• Dollar gains stall for now but the technicals look good
• Dollar back in the driver’s seat
• How has the Fed pricing changed in the past week?
• ECB’s Lagarde: We are heading towards more delicate decisions going forward
• ECB reportedly to step up scrutiny of bank liquidity, may raise requirements
• BOJ’s Ueda: Appropriate to take time in determining when to modify easy policy
• BOJ’s Ueda: Japan inflation likely to slow back below 2% in middle of current fiscal year
• China state banks reportedly seen swapping yuan for dollars in onshore forwards market
• Germany April PPI +0.3% vs -0.5% m/m expected

Markets:

• NZD leads, USD lags on the day
• European equities higher; S&P 500 futures up 0.3%
• US 10-year yields up 0.7 bps to 3.655%
• Gold up 0.3% to $1,963.53
• WTI crude up 1.0% to $72.60
• Bitcoin up 0.5% to $26,843

There weren’t many major headlines during the session as European trading featured a quieter and calmer mood. The dollar saw its gains from yesterday cut back a little, but remains in a favourable spot overall. That comes as European indices rush higher again with the DAX hovering at fresh record highs currently.

The positive momentum in the equities space is continuing after the tech-heavy gains in Wall Street and US futures are also holding higher again today.

That is at least helping with a light pullback in the dollar with EUR/USD moving back to 1.0800 but still keeping just below its 100-day moving average at 1.0806. Meanwhile, USD/JPY did move lower to touch 138.00 but is now seen at around 138.40, still 0.2% down on the day, as bond yields recover from an early retreat.

Amid the more optimistic mood, the antipodeans are notable gainers with AUD/USD keeping a bounce from 0.6600 yesterday to stick around 0.6650 levels. NZD/USD is also seen up 0.8% to 0.6275, trying to nudge above its own 100-day moving average.

Elsewhere, gold is also seeing a minor bounce to $1,963 but it still doesn’t take away from the break of support at $1,975-81 from yesterday.

All eyes now move to Fed chair Powell’s speech to wrap up the week, so we’ll have to see if there is any angle for traders to work with or if we will see a continuation of the technical play in the dollar.

This article was written by Justin Low at www.forexlive.com.

The latest retreat has roughly two parts to it as gold bulls were once again unable to chase a break above $2,070-75 from the 2020 and 2022 highs, as well as the dollar and bond yields moving higher in tandem. That pushed gold back towards the support region around $1,975-81 and that eventually gave way in trading yesterday.

While there is a bit of a pullback now with dollar gains easing up, gold is still trading below $1,970 and sellers are keeping in near-term control for now. Here’s a look at the daily chart:

Unless we do see price climb back above the $1,975-81 region, gold looks poised for a deeper pullback at this point in time. The next plausible target seems to be closer towards the 100-day moving average (red line) at around $1,928.

Beyond that, it could prove to be a slippery slope for gold prices as it lurches back towards $1,800+ levels. I would rate the odds of such a strong pullback as being limited but I wouldn’t discount the risks, especially since markets have been underestimating the dollar side of the equation since the regional banking crisis.

We’ve gone from pricing three Fed rate cuts by year-end to two now and that is exerting its influence on the dollar this week. If there is more to come, that means that the dollar rally may have legs to go and that doesn’t bode well for gold in the short-term.

That said, in the bigger picture, I still like gold’s long-term outlook especially as we draw closer towards the end of the tightening cycle. A deeper pullback to $1,800+ levels will present a very attractive dip buying opportunity in my view and I’d pile in on more longs there.

I wouldn’t go as far as to say that chasing gold shorts on a move under $1,800 is the way to go considering the balance of risks. As such, it is setting up to be a buy on dips kind of thing for gold in my view.

Of course, there still needs to be a break above $2,070-75 in the big picture but if we do return back to the expected playbook during the second-half of this year, I reckon the topside level could easily be taken out as we move towards next year.

This article was written by Justin Low at www.forexlive.com.