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Gold Prices Rise on Greek Debt Concerns but US Inflation Threatens Gold’s Bullish Run Posted: 20 Jun 2011 05:20 AM PDT Spot gold prices have been rising over the past week as a safe-haven play with the ongoing Greek debt crisis. Today's failure by the European finance ministers to come to an agreement for the release of the next batch of aid pushes the final decision out until July which may add to spot gold demand. However, traders should be eyeing the recent rise in US inflationary numbers which could support the US dollar and pressure spot gold prices in the medium-term. Spot gold prices moved higher as a delay in additional Greek bailout loans had traders moving into safe haven assets such as the US dollar and gold bullion. After the first day of negations in Luxembourg European finance ministers neither were unable to come away with any concrete progress towards the release of additional loans for Greece to stave off a default nor were any steps taken for an increased to the previous bailout. Discussions have ranged for a new EUR 120 bn bailout fund to shore up Greek finances in 2012. The prolonging of bailout talks and a lack of a political solution to the Greek debt crisis may serve to boost demand for gold in the near term on a safe haven bid. Looking more towards the medium term one risk to the bullish trend in spot gold prices is a rise in US inflationary pressures. This past week US inflation data slipped quietly under the radar due to the heightened tensions in in the euro zone. Data last week showed US CPI rose 3.6% y/y during the month of May. This stands in sharp contrast to the 2.7% increase in during the month of February. The Fed favorite core CPI also ticked up to 1.5% from 1.2% during the same three months which was above market expectations. The relatively heightened level of inflation may force the fed to readjust its outlook for the Fed Funds rate. Thus in turn would be a positive for the US dollar and a negative for spot gold prices. Read more forex trading news on our forex blog.

Weekly Technical FX Preview – Dollar Making Further Gains Posted: 20 Jun 2011 12:01 AM PDT EUR/USD Last week's failure of the pair to close below the 100-day moving average should not dismay euro shorts. The late in the week rally failed to move above the 20-day moving average which may induce some traders to sell into any euro gains. Both monthly and weekly stochastics have turned lower and point to potential declines. Support is found at 1.4075 followed by the May low at 1.3970. The 200-day moving average may be a likely target and below that the rising trend line from the May 2010 low comes in this week at 1.3610. Resistance is found at Friday's high of 1.4340 followed by 1.4500 and the early June high of 1.4690. GBP/USD Cable is on the verge of breaking the neckline of a head and shoulders top which comes in today at 1.6120. A breach at this level and a measured move from the chart pattern could take the GBP/USD lower to 1.5370. The likeliest target on the charts is the December low at 1.5350. On the way lower cable could encounter support at the May low of 1.6050 and the March low at 1.5940. To the upside the pair may see resistance at last week's high at 1.6440 as well as 1.6550 off of the May high. USD/JPY The pair failed to establish a beachhead above the 81 yen level and proceeded to fall. This level will serve as initial resistance followed by the May 31st high at 81.75 followed by 82.20 and 82.57. Falling daily stochastics hint at further declines. Support comes in at the May low of 79.50 followed by the all-time low at 76.11. USD/CHF The USD/CHF rose to the May support which has turned into a resistance level at 0.8550, a phenomenon which often occurs in technical analysis. A break higher would run into the 50-day moving average which coincides with the falling trend line off of the February high at 0.8640. This may offer traders a good level to enter short into the long term downtrend. Additional resistance is located at the mid-May low at 0.8750 and the May high of 0.8950. To the downside the all-time low could be supportive at 0.8325. Read more forex trading news on our forex blog.

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