The USD closed the month of May with some modest gains, settling at 97.66 by Friday’s close. This marks a fourth month of consecutive gains in price. On a weekly basis, the greenback extended strong losses. The declines came as investor fled to safe haven assets impacting the USD as a result. Trade war uncertainty just grew a notch higher with not only China being hit with tariffs, but now Mexico also.
Euro Gains on a Weaker USD
The common currency managed to post some modest gains by Friday’s close. The euro gained mostly as the USD retreated. Month-end flows also partly contributed to the declines in the USD. Economic data on the day saw the US personal income and spending rising 0.3% and 0.5% respectively. And despite a weaker than expected inflation growth in Germany, the common currency stood its ground.
Can the EURUSD Post Further Gains?
The common currency has managed to rebound off the recent lows. However, the initial test comes in at the 1.1200 level where resistance is most likely to be formed. If the EURUSD manages to break out above this level, we could expect to see further gains in store. However, with the ECB meeting on Thursday, price action in the EURUSD could remain flat.
Oil Slips to a Four-Month Low
Crude oil prices fell sharply on Friday, shedding over 9% for the week. The declines in price came amid concerns that the trade wars would lead to slower growth globally. The tariffs imposed on Mexico is also expected to impact some US oil refineries. Meanwhile, OPEC is due to meet later in June. However, the US crude oil production increase is expected to offset any production cuts from OPEC and Russia.
Will Oil Prices Fall Further?
Last Friday’s declines in crude oil prices could see some moderation in the near term. The immediate price level of interest is the 57.50 handle which briefly served as support. A return to this price point to establish resistance could mark further downside in oil prices. The lower support remains at the psychologically crucial $50.00 handle.
Gold Prices Gain on Risk Off Sentiment
Gold prices were seen rising sharply on Friday. The precious metal closed the week with 1.61% while gaining 1.32% on the day. The rebound in the precious metal comes as investors shed risky assets and fled to safe haven assets. The Japanese yen also appreciated strongly on Friday indicating the investor concerns on the impact of the trade wars.
Can XAUUSD Maintain the Gains?
In the near term, we expect gold prices to pull back a little. The key level of interest is the 1290 – 1285 handle which has seen quite a bit consolidation. A retracement to this level to establish support will indicate further upside in gold. However, expect to see some volatility in gold prices as investors react to the developing narrative.