Dollar Strengthens and Gold Rallies in a Turbulent Market

The US dollar strengthens on higher Treasury yields, gold rallies amid geopolitical tensions, and rate cut speculations fluctuate.

Financial markets weigh US Treasury yields, NFP results, and gold rallies on geopolitical tensions.

Amid early European trade, the US dollar has shown resilience, bolstered by a surge in US Treasury yields. The robust Non-Farm Payrolls (NFP) report on Friday, surpassing expectations at 303,000 compared to the projected 200,000, has tempered anticipations of a June rate cut by the Federal Open Market Committee (FOMC). The market had been steadily pricing in a rate cut for the June 12th meeting. However, recent developments have transformed this expectation into a coin-toss scenario, scaling back predictions.

The surge in US Treasury yields post-NFP has been notable, with the US 2-year yield climbing to 4.77%, nearing levels last observed in mid-November. Concurrently, the benchmark US 10-year yield has surpassed a range of resistance, presently hovering at a multi-month high of 4.475%.

Dollar Strengthens and Gold Rallies in a Turbulent Market

Looking ahead, March core Inflation figures and the release of the latest FOMC minutes, both scheduled for Wednesday, will drive the US dollar this week. The US dollar index currently finds support around the 38.2% Fibonacci retracement level at approximately 104.35, reinforced by a cluster of three simple moving averages (SMAs). A bullish crossover between the 50-day and 200-day SMAs in late March further bolsters this upward trajectory.

In parallel, gold prices continue their ascent, buoyed by escalating geopolitical tensions between Israel and Iran. The perpetual uncertainty surrounding these tensions has recently propelled gold to record highs, with little indication of abating soon.

Retail trader data reflects mixed sentiments, with 42.79% net-long, though the short-to-long ratio is 1.34 to 1. Notably, net-long traders have seen a marginal increase of 0.49% compared to the previous day, while net-short traders have decreased by 2.35%. Weekly, net-long traders have decreased by 0.93%, juxtaposed with a 1.91% rise in net-short traders.

While gold maintains bullish momentum, the US dollar’s fate remains intertwined with forthcoming economic indicators and geopolitical developments, poised delicately amid shifting market sentiments.

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