The US total personal consumption expenditure (PCE) in April was in line with expectations, but the core PCE was lower than expected, and the US PMI was significantly lower than the forecast of 41, increasing the possibility of the Fed's interest rate cut in September. For now, traders can ignore the concerns of the recent "hawkish rate hike" signals from Fed officials. Before the close of Friday (May 31), the US dollar index rebounded slightly at 104.62, and gold unexpectedly plunged nearly $40, breaking the key level to indicate further weakness. Bitcoin once fell below $67,000, and although it rebounded slightly afterwards, the bulls still did not take control of the situation.
The US monthly overall PCE in April was in line with expectations at 0.3%, while the annual overall PCE also remained stable at 2.7%.
The monthly core PCE fell to 0.2% in April from 0.3% in March, and the annual core PCE remained unchanged at 2.8%.
Personal income fell to 0.3%, down from 0.5% in the previous month.
Personal spending fell to 0.2% from 0.7%.
In May, the Chicago PMI was 35.4, lower than the previous value of 37.9, which was significantly lower than the forecast of 41.
Stock markets were very bullish on weak personal consumption expenditure data and the rise in major European and US indices.
According to the Chicago Mercantile Exchange's (CME) Fed Watch tool, federal funds futures pricing data shows that the probability of keeping interest rates unchanged in September is 49.0%, the probability of a 25 basis point (bps) rate cut is 45.1%, and the probability of even a 50 basis point rate cut is 5.4%, with a marginal price of 0.5% for a rate hike.
The benchmark 10-year Treasury note is trading around 4.49% and is heading for further declines.
US Dollar Index Technical Analysis: Has the Fed Made a Policy Mistake?
FXStreet analyst Filip Lagaart said that the dollar has clearly depreciated and deflation is back on track. The market can now almost completely ignore the recent remarks of some Fed officials who said that they may need to raise interest rates first.
On the upside, the US Dollar Index has reclaimed the key 55-day Simple Moving Average (SMA), currently at 104.98, as well as the 105.00 round number. It will be important to see if these levels hold support if US data weakens. If this is confirmed, 105.52 and 105.88 will be on the radar.
On the downside, the 200-day SMA at 104.43 and the 100-day SMA around 104.40 are the last lines of defense. Once below this level, a hole will form between 104.30 and 103.00. If the dollar continues to fall, the March low of 102.35 and the December low of 100.62 are levels worth considering.
Gold technical analysis: Break below key level signals further weakness
Bruce Powers, an analyst at FXEmpire, said that after successfully testing the resistance level near the 20-day moving average, gold prices began to fall and hit the 50-day moving average. Gold prices have reached the day's low of $2,321 and continue to trade near that low. In addition, Friday's low is a new retracement low as the previous $2,322 level was broken. Unless strong support emerges soon, gold seems to be intent on testing lower price levels.
The next potential support area could be near the top ascending channel line, which is currently located near $2,298. If gold prices fall further below the 50-day moving average and sustain below that level, the recent swing low of $2,277 is at risk of being breached. Several lower price areas are marked on the chart, but the market needs to first consider the developing descending ABCD pattern.
After two days of rallying, a bearish continuation was triggered on Wednesday. Support was then found near the 50-day moving average, leading to a test of resistance again today and yesterday. As a decline was followed by resistance today, it looks like the initial target of the pattern at $2,239 may eventually be reached.
This could be a more significant price area to move further down as it was previously the trend high of a minor consolidation pattern. When combined with Fibonacci price levels, this suggests a potential support area from $2207 to approximately $2195. A breakout of this consolidation was the most recent pattern breakout prior to the April 12 swing high. Therefore, this price area would be the biggest drop that could test previous resistance as support.
The weekly chart supports a deeper retracement as this week could see a close below last week's low of $2,325, confirming a weekly bearish continuation signal. It extends last week's bearish candlestick pattern when gold also closed near this week's low. This means that the past two weeks have produced a bearish reaction to last week's new trend high. In other words, the breakout failed. Failed patterns often lead to sharp moves in the opposite direction.
Bitcoin technical analysis: Bulls fail to regain control
CoinTelegraph noted that Bitcoin rebounded from the support line of the symmetrical triangle pattern but the bulls failed to sustain the higher levels.
The bulls must push the price above the triangle to gain the upper hand. This could spark a rally to the overhead resistance at $73,777. The bears are expected to defend strongly at this level.
Conversely, if the price continues to move lower and breaks below the support line, it will suggest that the bears have taken control. Bitcoin could drop to $64,600 and eventually to the critical support at $59,600. The bulls are likely to buy in the area between $56,550 and $59,600.
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