestic economic data.

Technical Analysis

Dollar Index (USDX) – Pullback Continues Below Key Resistance

The U.S. Dollar Index remains under mild selling pressure after failing to sustain gains above 101.60. Technical indicators suggest the recent rally is losing momentum, with immediate support located around 101.05 followed by 100.80. A recovery above 101.60 would be required to restore bullish momentum.

EUR/USD – Recovery Gains Momentum

EUR/USD has stabilized above the 1.1350 support zone after recent weakness. The pair is attempting to build bullish momentum with resistance seen near 1.1430 and 1.1470. Holding above current support could encourage further upside in the near term.

XAU/USD – Gold Reclaims the $4,000 Psychological Level

Gold has regained bullish momentum after bouncing from support below $4,000. The recovery is supported by a weaker U.S. Dollar and softer Treasury yields, although expectations for higher-for-longer interest rates continue to limit stronger upside. Immediate resistance is seen near $4,115 followed by $4,162, while support remains around $4,001.

Economic News

Gold Benefits from Softer Dollar

Gold advanced after the latest U.S. inflation report matched expectations, easing fears of a more aggressive Federal Reserve. Lower Treasury yields and profit-taking in the U.S. Dollar supported bullion, although elevated interest rates continue to limit longer-term gains.

Oil Stabilizes Despite Supply Recovery

WTI crude remained close to $70 per barrel as improving shipping conditions through the Strait of Hormuz and Saudi Arabia's renewed exports reduced supply concerns. While geopolitical risks remain, traders continue to focus on increasing Middle Eastern production and potential oversupply.

Dollar Retreats After Inflation Data

The U.S. Dollar weakened following inflation figures that matched forecasts, encouraging investors to trim expectations for another immediate Fed rate hike. However, resilient economic data and continued hawkish Fed commentary continue to provide underlying support for the Greenback.

Yen Finds Support from Inflation

Tokyo Core CPI accelerated during June, strengthening expectations that the Bank of Japan may continue gradually tightening monetary policy. The stronger inflation reading helped support the Japanese Yen despite the wide interest rate differential with the United States.

Upcoming Economic Events

Markets will continue monitoring U.S. economic releases, labour market indicators, and consumer confidence data for further clues on Federal Reserve policy. Investors will also watch developments surrounding Japanese inflation and global geopolitical risks, which remain key drivers of currency, commodity, and precious metal markets during the week ahead.