Gold rises to two-month high as global trade tensions rise

Global stocks declined today as the world continued to react to the ongoing trade war. Last week, in a surprise tweet, Donald Trump announced that the US will add tariffs on all goods from Mexico. This came two weeks after he restarted his trade war with the Chinese. Over the weekend, his administration declassified India as a developing country. This means that there will be tariffs on goods from India to the US. In response to the Huawei ban, China announced that it was starting an investigation into FedEx, one of the biggest shipping companies. Mexico, on the other hand, sent a huge delegation to meet with Trump’s team to address the issue of illegal immigration. As stocks declined, gold rose to a two-month high.

The Aussie rose today after the impressive PMI data from China. The data from Caixin showed that the manufacturing PMI rose to 50.2 in May. This was higher than the expected 50.0 and in line with the previous month’s 50.2. However, data from Australia disappointed. The PMI rose to 51.0 from the previous 50.9 but was less than the expected 51.1. Company gross operating profits in the first quarter declined to 1.7% from the previous 2.8%. This will be an important week for the Aussie as the RBA is expected to slash rates tomorrow.

The euro jumped after mixed economic data from Europe. In the UK, the manufacturing PMI contracted to 49.4 from the previous 53.1. In the EU, the manufacturing PMI remained unchanged at 47.7. The same was true in Germany, where the PMI remained at 44.3. In Italy, the PMI data of 49.7 was better than the expected 48.6. In France, the PMI data remained at 50.6. A PMI reading of below 50 sends a signal that the economy is contracting. Later today, investors will receive the PMI data from the US and listen to statements by the Fed’s Richard Barkin and James Bullard.

EUR/USD

The EUR/USD pair rose sharply today as the trade war escalated. The pair reached a high of 1.1190, which is the highest level since Wednesday last week. On the hourly chart below, the pair is above the 25-day and 50-day moving averages. It is also along the upper band of the Envelopes indicator. The moving average oscillator has remained on the lower side while the RSI has remained below the overbought level. While the pair could continue moving higher, there is a possibility that it will resume the downward trend ahead of the US jobs data.

XAU/USD

Gold continued rising as turmoil in the stock market continued. The XAU/USD pair rose to a two-month high of 1318.20. On the four-hour chart, the price is along the upper line of the Bollinger Bands. It is also above the 50-day and 25-day moving averages, while the RSI has moved to the extreme overbought level of 86. The same is true with the MACD and other oscillators like the CCI and Stochastic. The pair will likely continue rising, although it may see a few pullbacks.

AUD/USD

On Friday, the AUD/USD pair crossed the important resistance level of 0.6937. Today, the pair continued moving higher, reaching a high of 0.6962. On the hourly chart, this price is along the upper line of the Bollinger Bands while the RSI reached a high of 68. The signal line of the MACD indicator continued to rise. There is a likelihood that the pair will reach the important resistance level of 0.7000. This could change depending on the RBA statement tomorrow.