Today's Financial News

Reminders

Increased geopolitical tensions and economic uncertainties will lead to volatile market conditions. This unpredictability makes it challenging to rely solely on data for market analysis and speculation. Consequently, we recommend focusing on short-term trading strategies to navigate these uncertain times more effectively.

Market Overview

The G7 is about to approve the loan to reconstruct the damage done by Russia to Ukraine, using Russia's own frozen assets. 

During a trip to Normandy last week, Mr. Biden appeared to have persuaded France, one of the last holdouts, to support the deal. At the end of the trip, President Emmanuel Macron of France told reporters that he hoped “all members of the G7 will agree to a $50 billion solidarity fund for Ukraine.”

The Biden administration, after considerable internal arguments, had been pushing to outright seize the assets. But that idea fell flat in Europe, where most of the funds are held, out of concern that it would be a violation of international law.

Allowing such a thing to happen under the watch of the Central Banks will lower their assurance of the US Dollar. However, such a damage IS done. Others are becoming more cautious of the dollar, especially now that the seizing of assets is put on the table as a possibility. This threatens other countries and drives them to find alternatives where they are to be put on the other end.

These past few years have marked a significant turnaround in demand. In 2021, central banks added 455 MT of gold to their holdings, and 2022 saw a massive 1,135.7 MT of gold added to central bank vaults — an all-time high. In 2023, for a second year in a row, central bank gold buying surpassed the 1,000 MT mark. At 1,037 MT, last years gold purchases came in at just 45 MT off of the 2022 record.

According to a mid-2023 central bank survey from the WGC, 24 percent had plans to increase their gold reserves in the next 12 months; more than 70 percent of those surveyed expect to see global central bank reserves increase in the next 12 months.

In the first quarter of this year, central banks have reportedly added another 290 MT to their coffers. “The strong start reinforces our view that central bank demand will remain robust in 2024,” noted the WGC.

This means, the GOLD recording new highs was not unexpected. In fact, we know that the GOLD will only rise higher alongside Silver.

Back to the G7's plans for Ukraine,

John E. Herbst, senior director of the Eurasia Center at the Atlantic Council, and a former U.S. ambassador to Ukraine, said that unlocking the assets was of principal importance for the Group of 7, especially after the stalemate in Congress and the United States delays in providing Ukraine with certain weapons.

“The administration has been quick to get aid to Ukraine once Congress moved, and that‘s to its credit,” he said. “But we still are slow in getting Ukraine what it needs in terms of the right weapon system, especially right now. This is not just an American failure; it’s a failure of the entire alliance.”

The unlocking of frozen assets would be “a game changer,” said Evelyn Farkas, the executive director of the McCain Institute at Arizona State University, who previously served as deputy assistant secretary of defense for Russia, Ukraine, and Eurasia under President Barack Obama.

Ms. Farkas said that the U.S. delays likely “focused the European mind,” in making European countries think: “OK, we have to come up with alternatives because the U.S. is not reliable.”

“Hopefully,” she said, “they stay focused.”

The U.S. still urges the de-escalation of the conflict to not risk an all-out war. 

What's concerning is the Gaza population is experiencing 'catastrophic hunger and famine-like conditions.'

What Israel wants, they quoted, is 'total victory'.

This means undetermined market conditions as conditions worsen. The U.S. cannot worsen the status of the war for fear of disrupting the global supply of oil ahead of elections. However, this may not last for long as these tensions will sooner or later, cause a big ripple and shift the focus of modern economies. Not to mention, there is also the challenge where of 6 out of the 7 G7 leaders will retire from their positions until the next year. A set of new leaders will shift economies.

GOLD -After yesterday's lackluster CPI data, gold managed a slight recovery but struggled to push past 2332.174. The larger timeframe reveals an emerging SHS pattern, hinting at continued bearish momentum for gold. However, given the global economic landscape, we maintain a bullish long-term outlook. Short-term selling might yield profits.

SILVER -Silver has been stuck in consolidation between 29.900 and 29.018. The current M formation confirmation signals a potential bearish shift if the price breaks below 29.018. Were closely monitoring this level for a decisive move.

DXY - Yesterday's U.S. data release showed signs of economic slowing, with Core CPI dropping to 0.2% and monthly CPI stagnating. The yearly CPI also dipped by ten basis points. As anticipated, the FOMC held the fed funds target range at 5.25%-5.50%, stating that rate cuts are off the table until inflation trends towards 2%.

The Fed's 2024 GDP forecast remains at +2.4%, but the core PCE forecast increased to +2.8%. Fed Chair Powell acknowledged progress in easing inflation but emphasized the need for a restrictive stance. The market currently prices in an 8% chance of a rate cut in July and 60% in September.

GBPUSD - After a significant recovery spurred by recent news, GBPUSD bounced off 1.28508 but retraced following the FOMC release. The price is now testing 1.27938 and may revert to its previous range.

AUDUSD - AUDUSD failed to reach 0.67142, indicating bearish sentiment. A move below 0.66541 could see it testing 0.66145. While the higher timeframe maintains a bullish structure, the market is presently consolidating.

NZDUSD - The market is consolidating between 0.62086 and 0.60954 without a clear direction. The higher timeframe suggests an overall bullish trend.

EURUSD - Given the Fed's stance and diminishing expectations for rate cuts this year, we foresee further declines for the EUR. With the BoE already cutting rates, the euro remains weaker compared to the dollar.

USDJPY -Despite slipping post-data release, the yen's vulnerability is evident ahead of the BoJ announcement. Traders are keenly awaiting Fridays announcement as the price hovers near 157.193.

USDCHF -USDCHF has failed to reach 0.88886 and may continue rising from here. We adopt a reactive approach, waiting for further confirmations before forming a bias.

USDCAD -USDCAD dipped below 1.37435 but quickly rebounded to retest this level. The pair might continue upward or remain range-bound. Although several bearish structures have broken, we hold a cautiously bullish outlook, pending further confirmations.