US DOLLAR GAINS AHEAD OF INDEPENDENCE DAY

The US dollar traded steady on Monday, as the bears relinquished control of the market ahead of the Independence Day holiday.

The dollar index (DXY), which tracks the performance of the US currency against a basket of six rivals, shot up 0.4% to 96.03. The index plunged to more than nine-month lows last week, as the euro, pound and Canadian dollar rose.

The euro gave back some of its gains on Monday as traders sifted through a malaise of economic data. Germany’s manufacturing PMI strengthened more than expected in June, with the headline indicator climbing 0.3 point to 59.6. Meanwhile, the euro area manufacturing gauge edged up to 57.4 from 57.3.

“Eurozone manufacturing growth gained further momentum in June, rounding off the best quarter for just over six years. At current levels, the PMI is indicative of factory output growing at an annual rate of some 5%, which in turn indicates the goods-producing sector will have made a strong positive contribution to second quarter economic growth,” IHS Markit chief business economist Chris Williamson said in a statement that accompanied the data.

Meanwhile, the Australian dollar fell half a percent against the greenback after soaring to three-month highs.

The Melbourne Institute reported on Monday that Australian consumer prices rose 0.1% in June, which translated into a year-over-year gain of 2.3%. That’s well below the May expansion of 2.8%.

Meanwhile, Caixin reported a bigger than expected rise in Chinese manufacturing PMI last month, although survey analysts said further declines were expected. The Caixin China manufacturing purchasing managers’ index (PMI) rose to 50.4 in June after slipping into contraction the previous month.

A weak dollar has failed to instill confidence in precious metals traders. Gold prices were last seen trading at their lowest level in a month-and-a-half.  

AUD/USD

The Aussie’s latest rally stopped short at the 0.77 level, although significant gains were made along the way. The AUD/USD exchange rate faces immediate resistance at the 0.7750 level. A clean break above this area could lead to a re-test of the 0.80 level, which is critical on the longer-term charts. However, much of the rally will depend on the US dollar.

EUR/USD

The euro remains in a firm uptrend, but overbought signals are pressuring the latest rally. The EUR/USD exchange rate is looking for direction at its current price levels. However, it may have to wait until after the holiday for fresh trading catalysts.

GOLD

Gold prices are testing last week’s swing lows, an ominous sign for bullion. The bears are firmly in control of the market; a clean break below $1,235.00 a troy ounce could set the yellow metal up for heavier losses in the near term.