Dollar Gains on U.S.-China Deal Optimism, Gold and Euro Slip (05.12.2025)

EUR/USD Near 1.1240 on ECB Cut Bets

The EUR/USD pair edged lower near 1.1240 in Monday’s Asian session, pressured by expectations of a possible ECB rate cut following dovish comments from official Olli Rehn. However, optimism over U.S.-China trade talks in Geneva, where “substantial progress” was reported, offered some support. Markets now await the U.S. reaction to proposed EU tariffs on €95 billion in American goods, while stagflation concerns and Fed warnings on tariff-driven inflation weigh on the U.S. outlook.

The pair faces resistance at 1.1260, with further upside capped near 1.1460 and 1.1580. On the downside, support is seen at 1.1150, followed by 1.1100 and 1.1050.

JPY Hits One-Month Low as Safe-Haven Demand Fades

The Japanese yen fell past 146 per dollar on Monday, hitting a one-month low as optimism over U.S.-China trade talks reduced safe-haven demand. Over the weekend, both sides reported progress, with the U.S. highlighting a deal to narrow the trade deficit and China citing an “important consensus.” U.S. Commerce Secretary Lutnick said the 10% base tariff on other countries would likely remain. Meanwhile, markets monitored U.S.-Japan talks, as Tokyo targets a June agreement. Japan posted a JPY 3.45 trillion current account surplus in March, down from February’s record.

Resistance stands at 146.75, with further levels at 149.80 and 151.20. Support is found at 139.70, then 137.00, and 135.00.

Gold Hits One-Week Low After U.S.-China Talks

Gold fell over 1% to $3,260 on Monday, a one-week low, as optimism from US-China trade talks reduced safe-haven demand. Weekend talks ended positively, with Beijing preparing formal negotiations and Washington citing progress. Treasury Secretary Bessent promised a full Monday briefing. The India-Pakistan ceasefire held overnight despite mutual violation claims. Gold also faced pressure from the Fed’s inflation warning and Powell’s dismissal of a preemptive rate cut.

Resistance is seen at $3,500, $3,430, and $3,360, while support holds at $3,270, $3,100, and $3,165.

GBP/USD Slips to 1.3275 on Dollar Strength

The GBP/USD pair fell about 0.20% on Monday, trading near 1.3275 during the Asian session after rebounding from a three-week low around 1.3200 on Friday. The decline was driven by broad US Dollar strength, supported by a new US-China trade agreement announced after high-level talks in Switzerland, which eased recession fears and improved risk sentiment. The greenback also gained from the Federal Reserve’s hawkish pause, pushing the dollar to a one-month high. However, the downside in the British Pound may be cushioned by last week’s limited US-UK trade deal and the Bank of England’s cautious stance, as it pledges to keep rates restrictive to manage persistent inflation.

If GBP/USD breaks above 1.3300, resistance levels come in at 1.3450 and 1.3550. Support lies at 1.3160, followed by 1.3000 and 1.2960.

Silver Extends Rally Despite Eased Safe-Haven Demand

Silver (XAG/USD) rose for a third session on Monday, trading near $32.90 in Asia, supported by Pan American Silver’s $2.1 billion acquisition of MAG Silver, securing a 44% stake in Mexico’s Juanicipio mine. Geopolitical tensions also offered support, with India warning Pakistan over ceasefire violations and Russia rejecting Ukraine’s May 12 ceasefire proposal. However, silver's upside is capped by easing safe-haven demand as US-China trade talks advance, and by Fed Chair Powell’s warning on inflation and labor risks, ruling out a preemptive rate cut.

Technically, resistance is seen at $33.80, followed by $34.20 and $34.85, while support levels are noted at $32.00, $31.40, and $30.20.