Gold's Shine Fades, Euro Slumps (01.06.2025)

The euro fell to its lowest since 2022, pressured by ECB rate cut expectations, while the yen weakened on BoJ policy uncertainty and a strong US dollar.

Gold dipped below $2,640 as traders awaited key US economic data, with geopolitical pressures offering limited support. The pound remained near an eight-month low due to weak UK data and US dollar strength, and silver steadied at $29.60, supported by China's economic measures on global uncertainties. Key resistance and support levels highlighted crucial thresholds for traders across all assets.

Euro Hits Lowest Level Since 2022

The EUR/USD pair slid to around 1.0315 in the early European session on Monday. Expectations that the European Central Bank (ECB) may lower interest rates further this year are weighing on the Euro against the US dollar. Later in the day, market participants will look for additional insights from the Eurozone HCOB Composite Purchasing Managers’ Index (PMI) and the December preliminary German Consumer Price Index (CPI) data.

From a technical perspective, the first resistance level is at 1.0345, with further resistance levels at 1.0385 and 1.0450 if the price breaks above. On the downside, the initial support is at 1.0270, followed by additional support levels at 1.0220 and 1.0120. 

Yen Falls on BoJ Policy Uncertainty

The Japanese yen weakened past 157.5 per dollar, approaching its lowest level since July, amid ongoing uncertainty about when the Bank of Japan might raise interest rates. BoJ Governor Kazuo Ueda reiterated that any policy changes will depend on economic conditions, inflation, and financial developments, stressing the importance of sustainable wage growth. The central bank also emphasized the need for caution given both domestic and global uncertainties.

On the economic front, Japan’s composite and services PMIs for December were revised lower, reinforcing a dovish outlook for BoJ policy. Meanwhile, the yen continued to face pressure from a strong US dollar, fuelled by expectations of fewer Federal Reserve rate cuts in 2025.

The key resistance level appears to be 158.30, with a break above it potentially targeting 160.00 and 161.00. On the downside, 154.90 is the first major support, followed by 153.40 and 152.40 if the price moves lower.

Economic Data and Fed Policy Outlook Drive Gold Prices

Gold traded below $2,640 per ounce on Monday as traders awaited a series of US economic data releases this week to gauge the Federal Reserve’s approach to rate cuts. Key events included job openings, the minutes from the Fed's December meeting, and the non-farm payrolls report. Over the weekend, comments from San Francisco Fed President Mary Daly and Fed Governor Adriana Kugler reinforced expectations that the US central bank will take a more cautious stance on interest rate cuts this year. Furthermore, the economic policies of the incoming Donald Trump administration are expected to increase inflation, potentially limiting the Fed's ability to reduce rates. This could diminish the appeal of non-yielding gold. However, the precious metal continues to find support from ongoing geopolitical tensions and expectations of sustained central bank buying.

Technically, the first resistance level will be 2665 level. In case of this level’s breach, the next levels to watch would be 2695 and 2725 consequently. On the downside 2630 will be the first support level. 2620 and 2600 are the next levels to monitor if the first support level is breached. 

Economic Worries Push Pound to 8-Month Low

The GBP/USD pair is struggling to build on Friday's modest recovery and remains range-bound, holding above the 1.2400 level at the start of the new week. The pair is still near its lowest point since April 2024, hit last week, and appears vulnerable to extending its three-month downtrend, weighed down by a strong US dollar.

The USD Index remains near a two-year high, supported by optimism over Trump's expansionary policies and the Fed's hawkish stance. Concerns about Trump's proposed tariffs, combined with geopolitical risks from the Russia-Ukraine war and rising tensions in the Middle East, are strengthening the US dollar and creating headwinds for the GBP/USD pair.

At the same time, sentiment around the British Pound remains weak, driven by a series of disappointing data from the UK and uncertainty regarding the fiscal strategy of the newly elected Labour government. The Bank of England's dovish outlook and its decision to keep interest rates unchanged in December amid a split vote continue to pressure the GBP. As a result, the negative outlook for the GBP/USD pair remains intact, with traders awaiting the final UK Services PMI for potential new direction.

The first resistance level for the pair will be 1.2480. In case of this level's breach, the next levels to watch would be 1.2570 and 1.2600. On the downside 1.2350 will be the first support level. 1.2300 and 1.2265 are the next levels to monitor if the first support level is breached.

China's Economic Outlook and US Risks Drive Silver Recovery

Silver prices are trading around $29.60, reflecting a pullback in gold prices. Reports have emerged that Joe Biden was briefed on contingency plans to target Iran's nuclear facilities if Tehran made significant advancements toward developing a nuclear bomb, just weeks before Donald Trump’s inauguration. Additionally, uncertainties surrounding the incoming Trump administration drove demand for safer assets.

In China, promises from Beijing for "more proactive" macroeconomic policies and lower interest rates this year have helped stabilize market sentiment.

Technically, the first resistance level will be 29.85. In case of this level’s breach, the next levels to watch would be 30.20 and 30.70. On the downside 28.50 will be the first support level. 28.00 and 27.50 are the next levels to monitor.

What to Expect: EUR/USD

On January 2, the first pivot point in our previous recommendation at the 1.0220 level has been tested. Following a strong reaction from this zone, the pair is currently trading around 1.0310. After the sharp decline, we have revised the trend-following levels for risk-averse investors to the 1.0500-1.0520 range while still considering the 1.0630-1.0660 range as the key resistance zone.

On the downside, if the pair closes below 1.0220 weekly, we expect the 1.0120-1.0130 range and the 1.0000 level to be the next targets.

What to Expect: USD/CNH

We maintain a negative outlook for the Chinese yuan this year, based on several factors. Last week, a statement from the People's Bank of China (PBOC) indicated that interest rate cuts are expected in the new year, with a shift in focus from credit growth to adjustments in policy rates. This suggests that, with only a 50 basis point rate cut anticipated from the Federal Reserve, the interest rate differential between the Fed and PBOC will widen. Following this news, the yield on China’s 10-year government bonds has also fallen to historical lows.

The expected imposition of additional tariffs and trade barriers by Donald Trump’s administration after taking office has also contributed to our negative view of the yuan.

In line with these expectations, we foresee the USD/CNH pair potentially testing the 7.78-7.80 range in the medium term, provided the weekly close remains above the 7.3670-7.3770 range. Along the way, potential profit-taking levels could be observed at 7.47-7.54 and 7.64.

On the downside, the first support will be in the 7.29-7.27 range, and if the pair falls below this level, our medium-term trend target will be in the 7.07-7.10 range.