Fed's Waller Lifts USD; Oil Rebounds - CPT Markets

Market Wrap-up: USD Strengthens After Waller CommentsMarkets traded cautiously on Monday as investors digested mixed US economic data alongside renewed hawkish rhetoric from the Federal Reserve. The US ISM Services PMI came in slightly below expectations at 54.0 versus the 54.2 forecast, while comments from FOMC member Christopher Waller provided modest support for the US dollar.

Waller reiterated that the Fed remains firmly committed to its 2% inflation target, describing it as a credible commitment. He also noted that policy risks have shifted, with the labor market appearing more resilient while inflation pressures have started to re-emerge.

The US Dollar Index (DXY) rose 0.3% to 101.29 during Monday's session before easing slightly in Tuesday's Asian trading. The firmer dollar weighed on gold, pushing the precious metal down 0.4% to USD 4,159.99 per ounce.

Despite the near-term pullback, JPMorgan continues to project gold prices at around USD 4,300 per ounce in the third quarter and USD 4,500 per ounce in the fourth quarter of this year.

US equities also moved higher, led by the Dow Jones Industrial Average, which closed above the psychological 53,000 level for the first time. The advance came even as semiconductor shares, the market's primary leadership group earlier this year, lost momentum last week as investors rotated capital into other sectors.

In energy markets, reports that Iran attacked two commercial vessels late yesterday lifted crude prices above USD 69 per barrel during Tuesday's Asian session.

Nevertheless, oil continues to trade near its lowest level in four months, with downside pressure remaining in place after OPEC+ agreed to increase production quotas again from August, reinforcing expectations of a global supply surplus.

Looking ahead, traders will focus on the US ADP Employment Change report and the US Trade Balance data for further clues on the strength of the US economy.

XAU/USD: Gold Slips Ahead of Fed Minutes 

Key takeaway:

Gold declined on July 6 after reaching a two-week high as a firmer US dollar weighed on prices.

However, downside momentum remained limited as signs of a cooling US labor market reduced expectations that the Federal Reserve would move toward tighter monetary policy in the near term.

Investors are now awaiting the minutes from the Fed's latest policy meeting, scheduled for release on Wednesday, July 8.

Technical Outlook:

Daily Bias: Bearish with Rebound Potential

Support: 4,100

Resistance: 4,200

WTI: Oil Rebounds After Iran Attacks Commercial Vessels 

Key takeaway:

WTI edged higher after Iran attacked commercial vessels in the Strait of Hormuz.

Despite the renewed geopolitical risk, crude prices remain anchored near four-month lows as expectations of expanding global supply continue to weigh on the market.

Adding to the bearish supply outlook, OPEC+ has agreed to raise production quotas again from August.

Technical Outlook:

Daily Bias: Bullish

Support: 68.00

Resistance: 71.60

DXY: US Dollar Index Rises on Hawkish Waller Remarks 

Key takeaway:

The US Dollar Index (DXY) edged higher late Monday as investors assessed hawkish remarks from Federal Reserve Governor Christopher Waller alongside resilient US services sector data.

The US ISM Services PMI eased slightly to 54.0, below the market forecast of 54.2.

Meanwhile, the New Orders Index declined to 55.1 from the previous month's 57.3, indicating some moderation in business activity.

Technical Outlook:

Daily Bias: Bearish

Support: 100.54

Resistance: 101.12

EUR/USD: Euro Holds Firm Despite Stronger US Dollar 

Key takeaway:

The euro posted modest gains despite geopolitical risks in the Strait of Hormuz continuing to provide underlying support for the US dollar.

Meanwhile, the recent decline in crude oil prices has eased inflation concerns, reducing pressure on the European Central Bank to pursue more aggressive policy tightening.

Expectations for additional ECB rate hikes have moderated following the unexpected slowdown in Eurozone inflation, suggesting caution before positioning for further upside in the single currency.

Technical Outlook:

Daily Bias: Bullish

Support: 1.14177

Resistance: 1.14879

USD/JPY: Japanese Yen Rebounds on Intervention Concerns 

Key takeaway:

The Japanese yen recovered as concerns over potential currency intervention resurfaced, although the rebound remains unconvincing.

Reports last week suggested that Japanese authorities are shifting away from their traditional practice of verbally signaling intervention risks and are instead focusing more directly on speculative market activity. However, the market's immediate response has faded as no concrete action has been taken.

On the economic front, Japan's nominal wages, or total cash earnings, rose 3.2% in May, slightly slower than the revised 3.6% increase recorded in the previous month.

Technical Outlook:

Daily Bias: Bearish with Rebound Potential

Support: 161.53

Resistance: 162.40

The US dollar remains the primary driver across asset classes after hawkish comments from Christopher Waller reinforced the Fed's commitment to containing inflation. That provided modest support for the greenback, pressured gold, and kept major currency pairs trading within established ranges.

Meanwhile, geopolitical tensions in the Strait of Hormuz lifted oil prices, but the broader bearish supply outlook remains intact as OPEC+ continues to increase production.

Equity markets extended their advance, with the Dow Jones reaching a fresh milestone despite ongoing sector rotation away from semiconductor stocks.

Attention now shifts to the US ADP Employment Change report and Trade Balance data, which could provide fresh direction for expectations surrounding the US economy and the Fed's policy outlook.

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