US-Iran tensions skyrocket

Tensions in the Middle East have skyrocketed in less than 24 hours. In particular, President Trump stated that he was “less confident” that that Tehran would agree to stop enriching uranium, which appears to be a red line for the US in the negotiations. Specifically following his comments it has been reported that the President stated that “it would be nicer to do it without warfare, without people dying, it’s so much nicer to do it” showcasing that the US Government is considering the possibility of striking Iran. In return, Iran’s Defence Minister stated that “all US bases are within our reach and we will boldly target them in host countries”, showcasing as well that Iran is prepared to retaliate against the US. Moreover, Israel has been thrown into the mix with media sources stating military action in the coming days with or without US support. Therefore, in our view we would be surprised to see gold’s price being supported by safe haven inflows. Furthermore, the “loose” cannon in our view is Israel which appears to have been itching for a justification to strike Iran for quite some time now and thus any military action by any party could lead to heightened market volatility and in particular, Gold and Oil.The US CPI rates for May which were released yesterday tended to showcase easing inflationary pressures in the US economy with both the Core and Headline rate coming in lower than expected at 2.8% and 2.4% respectively. In turn the implications of easing inflationary pressures in the US economy may have weighed on the greenback. However, in our view the easing inflationary pressures are a positive note yet the continued tariff narrative may be taking the center stage, with Trump stating per Bloomberg that he will set unilateral tariffs in two weeks. In the UK their GDP rates for April showcased a contraction on a mom level and could weigh on the pound.

XAU/USD appears to be moving in an upwards fashion. We opt for a bullish outlook for gold’s price yet from a technical perspective, the RSI indicator is near 50, implying a neutral market sentiment , in addition to gold’s price violating our upwards moving trendline. Nonetheless, for our bullish outlook to continue we would require a clear break above the 3385 (R1) resistance level, with the next possible target for the bulls being the 3500 (R2) resistance ceiling. On the other hand, for a sideways bias we would require gold’s price to remain confined between the 3240 (S1) support level and the 3385 (R1) resistance line. Lastly, for a bearish outlook we would require a clear break below the 3240 (S1) support line with the next possible target for the bears being the 3115 (S2) support level.

WTICash appears to be moving in an upwards fashion, yet we would not be surprised to see the commodity’s price retracing to lower ground in the short term. We opt for a bullish outlook for the commodity’s price and supporting our case is the upwards moving trendline, in addition to the RSI and MACD indicators below our chart. For our bullish outlook to continue we would require a break above the 69.65 (R1) resistance line, with the next possible target for the bulls being the 74.15 (R2) resistance level. On the other hand, for a bearish outlook we would require a clear break below the 63.79 (S1) support level and our upwards moving trendline, with the next possible target for the bears being the 59.45 (S2) support line. Lastly, for a sideways bias we would require the commodity’s price to remain confined between the 63.79 (S1) support level and the 69.65 (R1) resistance line.

Other highlights for the day:

Today we highlight the release of the UK’s employment data for April, the UK’s manufacturing output rate for April, the US weekly initial jobless claims figure, the US PPI Machine manufacturing figure for May and the speech by ECB member Elderson.In tomorrow’s Asian session, we note Japan’s tertiary index rate for April and Japan’s revised industrial output rate for April.

XAU/USD Daily Chart

• Support: 3240 (S1), 3115 (S2), 2980 (S3)
• Resistance: 3385 (R1), 3500 (R2), 3645 (R3)

WTICash Daily Chart

• Support: 63.79 (S1), 59.45 (S2), 55.25 (S3)
• Resistance: 69.65 (R1), 74.15 (R2), 77.80 (R3)

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