On Wednesday, the AUD/USD currency pair gained to fresh highs on the year, approaching the 0.6550 level. This dramatic rise comes amid profound upheaval in the foreign exchange marketplace. This is occurring during the most significant US Dollar weakening we’ve seen in decades. Analysts argue that the recent uptick in AUD/USD is tenuous. Despite the recent positive changes, they don’t think this shooting star of an upward trend is sustainable in the long-term.
Many of those recent AUD/USD gains relate to bigger picture market moves, driven by US inflation data coming in lower than expected on the May figures. Another element of this economic report was the sudden and sharp devaluation of the US Dollar. Traders responded dramatically to the softer inflation readings, pushing the currency lower. Traders are becoming increasingly hopeful of a positive outcome to the protracted US-China trade impasse. This optimism is exerting further pressure on the Dollar.
In recent weeks gold prices have become steady, and are currently trading in consolidation between $3,340 to around $3,355 dollars per troy ounce. This is particularly remarkable given the fortunes of the Greenback, which fell sharply. This graphic illustrates what happens when dollar strength increases based on how gold usually responds. Traders continue to react to a series of softer inflation readings and gold prices have begun to settle down on the defensive sentiment. Optimism towards trade may limit its upside for more gains going forward.
The EUR/USD currency couplet has been one of the stronger tracks over the course of this week. It is now getting close to the key, psychological level of 1.1500. Currently just pips away from this barrier, EUR/USD’s advance reflects a broader recovery trend that has emerged amid fluctuating market conditions. Yet, analysts point out that a psychological wall stands at 1.1500, making it difficult for the euro to make further advances.
Further exploring the interactions between these currency pairs and specific commodities, we can see macroeconomic influences drive market sentiment and trading patterns. This week’s price movements is an indication that traders are starting to feel bullish again. They’re particularly interested in the AUD outlook and gold outlook, as economic data remains unpredictable.
Gold is now holding firm at about $3,340 per troy ounce. Nonetheless, forecasters caution that further trade talks and a possible change in inflation expectations may constrain its gains. These reasons pave the way for gold to experience a period of consolidation. All in all, unlikely to be big aggressive gains for the immediate future.
For now, as the market continues to absorb these changes, traders are keeping a close eye on anything that may signal a shift in the recently established status quo. The AUD/USD uptrend is tenuous at the moment. At the same time, gold has been in a consolidative phase, setting up a tricky environment for investors in these two asset classes.