Gold is trading 0.55% higher at $4,401 per ounce this morning, rebounding after Thursday’s 1.3% decline as weaker-than-expected US retail sales reinforced expectations for a more accommodative Federal Reserve. Softer economic data has pushed Treasury yields lower and weighed on the dollar, strengthening the macro backdrop for non-yielding assets such as gold.The recent pullback appears to be a healthy period of profit-taking rather than a reversal of the broader bullish trend. With US economic momentum showing signs of moderation, front-end yields could move lower while expectations for Fed easing remain supportive. A weaker dollar also provides an additional tailwind for bullion, keeping the path of least resistance higher. The recent divergence between gold and other macro drivers is therefore worth monitoring, but does not yet undermine the broader bullish setup.On the daily chart, gold is testing the $4,400 level. A sustained break above would provide a strong bullish signal and could trigger the next leg higher towards $4,450, followed by $4,500. On the downside, $4,350 remains the key near-term support, with the broader bullish structure intact as long as prices hold above this area. Overall, improving expectations for lower US yields, a softer dollar and resilient technical structure continue to favour further upside in gold.
Silver is trading 1.51% higher at $65.68, extending its recovery after breaking above the descending trendline. The metal is now testing resistance at $66.40; a sustained break above this level could open the way towards $68.00. Support remains at $64.30, with the broader bullish structure intact while prices hold above this level.
Oil prices are trading mixed in the current session, looking to build on the previous week’s gains. WTI is trading around $82, and Brent around $90, as a renewed escalation between Israel and Lebanon might push prices higher.Lebanon saw its heaviest day of fighting in months on Sunday, as Israel struck Tehran-backed Hezbollah. Wider negotiations between Iran and the US appeared to be at a standstill as their ceasefire expires Monday. Apparently, there is no path forward on talks on the Strait of Hormuz, and Washington is readying an economic isolation plan. This could keep oil prices supported in the near term. Meanwhile, Iran and Oman appear to be finalising a shipping map as part of a broader agreement on how to govern traffic in the strait. Also, Middle Eastern producers continue to shuttle large volumes of crude out of the Persian Gulf, estimated at more than 4 million barrels per day. These two factors cap a rally in crude prices. However, keep in mind the ship attacks reported last week and that transit through the Strait is still risky. With refined products still tight, oil prices could gradually push higher.Technically, WTI is looking to break higher from a descending trendline formed since July highs of $94.50. A sustained breakout and hold above the resistance at $83 would be ideal for a long entry, with $85 as the target due to secondary resistance. Conversely, support is near $81 (close to the 50 EMA on 4-hr chart), which provides an opportunity for a long entry with a target at $83. Secondary support appears around $79.
U.S. Markets
U.S. equity indices are edging higher in early trading, with S&P 500 futures up 0.18% at 7,800 and Nasdaq 100 futures gaining 0.36% to 30,226 at the time of writing. The positive start follows another resilient week for equities, with the S&P 500 and Nasdaq completing their third consecutive weekly advance, rising 0.4% and 0.1%, respectively.
The market now turns its attention to the health of the U.S. consumer after July retail sales unexpectedly fell 0.6%, marking the first monthly decline in nine months, while core retail sales dropped 0.4%. Both readings missed expectations and pushed September Fed rate-hike odds closer to 30%. This puts retail earnings firmly in focus this week, with Home Depot reporting on Tuesday, Target and Lowe’s on Wednesday, and Walmart on Thursday, offering a more detailed look at consumer spending trends.
Investors will also closely watch the release of the Federal Reserve’s latest meeting minutes on Wednesday, particularly after subdued U.S. inflation data last week prompted markets to scale back expectations for a September rate hike. Any indication that policymakers are becoming more comfortable with the inflation outlook could further support equities, while a more hawkish tone may revive concerns around elevated interest rates.
Despite geopolitical uncertainty surrounding the Middle East and lingering questions over the sustainability of the AI trade, a strong earnings season has continued to provide support to Wall Street. With the S&P 500 hovering near record highs, however, the market may require another round of solid earnings and reassuring economic data to sustain its recent advance.
Technically, for SPX, resistance is seen near the all-time high at 7,816, while immediate support lies at 7,775, the breakout level of the previous consolidation that fueled the recent rally to record highs. Holding above 7,775 keeps the broader bullish structure intact. For Nasdaq 100, the index has broken above a descending trendline and is now attempting a breakout from a short-term consolidation pattern, which signals continued upside momentum. The index could target 30,400, while 30,036 serves as a key support on the downside.
US Dollar Index
The U.S. Dollar Index (DXY) closed 0.31% lower on Friday, closing out the week relatively flat. Consequently, the EUR/USD pair rose by 0.12% for the week. The dollar index is weakening further at the start of the week, trading 0.17% lower in Monday’s Asian session, while EUR/USD is up 0.20%, touching a 2-month high.
The dollar faces pressure as odds of an imminent Fed rate hike decline after last week’s macroeconomic data releases. Along with moderating price pressures, US Retail Sales fell 0.6% in July, marking the biggest monthly fall since May last year, and pointing to a slowdown in consumer spending. These signals are giving the US central bank headroom to keep interest rates steady, with markets now reducing the odds of a 25-bps rate hike from 52.2% a week ago to 30.1%, according to the CME FedWatch Tool. Meanwhile, odds of an ECB rate hike at the September meeting now stand at 91%, supporting the upside case for EUR/USD, as inflation remains above the Euro Area’s 2% target.
From a technical standpoint, the dollar index seems to have broken below an upward-sloping trendline connecting the lows of 27th Jan, 6th May, 3rd August, and 7th August, supporting a bearish stance for the near term. Meanwhile, EUR/USD has broken out from a downward-sloping trendline connecting the highs of 17th April, 12th May, and 7th August, along with the 200-day EMA, with bulls eyeing 1.162 resistance from mid-June highs.
