Gold, USD/JPY Forecast: Two trades to watch

Gold Declines 12% in June. Is There More Weakness to Come?

Gold has recovered back above 4,000 but remains on track to post a 12% decline in June, marking its largest monthly fall since October 2008, as markets shift their focus away from geopolitical risk and back towards higher U.S. interest rates.

The precious metal is also on course for its first quarterly decline since 2024 and its largest three-month fall since the second quarter of 2013.

The decline comes as investors increasingly expect the Federal Reserve to raise interest rates this year.

Following the hawkish FOMC meeting this month and sticky Core PCE inflation at 3.4%, a three-year high, markets are pricing more than a 60% probability of a 25-basis-point rate hike in September and continue to see scope for up to three rate hikes this year.

Those expectations have also lifted the U.S. dollar to a 13-month high. At the same time, higher real yields have increased the opportunity cost of holding non-yielding assets such as gold.

This combination of a hawkish Fed, higher real yields and a stronger U.S. dollar continues to weigh on the precious metal.

Attention now turns to Federal Reserve Chair Kevin Walsh's speech at the ECB Sintra Forum on Wednesday and Thursday's U.S. non-farm payroll report, both of which could provide further clues on the outlook for interest rates and, in turn, gold.

For the outlook to improve, bulls would need to see lower real yields, a softer U.S. dollar or an unwinding of hawkish Fed expectations—none of which appear imminent based on current fundamentals.

Gold Forecast – Technical Analysis

Gold has broken below its symmetrical triangle pattern and the 200-day SMA, falling to a low of 3,942, its weakest level since November.

The 50-day SMA has also crossed below the 200-day SMA, forming a bearish death cross. Combined with the RSI below 50, the technical picture continues to favour further downside.

Sellers will look to extend losses towards 3,930, the November low, followed by 3,800. A break below there could expose the psychological 3,500 level.

Any recovery would first need to reclaim 4,100, which marks this week's high and the March low. Above there, attention turns to falling trendline resistance around 4,300, followed by horizontal resistance at 4,350. A move above that level would expose the 200-day SMA around 4,500.

USD/JPY on Intervention Watch

USD/JPY has risen to a 40-year high above 162, raising concerns that Japanese authorities could intervene to support the yen.

The yen has fallen to levels not seen since 1986, fuelling speculation that Tokyo could step into the market in the coming days, even as the U.S. dollar has eased back from its 13-month high.

The yen fell 2% in the second quarter, marking its fourth straight quarterly decline and its longest losing streak in four years as the wide U.S.-Japan interest rate differential continues to weigh on the Japanese currency.

Japanese Finance Minister Satsuki Katayama reiterated that authorities stand ready to respond appropriately at any time. Previous interventions have tended to occur during periods of thinner market liquidity, and with this being a holiday-shortened week, market conditions could favour such a move.

The question increasingly appears to be when, rather than if, the Ministry of Finance intervenes again. However, unless intervention is accompanied by a narrowing in the U.S.-Japan interest rate differential, history suggests any support for the yen is likely to prove temporary.

Japan intervened in late February and again in early May, briefly supporting the yen before USD/JPY resumed its climb as markets repriced the outlook for U.S. interest rates. The market has repeatedly faded intervention because the underlying macro drivers remain unchanged. As long as U.S. yields continue to outpace Japanese yields, the carry trade is likely to continue supporting USD/JPY.

Following the hawkish Fed meeting this month and sticky Core PCE inflation at 3.4%, a three-year high, markets are pricing around a 60% probability of a 25-basis-point rate hike in September and continue to see scope for up to three hikes this year.

Attention this week will be on Federal Reserve Chair Kevin Walsh's speech at the ECB Sintra Forum on Wednesday and Thursday's U.S. non-farm payroll report, both of which could provide further clues on the outlook for U.S. interest rates.

Ahead of that, U.S. consumer confidence and JOLTS job openings data will also be closely watched.

USD/JPY Forecast – Technical Analysis

USD/JPY has broken above the upper boundary of its rising wedge pattern, pushing to a fresh 40-year high of 162.40 and invalidating the previous reversal setup.

The RSI is in overbought territory across multiple timeframes, suggesting the pair could consolidate before attempting another move higher.

Buyers will look to extend gains towards 165, with 170 the next longer-term upside target.

Immediate support is seen at 160.20, followed by the key 160.00 support zone. A break below here exposes the 50-day SMA around 159.50, ahead of 157.90, where the rising trendline converges with horizontal support.