The producer price index (PPI) rose by 0.2% in June, exceeding expectations of a 0.1% increase. The increase was driven by higher service prices, which offset a decline in goods prices. Despite this hotter-than-expected PPI reading, recent consumer price index (CPI) data showed a decrease in headline inflation to 3% year on year.
The Federal Reserve is expected to hold rates steady in the next meeting, with a possible rate cut in September. The next key inflation data, the personal consumption expenditures price index, will be released on July 26.
DOW JONES
U30USD (Daily). The investors highly respect the figure 40,000 as a psychological level for Dow Jones. DJ went beyond 40,000 on Friday, but the price retraced and closed at 40,036. We expect DJ to retrace towards 39,000 before continuing the uptrend.
YEN
The Japanese yen surged nearly 2% on Thursday, marking its largest daily rise since late 2022. The dollar fell almost 400 pips to 157.40 against the yen. The plunge was attributed to potential official intervention by Japan to support the currency at a 38-year low. Japan’s Ministry of Finance and the New York Federal Reserve did not comment on the intervention. The dollar ended the day at 158.79 yen, down 1.8%. The significant interest rate gap between the US and Japan has fuelled lucrative carry trades, adding pressure on the yen.
USDJPY (Daily). Yen is expected to continue to strengthen. If the price could break the bullish projection line starting in January 2024, the USDJPY could continue to the 38.2% and 50% Fibonacci levels around 151.00 and 153.70 respectively.
GOLD
Gold held above $2,400 per ounce on Friday, marking its third consecutive weekly gain as investors anticipate a Federal Reserve rate cut soon. Despite a hotter-than-expected producer price index report, the recent decline in consumer prices bolstered hopes for rate cuts, driving gold prices higher. Markets estimate a 96% chance of a rate cut in September, which would reduce the opportunity cost of holding non-yielding bullion.
XAUUSD (H4). Without hesitation, Gold prices continue to soar due to the weak US economic conditions. We expect a correction to the bullish projection line at 2382.00.
OIL
Oil prices edged higher amid easing inflation in the US, but gave up the gain on Friday. West Texas Intermediate crude futures ended the week at $81 a barrel. Investors’ confidence grew after the drop in US consumer prices, raising hopes for a Federal Reserve rate cut to boost economic growth and fuel consumption. However, ongoing economic weakness and uncertain demand recovery kept the market grounded.
WTIUSD (Daily). A month down and a month up, oil prices are trading slower and looking for a clearer direction. The sideways pattern suggests profit-taking near the resistance level at 84.00 and short-selling with a target at the halfway mark to the support level around 72.40.
Fullerton Markets Research Team
Your Committed Trading Partner
