Analysis of across multiple timeframes indicates that recent price movements reflect the renewed escalation between the U.S. and Iran. This escalation follows Iranian strikes on U.S. military sites in Bahrain and Kuwait on Wednesday, which occurred after the U.S. launched a series of military strikes on Iran in response to attacks on tankers in the Strait of Hormuz.
In the latest blow to the fragile ceasefire agreement, the Islamic Revolutionary Guard Corps said it carried out a joint missile and drone operation against key U.S. military sites in Bandar Salman, Bahrain’s Fifth Naval District, and Ali Al Salem Air Base in Kuwait, and shot down a U.S. MQ9 drone attempting to interfere with the operation.
Air raid sirens sounded in Bahrain and Kuwait, officials said. The Kuwaiti army said air defences were confronting “hostile” missile and drone attacks.
The U.S. earlier unleashed fresh military strikes and revoked a licence allowing Iran to sell oil in response to attacks on three tankers in the strait.
The U.S. Central Command said more than 60 small boats of the Islamic Revolutionary Guard Corps were among the targets hit, in a bid to impose a high cost on Iran for strikes on shipping in violation of the ceasefire.
“The unwarranted aggression by Iranian forces is a clear and dangerous violation of the ceasefire and undermines freedom of navigation,” CENTCOM said in a statement.
Iran’s top joint military command, Khatam al-Anbiya Central Headquarters, condemned the U.S. strikes as a “blatant act of aggression,” threatened a “crushing response,” and warned that Tehran would not allow U.S. interference in the management of the strait.
Undoubtedly, the primary driver behind the market’s defensive posture is Wednesday’s upcoming publication of the Federal Reserve’s June 16–17 policy minutes. The document represents the first detailed look at the inner workings of the Federal Open Market Committee (FOMC) under the leadership of newly appointed Fed Chair Kevin Warsh.
While the central bank held the federal funds rate steady at 3.50%–3.75% last month, the accompanying Summary of Economic Projections (SEP) shocked markets with a notably hawkish undercurrent.
Bond yields had initially faced downward pressure earlier in the week after non-farm payrolls showed the U.S. economy added just 57,000 jobs in June – well below consensus estimates of 115,000.
Meanwhile, the yield on the benchmark was up at 2.948% in afternoon trade, and the short-dated two-year yield, which moves in lockstep with the European Central Bank’s rate expectations, was up at 2.54%.
Fixed-income markets faced selling pressure after the latest Sentix index showed a much stronger-than-expected bounce in Eurozone investor confidence in July.
Compounding the pressure on bonds were remarks from European Central Bank (ECB) policymaker Fabio Panetta. Speaking at an industry event, the Bank of Italy governor warned that European central banks face growing long-term political pressure to absorb heavier government deficits due to aging populations and industrial subsidies.
The brightening outlook, particularly for Germany’s industrial base, encouraged a rotation out of government bonds and back into riskier equity classes.
On Wednesday, gold futures, after facing significant pressure since July 3, tried to defend the immediate support at $4,125.61 on the daily chart, signaling that a breakdown below this could trigger a selling spree to push the futures to test the next support at $3,955.16 before this weekly close.
On the 4-Hr. chart, despite some bounce on Tuesday, gold futures are still trading much below the uptrend line, trying to hold the immediate support at the 50 EMA ($4,128), where a breakdown could push the futures to test the next support at $4,030 shortly.
On 1-Hr. chart, after facing significant resistance at the 50 EMA ($4,143), gold futures are trying to hold the immediate support at the 100 EMA ($4,136), just above the 200 EMA ($4,127), where a breakdown could push the futures to remain in bearish territory this week, and could test the next support at $4,030 in today’s session.
Disclaimer: Readers are advised to take any position in gold futures at their own risk, as this analysis is based solely on observations.
