Gold rangebound as traders hunker down for Fed cues

“Even if you are on the right track, you’ll get run over if you just sit there.” —Will Rogers 

HEADLINES

• Dollar dips as investors wait on inflation data, Fed
• Gold rangebound as traders hunker down for Fed cues
• Oil prices edge higher as Saudi output cuts outweigh weak demand signals
• S&P 500, Nasdaq fall as tech shares give up gains
• Treasury yields rise as investors look toward Fed’s next meeting
• EUR/USD: Ability to hold up around the 1.07 point suggests some underlying resilience – Scotiabank 
• EURUSD Short Term: Upside favored

Dollar dips as investors wait on inflation data, Fed

The dollar fell against the euro and yen on Wednesday with no major catalysts to drive market direction as investors awaited U.S. inflation data for May due on Tuesday, and the Federal Reserve’s interest rate decision the following day.

The U.S. central bank is expected to hold rates steady as it evaluates the impact of recent rate increases, though Fed fund futures traders are pricing for an additional rate hike in July.

Consumer inflation data on Tuesday is expected to show that prices rose by 0.30% in May. (USCPI=ECI)

COMMODITIES

Gold rangebound as traders hunker down for Fed cues

Gold traded in a narrow range on Wednesday as traders refrained from making big bets while positioning for fresh economic data and the U.S. Federal Reserve’s interest rate strategy next week.

The dollar inched 0.2% lower, supporting bullion. A stronger dollar makes gold cheaper in foreign currencies.

The U.S. inflation report for May, due on June 13, ahead of the Fed meeting, will provide investors with more clarity about the health of the world’s largest economy.

ENERGY

Oil prices edge higher as Saudi output cuts outweigh weak demand signals

Oil prices climbed over 1% on Wednesday as Saudi Arabia's plans for deep output cuts outweighed demand woes stemming from rising U.S. fuel stocks and weak Chinese export data.

Both benchmarks jumped more than $1 on Monday after Saudi Arabia's decision over the weekend to reduce output by 1 million barrels per day (bpd) to 9 million bpd in July.

U.S. crude stocks fell by about 450,000, according to data from the Energy Information Administration, compared with estimates for a 1 million build.

The unexpected build in fuel inventories raised concerns over consumption by the world's top oil user, especially as travel demand grew during the Memorial Day weekend.

STOCKS

S&P 500, Nasdaq fall as tech shares give up gains

S&P 500 and Nasdaq gave up early gains to drop on Wednesday as technology stocks reversed course, while investors awaited inflation data and the Federal Reserve's policy meeting next week.

More than half of the S&P sub-sectors declined, led by communication services (.SPLRCL) that lost 1.4%.

Inflation data in the U.S. is expected to show consumer prices cooled slightly on a month-over-month basis in May but core prices are likely to have remained elevated.

Money market participants now see a 69% chance that the U.S. central bank will skip raising interest rate in its June meeting but will hike in July, down from nearly 77% earlier, according to the CME's Fedwatch tool.

Treasury yields rise as investors look toward Fed’s next meeting

U.S. Treasury yields rose Wednesday as investors looked toward the Federal Reserve’s next meeting a week ahead amid a quiet week for economic data.

Yields and prices move in opposite directions. One basis point equals 0.01%.

Investors weighed what could be on the horizon for the economy and Federal Reserve monetary policy, especially regarding interest rates, ahead of the central bank’s meeting on June 13 and 14.

ANALYSIS

EUR/USD: Ability to hold up around the 1.07 point suggests some underlying resilience – Scotiabank 

“ECB policy hawks continue to stress the ‘more ground to cover’ on interest rate messaging (Knot, Schnabel), keeping market expectations high for hikes next week and Jul.

The EUR has found solid support on weakness to the 1.0670 zone over the past few days. 

Solid intraday price gains through 1.07 have triggered a minor double-bottom signal which should see gains extend to the 1.0730 area, with a push through here signaling scope for an additional 60 pips or so of strength.”

CHART

EURUSD Short Term: Upside favored

Technical View: Long position above 1.068. Target 1.073. Conversely, break below 1.068, to open 1.0665.

Comments: The pair remains supported. Further advance favored.

CALENDAR

*Times in GMT

Source: FX Street Economic Calendar

Footnotes
https://www.reuters.com/markets/currencies/dollar-adrift-traders-assess-fed-options-aussie-buoyant-2023-06-07/
https://www.cnbc.com/2023/06/07/gold-trades-in-tight-range-as-investors-await-fed-decision.html
https://www.reuters.com/business/energy/oil-prices-steady-fears-over-supply-tightness-counter-demand-woes-2023-06-07/
https://www.reuters.com/markets/us/futures-inch-lower-fed-policy-caution-china-data-hits-sentiment-2023-06-07/
https://www.cnbc.com/2023/06/07/us-treasurys-investors-weigh-fed-policy-economic-expectations.html
https://www.fxstreet.com/news/eur-usd-ability-to-hold-up-around-the-107-point-suggests-some-underlying-resilience-scotiabank-202306071159