JOLTS Strengthens the Dollar; Rising Middle East Tensions Support Oil Prices

Market Wrap-up: Middle East Tensions and Strong US Jobs Data Drive MarketsMarkets continued to extend the trends established at the start of the week as escalating tensions between the United States and Iran increased skepticism over the likelihood of a diplomatic breakthrough.

Iran reportedly launched ballistic missiles toward neighboring countries including Kuwait and Bahrain. Although the missiles did not hit their targets, the incident prompted US retaliatory airstrikes on Iran's Qeshm Island.

Meanwhile, US President Donald Trump maintained that negotiations remain ongoing, while reports from Iranian state media raised significant doubts over the progress of the talks.

WTI crude oil climbed to $96 per barrel, its highest level in two weeks, as markets unwound earlier expectations that diplomatic negotiations would lead to a favorable agreement between Washington and Tehran.

The sharp rise in energy prices, combined with the approaching Federal Reserve policy meeting, added pressure on gold as expectations for a dovish Fed continued to fade. Spot gold briefly traded above $4,500 during yesterday's session before retreating nearly $100 to around $4,460 during the Asian session this morning.

Growing expectations that the Fed could raise interest rates later this year have also led Commerzbank to lower its year-end gold forecast to $4,800/oz from its previous projection of $5,000/oz.

Gold additionally faced headwinds from a stronger US dollar after the latest JOLTS Job Openings report significantly exceeded expectations, reinforcing the view that the US labor market remains resilient and corporate hiring demand remains firm.

The latest report showed job openings rising sharply to 7.618 million in April from 6.887 million in March, well above the market consensus of 6.88 million.

Following yesterday's JOLTS release, market attention now shifts to today's ADP Non-Farm Employment Change report, which is expected to show stronger private sector hiring compared with April. Investors will also monitor ISM Services PMI and Factory Orders data for further insight into economic activity.

In addition, the Federal Reserve's Beige Book will be released later today. The report provides a broad assessment of US economic conditions across the Fed's 12 districts. Traders will focus on signals relating to growth, labor market conditions, and inflation to gauge the likely direction of future monetary policy.

XAU/USD: Gold Falls as Stronger USD and Hawkish Fed Expectations Weigh

Key takeaway:

Gold prices declined despite ongoing uncertainty surrounding the US-Iran peace negotiations.

Iran reportedly threatened to withdraw entirely from peace talks on Monday following Israeli attacks in Lebanon, while US President Donald Trump reiterated that negotiations with Iran remain ongoing.

Commerzbank now forecasts gold prices to reach $4,800/oz by year-end, down from its previous projection of $5,000/oz.

Technical Outlook:

Daily Bias: Bearish

Support: 4,417

Resistance: 4,534

WTI: Oil Rally Extends as Middle East Risks Threaten Supply Outlook

Key takeaway:

Oil prices surged after Iran launched ballistic missiles toward neighboring countries Kuwait and Bahrain.

US forces responded with retaliatory airstrikes on Iran's Qeshm Island. Adding to market caution is the deep uncertainty surrounding US-Iran peace negotiations.

With no diplomatic breakthrough currently in sight, energy analysts are increasingly concerned that global crude inventories could be drawn down to critically low levels.

Technical Outlook:

Daily Bias: Bullish

Support: 93.30

Resistance: 97.29

DXY: US Dollar Gains on Strong JOLTS Data Ahead of Key Labor Reports

Key takeaway:

The US dollar strengthened after stronger-than-expected JOLTS data, while markets prepare for additional labor market releases.

The latest JOLTS report showed job openings jumping to 7.618 million in April from 6.887 million in March, significantly above expectations of 6.88 million.

Attention is now turning to Friday's Non-Farm Payrolls report, which is expected to show 85,000 new jobs added in May, while the unemployment rate is projected to remain unchanged at 4.3%.

Technical Outlook:

Daily Bias: Bullish

Support: 99.03

Resistance: 99.41

EUR/USD: Euro Trades Soft as Oil Shock Boosts USD Demand

Key takeaway:

The euro traded largely sideways as the ongoing oil price shock continued to underpin demand for the US dollar.

Meanwhile, the European Union's Harmonized Index of Consumer Prices (HICP) rose 3.2% year-on-year in May, up from 3.0% previously and in line with market expectations.

Several European Central Bank policymakers also delivered remarks. ECB's Olli Rehn stated that a June rate increase would represent an insurance move, while emphasizing that inflation expectations remain well anchored.

Technical Outlook:

Daily Bias: Bearish

Support: 1.16029

Resistance: 1.16556

USD/JPY: Yen Weakens Further as Markets Focus on US Growth and Fed Policy

Key takeaway:

The Japanese yen continued to weaken against a stronger US dollar despite renewed intervention warnings from Japanese authorities.

Japanese Finance Minister Satsuki Katayama stated that authorities stand ready to act in the foreign exchange market if necessary.

However, market reaction has remained muted as investors remain concerned that Japan's economy could face additional pressure from Middle East tensions and ongoing disruptions to supply flows through the Strait of Hormuz.

In addition, the final S&P Global Japan Services PMI fell to 50.0 from 51.0 in April.

Technical Outlook:

Daily Bias: Bullish

Support: 159.71

Resistance: 160.00

Overall, markets are currently being driven by two key themes: escalating geopolitical risks in the Middle East and growing expectations that the Federal Reserve may maintain a more hawkish stance amid renewed inflation pressures.

WTI crude's sharp rally to $96 per barrel has intensified concerns that higher energy costs could slow the disinflation process in the United States. This has supported both US Treasury yields and the US dollar, while weighing on gold prices despite ongoing safe-haven demand stemming from geopolitical uncertainty.

In the FX market, the US dollar continues to draw support from resilient US labor market data. Meanwhile, EUR/USD remains under pressure from broad USD strength, while USD/JPY continues to trend higher as the Japanese yen lacks meaningful recovery catalysts.

Market focus now shifts to the ADP Non-Farm Employment Change report, ISM Services PMI, Factory Orders, and most importantly, the Federal Reserve's Beige Book. These releases will help investors assess whether the strength of the US economy is sufficient to reinforce expectations that the Fed may keep monetary policy restrictive for longer.

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