• EUR/USD struggles to defend the first weekly gain in five, retreats of late.
• ECB’s 0.25% rate hike is mostly given but Fed’s pause hinges on US inflation despite bearing 70% market bets.
• Downbeat EU, US data prods policy hawks but inflation woes need higher rates.
• Tuesday’s US CPI will kick-start the busy calendar and volatile week.

EUR/USD renews intraday low near 1.0750 as it pares the first weekly gain in five amid a cautious mood ahead of the key week comprising the European Central Bank (ECB) and the US Federal Reserve (Fed) monetary policy decisions. Apart from the pre-event anxiety, the recent challenges to the sentiment and reassessment of the previous bias about the ECB and the Fed’s next move also weigh on the Euro pair.

That said, the US Dollar Index (DXY) dropped in the last two consecutive weeks to 103.56 at the latest, grinding near the bottom by the press time, as downbeat prints of the US activity numbers for May joined disappointing employment clues to weigh on the US Dollar, despite looming economic fears. That said, the latest United States Initial Jobless Claims jumped to the highest levels since September 2021 whereas the US ISM Services PMI, S&P Global PMIs and Factory Orders also printed softer outcomes for May and pushed back the Fed hawks, which in turn weighed the US Dollar.

Following the downbeat data, market players placed higher bets on the US Federal Reserve’s no rate change decision in its June 13-14 policy meeting. That said, the CMEGroup's Fed watch tool suggests around 72% chance of the Fed rate being unchanged to the 5%-5.25% range.

On the other hand, growth numbers from the Eurozone and Germany, as well as final readings of the inflation catalysts haven’t been impressive to justify the ECB policymakers’ hawkish bias. That said, concerns about the economic slowdown in the old continent unearth after the recently downbeat statistics, which in turn suggests that the ECB might not be able to increase the rates past this week’s 0.25% rate hike.

It’s worth noting that the inflation clues from Germany and the US may entertain the EUR/USD pair traders as higher numbers can keep the policy hawks hopeful.

Elsewhere, fears of slower economic transition on a broader level join the fears of the US-China tension and higher yields to prod the EUR/USD traders. Amid these plays, Wall Street and yields closed higher but the market sentiment remains divided as the key week begins.

Also read: EUR/USD Weekly Forecast: US CPI, the Fed and the ECB grant action next week

Technical analysis

Failure to cross the 50-day Exponential Moving Average (EMA) hurdle of around 1.0810 directs EUR/USD towards retesting the 200-day EMA support, near 1.0690 by the press time.

“The latest OPEC+ agreement involved comprehensive reform, but that the alliance was also working against ‘uncertainties and sentiment’ within the market,” said Saudi Arabia's Energy Minister Prince Abdulaziz bin Salman on Sunday, reported Reuters.

When asked what was necessary to achieve market stability, Prince Abdulaziz said at the Arab-China business conference in the Saudi capital Riyadh that that is why they had the latest agreement.

On the other hand, Iran's supreme leader Ayatollah Ali Khamenei said on Sunday, per Reuters, “A deal with the West over Tehran's nuclear work was possible if the country's nuclear infrastructure remained intact, amid a stalemate between Tehran and Washington to revive a 2015 nuclear pact.”

Last month, the IAEA reported limited progress over disputed issues with Iran, including re-installing some monitoring equipment originally put in place under the 2015 pact that Tehran ordered removed last year, reported Reuters.

Market reaction

The news flashes mixed signals as the US-Iran deal could weigh on the Oil price while the Saudi Arabian comfort with the OPEC+ output cut keeps the energy bulls hopeful. That said, the WTI crude oil dropped in the last two consecutive weeks to $70.00 at the latest.

• Gold Price portrays pre-Fed consolidation after two consecutive weekly gains.
• Softer United States data, no rate hike expectations from Federal Reserve favor XAU/USD bulls, via downbeat US Dollar.
• Hopes of upbeat China growth, mixed macroeconomic view prod Gold buyers.
• US CPI for May will be crucial for Fed watchers despite 70% bets on no rate hike in June.

Gold Price (XAU/USD) begins the key week with mild losses, grinding lower to around $1,961 after witnessing a two-week winning streak. In doing so, the Gold price positions for the US Federal Reserve (Fed monetary policy meeting after cheering the broad US Dollar weakness amid dovish concerns about the Federal Reserve’s next move, backed by downbeat United States data. However, the cautious mood ahead of this week’s United States inflation numbers and other key events challenges the XAU/USD bulks.

Gold Price benefits from dovish Federal Reserve concerns

Gold Price rose for the second consecutive week in the last as market players place heavy bets on the Federal Reserve’s (Fed) no rate hike decision, especially after the last week’s downbeat United States (US) data.

During the last week, downbeat prints of the US activity numbers for May joined disappointing employment clues to weigh on the US Dollar, despite looming economic fears. That said, the latest United States Initial Jobless Claims jumped to the highest levels since September 2021 whereas the US ISM Services PMI, S&P Global PMIs and Factory Orders also printed softer outcomes for May and pushed back the Fed hawks, which in turn weighed the US Dollar and propelled the Gold Price.

That said, US Dollar Index (DXY) dropped in the last two consecutive weeks to 103.56 at the latest, grinding near the bottom.

With this, market players placed higher bets on the US Federal Reserve’s no rate change decision in its June 13-14 policy meeting. That said, the CMEGroup's Fed watch tool suggests around 72% chance of the Fed rate being unchanged to the 5%-5.25% range.

However, Tuesday’s US Consumer Price Index (CPI) data appears crucial for May appears crucial to determine the Fed decision as the United States central bank has always shown readiness to tame inflation with a “whatever it takes” attitude. “US May CPI data will be published just ahead of the FOMC decision and that is adding some uncertainty to the immediate call – a strong core print could force the FOMC’s hand. The median market estimate expects that core inflation rose 0.4% m/m with the headline rate rising 0.2% owing to weaker energy costs,” said Analysts at the ANZ.

Hence, the Gold price remains on the bull’s radar amid the Federal Reserve (Fed) concerns but the cautious mood ahead of this week’s key US data, monetary policy meetings challenges the Gold buyers.

Moving on, monetary policy meeting decisions from the Fed, ECB, and BoJ, as well as key data from the US on inflation and retail sales, and employment numbers from Australia and the UK, will be in the spotlight to offer a volatile week to the Gold traders ahead.

US Inflation, Ex-Fed catalysts prod XAU/USD bulls

While the Federal Reserve (Fed) concerns weigh on the US Dollar and allow the Gold price to remain firmer, the other concerns keep challenging precious metal prices. Among them, are the surprise rate hikes from the Reserve Bank of Australia (BoC), Bank of Canada (BoC) and the concerns that recent downbeat US jobs report isn’t a strong push to the Fed for monetary policy easing.

“The jump in initial claims in the first week of June (261k) to their highest level since September 2021 and the 0.3% rise in May unemployment to 3.7% raises the question of whether the labor market is finally starting to weaken. We think the Fed needs to see a period of sustained labor market weakness to be confident that its policies are working,” said Analysts at the ANZ.

Economic concerns about one of the world’s biggest Gold consumers, namely China, and fears of global recession also prod the Gold buyers. People's Bank of China (PBOC) Yi Gang said in a statement on Friday that China's Q2 GDP YoY growth is expected to be high mainly due to base effects. The policymaker added, “There is plenty of room for policy adjustment.”

With this in mind, Reuters said, “Physical gold demand slowed in China and India this week and forced dealers to offer discounts, with volatile prices in India prompting buyers to delay purchases.” The news also added on Friday that the top consumer China raised gold holdings for a seventh straight month to 67.27 million fine troy ounces by May-end.

Also read: Gold Price Weekly Forecast: XAU/USD faces two-way risks in Fed week

Gold Price Technical analysis

Gold Price fades recovery from a fortnight-old ascending support line, around $1,943 by the press time. Even so, the bullish signals from the Moving Average Convergence and Divergence (MACD) and firmer Relative Strength Index (RSI) line, placed at 14, push back bearish bias.

Hence the XAU/USD is likely to remain sidelined between the aforementioned support line and a one-month-old horizontal resistance area comprising the 200-SMA, respectively near $1,943 and $1,985.

Should the Gold Price break the $1,943 support, the previous monthly low of near $1,932 and the 61.8% Fibonacci Expansion (FE) of the XAU/USD’s moves from May 10 to June 02, near $1,910, will gain the market’s attention.

On the contrary, a clear upside break of $1,943 can quickly propel the Gold Price toward the $2,000 round figure.

Following that, the 61.8% Fibonacci retracement of the pair’s May-June downside, near $2,025, will be in the spotlight.

Overall, the Gold price aptly portrays the market’s indecision ahead of the top-tier data/events.

Gold Price: Four-hour chart

Trend: Limited upside expected