Good morning traders. Hope the weekend gave you a proper reset, because last week did not let up and this one has its own collision course building.
Friday closed with gold sitting in the low 4,100s, a third straight weekly decline and its worst stretch in months. The Dollar pushed to a one year high after the Fed's hawkish dot plot last week, and that combination, stronger Dollar plus a market now pricing real odds of a 2026 hike, has been a genuine headwind for the metal. We called the hawkish Fed surprise the fulcrum two weeks ago. This is what the other side of that fulcrum looks like.
The Iran Situation Just Got More Fragile, Not Less
We flagged the Israel angle as the variable nobody wanted to talk about, and last week proved the point. Planned US Iran talks, mediated through Switzerland, did not go ahead as scheduled. The sixty day memorandum signed back on June 17 is technically still in force, the Strait of Hormuz remains open, but a stalled talks track this early in a sixty day clock is not a good sign for how smoothly the rest of that window goes.
This matters for more than headlines. Oil has been the transmission mechanism between this conflict and your charts all year. If shipping confidence through Hormuz stalls out alongside the diplomatic track, expect crude to find a bid again, and with it, fresh upward pressure on the same inflation numbers the Fed just got more hawkish about. The two biggest macro stories of the summer are not separate anymore. They are feeding each other.
Thursday June 25. Core PCE. The Number That Actually Matters To The Fed.
This is the one to have circled. Core PCE for May lands Thursday morning and it is the Fed's preferred inflation gauge, not CPI, not PPI. After last week's hawkish dot plot, this print is the market's first real chance to either validate or push back on the Fed's new posture.
Here is the setup. The Fed's own June projections put median 2026 core PCE at 3.3%, sharply higher than where they had it back in March. If Thursday's actual print comes in anywhere near or above that pace, it hardens the hike narrative further and gold's bad month likely gets worse before it gets better. If it surprises to the downside, you could see a sharp unwind of last week's Dollar strength and a real relief bounce in gold and in risk assets generally.
Either way, Thursday is the first genuine test of whether the bond market's aggressive repricing over the past two weeks was justified or overdone. Worth having on the screen all week, not just Thursday morning.
EUR/USD and the Levels That Matter
Euro is sitting on the lower end of its recent structure after last week's Fed driven Dollar strength, hovering closer to the 1.1500 area than the 1.1685 highs of the range. That 1.1492 to 1.1525 zone has defended itself more than once this month and is the line in the sand heading into PCE.
Lose that zone on a daily close with conviction and you are looking at a deeper move, potentially testing levels not seen since earlier in the year. Hold it again into Thursday and a soft PCE print could trigger a fast reversal back toward the 1.1685 resistance. I am not pre committing direction here. This is a week to let the data set the tone rather than anticipate it.
The Bottom Line For This Week
You have a stalled Iran diplomatic track that keeps the geopolitical risk premium alive in oil. You have a Fed that just turned hawkish and a bond market that has been pricing that aggressively for two weeks straight. And you have the one data release, Core PCE Thursday, that will tell you whether that repricing was correct or overdone.
This is not a week to fight the tape on conviction alone. Defined levels, clear invalidation, and patience through Wednesday before sizing anything meaningfully into Thursday's number.
Here at Cayman we will be tracking the Iran diplomatic thread and the PCE setup daily on the Telegram heading into Thursday.
Levels, bias, and session notes all week on the Telegram. See you in the channel.