Russia’s Producer Price Index (PPI) for June has increased by 0.1% compared to last year, down from the previous 0.3%. This information reflects changes in production costs in Russia. In other news, the AUD/USD pair is above 0.6500 but is facing downward pressure as traders await Australia’s employment report. Meanwhile, USD/JPY has bounced back to 148.00, influenced by lower expectations for a Bank of Japan rate hike and disappointing trade figures from Japan.

Gold Market Dynamics

Gold prices have dropped due to lower demand for safe-haven assets and a slight rise in the US Dollar. The bullion market is reacting to expectations that the Federal Reserve will postpone interest rate cuts due to ongoing inflation worries. In Australia, the unemployment rate is expected to stay steady in June, with forecasts predicting 20,000 new jobs added, recovering from the 2,500 jobs lost in May. In China, second-quarter GDP growth outperformed expectations at 5.2% year-on-year, supported by strong trade and industrial production, though there are worries about slowdowns in investment and retail sales. We believe that the Federal Reserve’s decision to delay interest rate cuts, in light of persistent inflation, is the main driving force in the market. The CME FedWatch Tool indicates a high chance that rates will stay unchanged through the summer, with the first rate cut not expected until later in the year. This prolonged period of high rates will guide our trading strategies in the upcoming weeks.

USD/JPY Momentum

The difference in policies between the US and Japan favors long positions in the US dollar against the Japanese yen, particularly as the latter’s central bank is more accommodating. With the USD/JPY pair recently reaching multi-decade highs around 158, we anticipate continued upward momentum. We recommend using call options to speculate on a rise towards the 160 resistance level. Thus, we expect ongoing pressure on gold prices, which have fallen to about $2,320 per ounce from higher levels above $2,400. A stronger dollar and high real yields increase the cost of holding this non-yielding metal. Traders should consider buying put options on gold to profit from a possible drop towards the $2,300 support level. The Australian dollar faces challenges from a robust US dollar while also receiving some support from China’s mixed but growing economy. Recent data from China showed May retail sales exceeded forecasts, but industrial production was weaker than expected, creating a cloudy outlook for its top trade partner. We expect the AUD/USD pair to experience significant volatility, rather than following a clear trend. Given Australia’s strong labor market, which added nearly 40,000 jobs in its last report, there are fundamental supports for the currency. However, these support elements clash with broader macro challenges. To manage this, we suggest using volatility-based strategies like straddles on the AUD/USD around key data releases, allowing profit from large price swings without needing to predict the direction. Create your live VT Markets account and start trading now.

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