GOLD AND STOCKS RETREAT AHEAD OF US CONSUMER INFLATION DATA
American stocks were volatile on Tuesday as investors waited for upcoming inflation data. The Dow Jones declined by more than 100 points while the Nasda100 rose by just 54 points. At the same time, bond yields struggled, with the 10-year falling to 2.9% and the 30-year falling to 3%. A number of companies made headlines during the session. For example, Pfizer shares declined after the company announced that it will acquire BioHaven in a $13 billion deal. Peloton shares declined by more than 13% after the firm published weak results. Other firms that declined sharply include Warby Parker, Affirm, and Embark Technologies.
The US dollar index remained in a tight range as investors focused on US inflation. Economists expect the data to show that the US consumer price index (CPI) declined from 8.5% to 8.0%. In the same period, they expect that the core CPI fell from 6.5% to 6.0%. If these numbers are correct, it will send a signal that the American inflation has peaked. A look at the commodities market shows that most of them have retreated from their highs. For example, the benchmark Brent crude oil is significantly below the year-to-date high. The dollar also reacted to statements by key Fed officials like Raphael Bostic and John Williams.
The euro moved sideways after the Bundesbank president called for the European Central Bank to hike interest rates in July. In a statement, Joachim Nagel said that there was disturbing evidence that inflation was gaining momentum in the region. As a result, he warned that there was increasing risk that the bank will act too late. Recent data showed that the Euro area inflation jumped to a record 7.5%. Other key events to watch today will be the EIA oil inventories data and German consumer inflation numbers.
EURUSD
The EURUSD pair remained in a consolidation phase as investors waited for the latest US and German consumer inflation data. The pair is trading at 1.0540, which is along the 25-day moving average and the middle line of the Bollinger Bands. The Relative Strength Index (RSI) is at 47 and pointing lower while the Average Directional Movement Index (ADX) has pointed lower. The key support and resistance levels to watch will be at 1.0480 and 1.0646.
XAUUSD
The XAUUSD pair declined sharply ahead of US inflation numbers. It moved to a low of 1,842, which was the lowest level in months. It managed to move below the important support at 1,850, which was at the lowest level on May 4. It has also moved slightly below the 25-day moving average while the Commodity Channel Index has moved to the oversold level. The pair will likely keep falling.
XAGUSD
The XAGUSD has continued the bearish trend in the past few days. It has moved along the lower side of the Bollinger Bands while the Williams % Range has moved below the oversold level. The DeMarker has moved to the oversold level. Therefore, the pair will likely keep falling as sellers target the key support at 21.
