Risk aversion was back in the markets with the safe haven assets outperforming. The US dollar index was also seen rising on the day on Wednesday. Trade spats from Washington and Beijing lowered the prospects of any trade deals that could be reached.
Meanwhile, the Trump administration is said to be considering hitting the Russia oil pipeline with sanctions. In the UK, the race for the next Prime Minister officially kicked off. Boris Johnson is slated to be the top contender for the post.
Euro Slips on Broad USD Strength
The common currency gave up the gains from earlier this week as the EURUSD lost the $1.130 handle. Economic data on the day was sparse. The ECB President, Mario Draghi along with the IMF Chief, Christine Lagarde spoke at an ECB-hosted event. Both argued the risks of the trade dispute between the US and China. They noted that this could create headwinds for the global economy.
EURUSD Likely to Test Lower Support
Following the recent rally, the euro currency is taking a breather. The correction lower could see price eventually testing the $1.1250 support. Establishing firm support here could signal a possible move to the upside. However, the Stochastics oscillator is bullish, which could signal a reversal. A close above the recent highs of 1.1338 is needed to confirm further upside in the single currency.
Crude Oil Resumes Declines, Falling for 3rd Consecutive Day
WTI Crude oil prices continued their declines as price plunged over 2% on the day on Wednesday. The declines in oil prices came amid weakening demand. Weekly inventory data from the EIA saw US stockpiles rising by 2.2 million barrels. Adding to the build-up in the inventories, other reports indicate that freight volumes were significantly lower compared to the year before.
WTI on Track to Test $50.00 Psychological Support
The declines in crude oil prices saw price crashing below the temporary support formed at 51.70. The strong bearish close below this level indicates that oil prices could soon be testing the $50.00 level of psychological support. We expect the declines to stall here temporarily. OPEC members and Russia will be meeting in a few weeks which could bring some additional volatility to the oil markets.
Gold Gains on Tame US Inflation
Gold prices rebounded on Wednesday, posting strong gains. The gains came as the US consumer price index data saw headline inflation rising modestly. On a month over month basis, headline inflation grew 0.1% in May while core CPI was also up 0.1%. Annualized inflation slowed to a pace of 1.8%, down from 2.0% in April. Energy prices dragged inflation lower.
Can XAUUSD Maintain the Current Gains?
The rebound in gold prices comes following the correction to the support at 1320. The rebound led by a reversal candlestick pattern has pushed prices close to last Friday’s highs. Still, gold remains a few points below the highs of 1341.80. A breakout above this level is required in order for the precious metal to post further gains to the upside. To the downside, the support at 1320 remains key.