Financial Market Volatility: Dollar Dips, Gold Retreats, Bitcoin Faces Selling Pressure, Israel Escalates Gaza Conflict

Financial Market Volatility: Dollar Dips, Gold Retreats, Bitcoin Faces Selling Pressure, Israel Escalates Gaza ConflictJuly 11th saw a volatile landscape in the financial markets. The US Dollar Index tumbled to 104

Financial Market Volatility: Dollar Dips, Gold Retreats, Bitcoin Faces Selling Pressure, Israel Escalates Gaza Conflict

July 11th saw a volatile landscape in the financial markets. The US Dollar Index tumbled to 104.98, while gold prices retreated to $2,372. Bitcoin faced selling pressure from former crypto exchange behemoth Mt.Gox and the German government, slumping to the $57,000 level. Meanwhile, Israel intensified its attacks on Gaza, ordering all civilians to evacuate the region.

US Dollar Index Declines

On Thursday, the US Dollar Index hit a new recent low at 104.98. FXStreet analyst Patricio Martn pointed out that technically, the US Dollar Index seems to be in a negative territory, with the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) both showing negative readings. Despite the slight rebound on Wednesday, the US Dollar Index managed to stay above the 100-day Simple Moving Average (SMA), mitigating the impact of the decline.

The Dollar's decline was primarily fueled by dovish signals from the Federal Reserve. On Thursday, Fed Governor Lisa Cook stated that although a soft landing after high inflation is rare, she expects a soft landing for the US as inflation cools, with minimal damage to the labor market.

Cook's remarks further reinforced the market's expectations of interest rate cuts from the Fed in September. The CME's FedWatch tool showed less than 10% probability of a rate cut in July, while the probability of a September cut hovered around 80%.

Gold Prices Retreat

Despite the US Dollar Index's decline, which typically supports the price of gold, gold prices fell back to $2,372 on Thursday after hitting $2,386 overnight. FXEmpire analyst Bruce Powers stated that gold continues to consolidate, showing signs of slight strength, having broken above Tuesday's high of $2,371. However, gold remains within a relatively narrow trading range between the resistance level of $2,393 and the support level of $2,349.

The price of gold is primarily influenced by US inflation expectations and geopolitical risks. The US Consumer Price Index (CPI) data, released on Thursday, will be a key focus for the market. Predictions suggest a year-over-year decline of 2% to 3.1% in overall inflation, while core inflation is expected to remain stable at 3.4%.

Bitcoin Faces Selling Pressure

Bitcoin prices fell to the $57,000 level on Thursday, driven primarily by selling pressure from the former largest cryptocurrency exchange, Mt. Gox, and the German government. According to data from Arkham Intelligence, the German government wallet appears to be preparing to sell another 6,000 Bitcoin. Additionally, the market will closely watch the extent of selling by creditors of the defunct crypto exchange, Mt. Gox, upon receiving their repayments.

Uncertainty surrounding the new supply of Bitcoin has dampened market sentiment, and according to Glassnode data, the Crypto Fear and Greed Index has fallen to 27, marking its lowest level since January 23rd.

However, CoinTelegraph notes that Bitcoin bears are attempting to resume the downtrend, but buyers are stepping in at lower levels. According to Farside Investor, inflows into US Bitcoin spot ETFs have exceeded $650 million since July 5th, suggesting strong demand at lower levels.

Israel Escalates Gaza Conflict

The Israeli army attacked the headquarters of the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) in Gaza City and ordered all Palestinian civilians to leave the city. The previous day, Israel also attacked a school sheltering displaced civilians in Khan Yunis, killing at least 27 people and injuring 53.

Mahmoud Basal, a civil defense spokesman, stated that the infrastructure and residential buildings in the Shuja'iyya area of Gaza City were subjected to "massive destruction" after the withdrawal of the Israeli army from the area.

The Israeli army shot and killed a 14-year-old Palestinian boy in the village of Deir Abu Mishaal in the occupied West Bank. The boy lay bleeding for 15 to 20 minutes before dying.

The UN Office for the Coordination of Humanitarian Affairs (OCHA) stated that over 550 Palestinians have been killed in the occupied West Bank since October 7, 2023.

Hezbollah leader Hassan Nasrallah stated that Hezbollah will abide by Hamas' decision on negotiations for a ceasefire in Gaza, and will halt cross-border attacks on Israel if a ceasefire agreement is reached.

Market Outlook

The market will continue to monitor the Federal Reserve's policy trajectory and inflation data in the coming days. The US Consumer Price Index (CPI) data, released on Thursday, will be a key focus for the market. If the CPI data is robust, it could curb expectations of a rate cut from the Fed, bolstering the US Dollar Index and putting pressure on gold and Bitcoin prices.

Furthermore, the conflict between Israel and Palestine will continue to influence market sentiment in the coming days. If the conflict escalates, it could trigger risk aversion, boosting gold prices and negatively impacting stock markets and Bitcoin prices.

Conclusion

The financial markets are currently experiencing volatility, with the US Dollar Index declining, gold prices retreating, and Bitcoin facing selling pressure. Israel has escalated its attacks on Gaza, ordering all civilians to evacuate the region, leading to heightened geopolitical risks. In the coming days, the market will continue to monitor the Federal Reserve's policy trajectory, inflation data, and the conflict between Israel and Palestine.

Technical Analysis

US Dollar Index

• Technically, the Dollar Index seems to be in negative territory, with the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) both showing negative readings.

• Despite the slight rebound on Wednesday, the US Dollar Index managed to stay above the 100-day Simple Moving Average (SMA), mitigating the impact of the decline.

• Subsequent support levels at 104.50 and 104.30 continue to act as solid barriers against further decline.

• On the other hand, for bullish momentum to resume, buyers must reclaim the 105.50 level to retest the 106.00 threshold.

Gold

• Gold continues to consolidate, showing signs of slight strength, having broken above Tuesday's high of $2,371.

• However, gold remains within a relatively narrow trading range between the resistance level of $2,393 and the support level of $2,349.

• Unless a decisive break of this range occurs, trading will likely remain volatile.

• However, bullish sentiment remains dominant as the consolidation pattern is forming above the 50-day moving average and other levels that were previously resistance.

• This reflects the underlying strength of the demand for gold which is increasing.

• As the Wednesday trading session draws to a close, it appears that gold may close the week on an intraweek basis. If so, a bullish breakout within the next week is likely.

• Of course, the volatility following the release of the US CPI could trigger a breakout of the current price range. If bullish signs persist afterward, gold has the opportunity to continue its upward journey.

Bitcoin

• Bitcoin bears are attempting to resume the downtrend, but buyers are stepping in at lower levels.

• According to Farside Investor, inflows into US Bitcoin spot ETFs have exceeded $650 million since July 5th, suggesting strong demand at lower levels.

• However, selling pressure is unlikely to end anytime soon. According to Arkham Intelligence, the German government wallet appears to be preparing to sell another 6,000 Bitcoin.

• Additionally, the market will closely watch the extent of selling by creditors of the defunct crypto exchange, Mt. Gox, upon receiving their repayments.

• Uncertainty surrounding the new supply of Bitcoin has dampened market sentiment, and according to Glassnode data, the Crypto Fear and Greed Index has fallen to 27, marking its lowest level since January 23rd.

• The bounce in Bitcoin indicates that bulls are resolutely defending the support zone at $56,552 to $53,485, as buyers pushed the price up to the 20-day exponential moving average at $60,217 on Wednesday.

• If the price falls significantly from the 20-day EMA, it will indicate that market sentiment remains negative, and traders are selling on rallies. Bears will then attempt to push Bitcoin below the support zone.

• If they succeed, the pair could fall towards the psychological support level of $50,000.

• The first strong signal comes from breaking and closing above the 20-day EMA, which would pave the way for a possible rise to the 50-day simple moving average at $64,970.

• This move would suggest that the range-bound trading between $53,485 and $73,777 could continue for some time.

Summary:

• The US Dollar Index decline is supporting gold prices.

• Gold prices are showing signs of slight strength, but remain in a consolidation phase.

• Bitcoin is facing selling pressure, but buyers are defending