Morning Note: Gold Awaits Fed Clues; Japan Fiscal Strain; SNB Hints More Cuts

Gold Flat Ahead of Key Fed Signals

Gold slipped during today's Asian trading session as demand eased. Investors weighed the potential for improved trade relations between the US and the EU following Monday’s announcement that the EU had agreed to accelerate negotiations with Washington to avert a transatlantic trade war.

Despite the slightly improved outlook, market sentiment remains cautious. Traders are closely monitoring global risks such as the expanding US budget deficit, geopolitical tensions in the Middle East and Ukraine, and the broader implications of ongoing trade talks. Attention now turns to the release of the FOMC Minutes on Wednesday and the PCE inflation data on Friday, both of which could provide further clarity on the Federal Reserve’s interest rate trajectory.

(Gold Daily Price Chart, Source: Trading View)
From a technical analysis perspective, gold has been trading within a descending channel since April 22, 2025, as evidenced by a series of lower highs and lower lows. Recently, the price was rejected at the upper boundary of the channel and the resistance zone between $3,335 and $3,355, which could potentially drive it lower to retest the order block between $3,280 and $3,295. If this order block fails to hold, the price may drop further to retest the support zone between $3,205 and $3,225.

Kato Warns of Fiscal Strain from Rising Yields

On Tuesday, Japanese Finance Minister Katsunobu Kato said that the government will closely monitor the bond market ahead of this week’s auction of super-long debt. He warned that rising interest rates could increase the cost of servicing government debt, putting additional pressure on public finances.

Global selling of long-dated bonds in recent weeks has heightened concerns, with Japan facing added uncertainty due to reduced bond purchases by the central bank and political manoeuvring over economic stimulus measures. These factors have amplified market volatility ahead of the upcoming debt issuance.

(Japan 225 Index Daily Chart, Source: Trading View)
From a technical analysis perspective, the Japan 225 index has rebounded from the support zone between 31,700 and 32,200, moving in a bullish trend since early April 2025, as indicated by a series of higher highs and higher lows. Recently, it retested the swap zone of 36,200 - 36,500, found support, and moved higher. If the index can break above the order block between 38,400 and 38,700, it may potentially surge higher to retest the resistance zone of 40,200 to 40,500.

SNB Schlegel Signals More Easing Ahead

The Swiss franc hovered around 0.82 per US dollar, near its one-month highs, supported by a weakened dollar. The currency remained relatively strong even as safe-haven demand waned, following President Trump’s decision to step back from implementing hefty tariffs on EU imports.

Despite five consecutive rate cuts since March 2024, bringing the SNB’s key rate down from 1.75% to 0.25%, markets are pricing in another reduction to zero at the upcoming policy meeting on June 19. SNB Chairman Martin Schlegel has highlighted concerns over subdued inflation, a strong franc, geopolitical tensions, and market volatility. He reiterated the central bank’s readiness to intervene in currency markets and consider negative rates if needed to support price stability.

(USD/CHF Daily Chart, Source: Trading View)
From a technical analysis perspective, the USD/CHF currency pair has been in a bearish trend, as indicated by a series of lower highs and lower lows. It is currently retesting the order block between 0.8170 and 0.8200. If this support zone holds the pair from dropping lower, the pair may potentially surge upward to retest the resistance zone between 0.8290 and 0.8325. Conversely, if this support zone fails to hold, the pair could drop further to retest the next support area between 0.8055 and 0.8085.

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Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.