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Daily Analytics: XAU/USD drops to one-month lows ahead of US data

Gold Price Forecast: XAU/USD drops to one-month lows ahead of US data

XAU/USD : Four-hour chart

Gold continued losing ground through the mid-European session and dropped to one-month lows, around the $1,773-72 region in the last hour. The US dollar was back in demand amid expectations for an imminent Fed taper announcement and a modest pickup in the US Treasury bond yields. This, in turn, was seen as a key factor that weighed on the XAU/USD for the second successive day.

Meanwhile, the latest leg of a sudden fall over the past hour or so could be attributed to some technical selling below the $1,780 horizontal support, or monthly lows touched on Tuesday. Given the recent pullback from the $1,832-34 supply zone, the overnight rejection near a technically significant 200-day SMA and the subsequent decline supports prospects for additional losses.

Next on tap will be the US economic docket, highlighting the release of Retail Sales, Philly Fed Manufacturing Index and the usual Weekly Initial Jobless Claims. This, along with the US bond yields, might influence the USD price dynamics and provide some impetus to gold. 

Previous update: Gold extended the previous day’s rejection slide from the very important 200-day SMA and witnessed some follow-through selling for the second successive session on Thursday. The downward trajectory dragged the XAU/USD back closer to monthly swing lows, around the $1,780 region, touched earlier this week. Despite signs of easing inflationary pressures in the US, investors still believe that the Fed would begin rolling back its massive pandemic-era stimulus later this year. This, in turn, was seen as a key factor driving flows away from the non-yielding yellow metal.

Meanwhile, worries about the fast-spreading Delta variant and a global economic slowdown did little to lend any support to the safe-haven XAU/USD. Bulls even shrugged off a subdued US dollar price action, which tends to benefit dollar-denominated commodities, including gold. With the latest leg down, the precious metal has now erased its weekly gains and seems vulnerable to slide further. A convincing break below the $1,780 horizontal support will reaffirm the negative outlook and set the stage for the resumption of the recent decline from the $1,832-34 supply zone.

Previous update: Gold (XAU/USD) takes offers around $1,792.50, extending the previous day’s losses heading into Thursday’s European session.

The yellow metal failed to benefit from the US dollar weakness on Wednesday as market sentiment dwindles over the Fed’s next moves even as the US Consumer Price Index (CPI) favored equities and weighed on the US Treasury yields.

The reason could be linked to the cautious optimism shown by the European Central Bank (ECB) policymakers and strong NY Empire State Manufacturing, as well as Import-Export Price Index data for September and August respectively.

Among the ECB policymakers, Executive Board Member Isabel Schnabel was more hawkish while saying, “Market may be overestimating risks to the global growth outlook.” On the same line was ECB Chief Economist Philip Lane who said that he is happy that the accommodative monetary policy is helping to build core inflation in the euro area, as reported by Reuters.

It’s worth noting that Australia’s trilateral security pact with the UK and the US, availing nuclear-powered submarines, signals a further worsening of relations with China and weighed on market sentiment earlier in the day. Further, higher virus infections in Australia, China and New Zealand also challenge the risk appetite, as well as gold prices.

It should be noted that the US adds the UK to its welcome list for the next week’s diplomatic talks in the White House and amplifies market fears that the Western friends are again gearing up for a battle with China, which in turn heavy the sentiment.

Amid these plays, S&P 500 Futures erase early Asian gains while the US 10-year Treasury yields drop one basis point (bp) to retest 1.297% by the press time.

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Daily Analytics: USD/JPY drops below 110.00 on weakness

USD/JPY drops below 110.00 on renewed USD weakness

USD struggles to find demand after inflation report

After spending the first half of the day moving sideways above 110.00, the USD/JPY pair lost its traction in the early American session and was last seen losing 0.1% on the day at 109.88.

The renewed selling pressure surrounding the greenback seems to be the primary driver of USD/JPY weakness. After the data published by the US Bureau of Labor Statistics revealed that the annual Core Consumer Price Index (CPI) declined to 4% in August from 4.3% in July, the US Dollar Index (DXY) turned south. As of writing, the DXY was down 0.3% at 92.33.

Furthermore, the benchmark 10-year US Treasury bond yield, which gained as much as 1% earlier in the day, is now losing 0.7%, putting additional weight on USD/JPY’s shoulders.
In the meantime, US stock index futures started to push higher following the US inflation data, suggesting that Wall Street’s main indexes are likely to open in the positive territory. In case risk flows start to dominate the financial markets, the USD could find it difficult to stage a rebound and cause USD/JPY to end the day in the negative territory.
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Market Analytics

Daily Analytics: EUR/USD bulls holding the fort at the 61.8%

EUR/USD bulls holding the fort at the 61.8% ratio

EUR/USD holds in positive territory into the closing bell on Wall Street.

EUR/USD is struggling to extend gains made in Thursday’s North American session, capped at a high of 1.1841 and trading mid-range near 1.1830. 

The euro is holding onto small daily gains following the European Central Bank meeting whereby it said it will trim emergency bond purchases over the coming quarter.

This is seen as the central banks first small step towards unwinding the emergency aid as the nation’s inflation readings head towards their highest in nearly a decade.

“The ECB is delivering mainly as expected today,” analysts at TD Securities said in a report on Thursday. “Looking ahead, the focus will be on how the ECB defines “moderately” – anything less than €60bn/mo could be bearish.”

Meanwhile, the ECB’s governor, Christine Lagarde, came with an upbeat assessment of the nation’s economic progress.

She explained that there has been a strong recovery in employment, business investment and said that there is ample scope for private consumption to rise further.

The central bank has raised its growth and inflation forecasts for this year although the 2023 forecasts provide a better assessment of where the ECB expects the economy to be over its forecast horizon.

”That is what is critical for monetary policy,” analysts at ANZ Bank argued.

The ECB left, however, its 2023 Gross Domestic Product projection unchanged at 2.1% and inflation was tweaked to 1.5% vs 1.4%, well below the 2.0% target.

”That predicted path implies the ECB will withdraw stimulus very cautiously and that interest rate rises remain a long way off. The focus in coming months will be on how to address the anticipated ending of PEPP next March (a temporary, pandemic facility). To end it abruptly risks a sudden tightening in monetary conditions that could undermine growth and inflation expectations,” the analysts explained.

”We, therefore, expect some expansion of the APP programme (currently EUR20bn per month) and/or a new envelope of QE purchases. The ECB will announce more in December.”

Meanwhile, investors are also focused on when the US Federal Reserve is likely to begin paring bond purchases.

The US dollar has managed to find demand on the notion that the global economy is no better off than the US’s recovery and despite last week’s dismal jobs print, the nation remains on solid foundations. 

The Fed. however, is unlikely to make a move until at least later after the weaker than expected jobs report on Friday.

That being said, we had four Fed officials on Wednesday saying that the central bank needs to make a move, though some cautioned a final decision requires more data.

As for Us data on Thursday, it has shown that the number of Americans filing new claims for jobless benefits continues to fall.

Last week, the claims fell to the lowest level in nearly 18 months, offering more evidence that job growth was being hindered by labour shortages rather than cooling demand for workers.

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Daily Analytics: Gold could extend correction with a daily close below $1,820

XAU/USD could extend correction with a daily close below $1,820

XAU/USD : Daily chart

Gold spent the majority of the previous week moving sideways in a tight range above $1,800 but managed to gain traction following the disappointing August jobs report from the US on Friday. After posting its highest weekly close since late July at $1,827, however, the XAU/USD pair reversed its direction on Monday and was last seen losing 0.3% on a daily basis at $1,822.

In the absence of significant fundamental drivers, gold’s action seems to be a technical correction of last Friday’s upsurge. Additionally, trading conditions remain thin due to the Labor Day holiday in the US, confirming the view that gold is staying in a consolidation phase rather than moving into a downtrend.

On Tuesday, there won’t be any high-tier macroeconomic data releases from the US and the risk perception could impact the greenback’s valuation and XAU/USD’s movements.

The data published by the US Bureau of Labor Statistics revealed on Friday that Nonfarm Payrolls (NFP) rose by 235,000 in August. This print missed the market expectation of 750,000 by a wide margin and the S&P 500 Index closed the day flat. In case Wall Street’s main indexes turn south following the long weekend, the greenback could find demand as a safe haven and force XAU/USD to remain on the back foot.

On the other hand, the dismal NFP reading is also seen as a factor that could allow the Federal Reserve to delay asset tapering. A dovish policy outlook is likely to limit the USD’s gains in the near term.

 

Gold technical outlook

On the downside, the initial support is located at $1,820 (Fibonacci 38.2% retracement of April-June uptrend). With a daily close below that level, gold could extend its slide toward $1,810 (200-day SMA). In case this level turns into resistance, the next target is located at $1,800 (psychological level).

Resistances could be seen at $1,830 (static level), $1,845 (static level) and $1,855 (Fibonacci 23.6% retracement).

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Market Analytics

Daily Analytics: EUR/GBP flirts with session lows

EUR/GBP flirts with session lows, continues to cap the upside

EUR/GBP edged lower for the second consecutive session on Friday.

The EUR/GBP cross quickly retreated around 15 pips from the early European session highs and refreshed daily lows, around the 0.8575 region in the last hour.

The cross struggled to capitalize on its modest intraday gains, instead met some fresh supply near the 0.8590 region and is now looking to extend the overnight rejection slide from the 0.8600 mark. The shared currency edged lower in reaction to disappointing Eurozone Retail Sales figures, which unexpectedly declined by 3.1% in July.

On the other hand, the British pound was supported by the prevalent bearish sentiment surrounding the US dollar. This, in turn, was seen as a key factor that dragged the EUR/GBP lower for the second consecutive session on Friday. That said, a combination of factors should lend some support and help limit any deeper losses, at least for now.

The recent spike in new COVID-19 cases in the UK and a slight downward revision of the UK Services PMI might hold traders from placing any aggressive bullish bets around the sterling. Moreover, the recent hawkish comments from a host of European Central Bank policymakers might continue to act as a tailwind for the common currency.

The fundamental backdrop seems tilted firmly in favour of bullish traders and supports prospects for the emergence of some dip-buying at lower levels. Hence, it will be prudent to wait for some strong follow-through buying before confirming that the EUR/GBP cross has topped out and positioning for any meaningful depreciating move.

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Daily Analytics: GBP/USD climbs to fresh two-week tops

GBP/USD climbs to fresh two-week tops

The recent rise in COVID-19 cases in the UK might act as a headwind for the British pound.

The GBP/USD pair shot to two-week tops during the early European session, with bulls now looking to build on the momentum further beyond the 1.3800 round-figure mark.

Following the previous day’s brief pause, the GBP/USD pair caught some fresh bids on Tuesday and prolonged its recent strong rebound from the 1.3600 neighbourhood or one-month lows. The uptick was exclusively sponsored by the prevalent selling bias surrounding the US dollar, which continues to be pressured by Fed Chair Jerome Powell’s comments on Friday.

During the highly anticipated speech at the Jackson Hole Symposium, Powell reassured the market that the Fed is in no hurry to raise interest rates. Powell confirmed that the central bank plans to begin rolling back its pandemic-era stimulus later this year but offered no signal on the specific timeline. His remarks were interpreted as dovish by the market.

This was evident from the ongoing decline in the US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond dropped to 1.27% during the first half of the trading action on Tuesday. Apart from this, a generally positive tone around the equity markets further undermined the safe-haven USD and provided a goodish lift to the GBP/USD pair.

It, however, remains to be seen if bulls are able to capitalize on the move amid the recent surge in new COVID-19 cases in the UK. According to the official figures released on Monday, another 26,476 people in Britain tested positive for COVID-19. This might act as a headwind for the British pound and cap any further gains for the GBP/USD pair, at least for now.

Even from a technical perspective, the pair was last seen hovering near a confluence hurdle comprising of the very important 200-day SMA and the 50% Fibonacci level of the recent leg down. This further makes it prudent to wait for some follow-through buying before placing fresh bullish bets around the GBP/USD pair and positioning for any further appreciating move.

There isn’t any major market-moving economic data due for release from the UK on Tuesday, leaving the GBP/USD pair at the mercy of the USD price dynamics. Later during the early North American session, traders might take cues from the US economic docket, featuring the releases of Chicago PMI and the Conference Board’s Consumer Confidence index.

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Market Analytics

Daily Analytics: Gold Price bulls eye $1,818

Gold Price Analysis: XAU/USD bulls eye $1,818

XAU/USD : Daily chart

This is what it sounds like when doves do not cry – Paraharasing Prince’s 1984 hit, Federal Reserve Chair Jerome Powell has shown his dovish feathers, sending gold above $1,800. Contrary to a long list of his hawkish colleagues, Powell, the man at the top, refrained from committing to tapering the bank’s $120 billion/month bond-buying scheme soon. While he acknowledged improvement in the labor market, his stance on inflation was mixed and he expressed worries about covid.

If the Fed continues printing dollars at a rapid clip, stock markets and the precious metal have reasons to be cheerful. After the initial gold rush, how is XAU/USD positioned on the charts? 

The Technical Confluences Detector is showing that gold is battling near-term resistance at around $1,800, which is a cluster including the Fibonacci 38.2% one-month, the Bollinger Band 4h-Upper, the Pivot Point one-week Resistance 2, and more.

Bulls are eyeing higher levels, and $1,818 stands out. That is the convergence of the Fibonacci 23.6% one-month, the PP one-day R3 and the PP one-week R3.

Immediate support awaits at $1,805, which is where the BB 1h-Upper and BB 15min-Upper hit the price. 

The next significant cushion is at $1,796, which is the confluence of the previous weekly high, the BB 4h-Middle and the Simple Moving Average 5-1h. 

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Market Analytics

Daily Analytics: USD/JPY Price Analysis Challenges 50-DMA

USD/JPY Price Analysis: Challenges 50-DMA

USD/JPY: Daily chart

USD/JPY is challenging four-day highs above 110.00, having taking out the post-FOMC top at 110.07, as the bulls continue to take advantage of the unabated US dollar demand across the board.

The Fed minutes revealed that the officials discussed tapering plans for the latter part of this year when they met in July for the monetary policy review. The greenback bulls were just awaiting this confirmation for advancing further, which drove USD/JPY higher alongside.

 

However, the bulls could face some stiff resistance on its three-day uptrend, as the Treasury yields are bearing the brunt of the risk-off trading in the global markets, thanks to the covid woes and tapering fears.

Technically, USD/JPY needs to crack the 50-Daily Moving Average (DMA) at 110.19 on a sustained basis to unleashing the recovery towards the August 13 highs of 110.46.

Further up, the buyers will target the August 11 highs of 110.80.

The daily Relative Strength Index (RSI) has pierced through the midline, reclaiming the bullish territory, which suggests that the tide has turned in favor of the optimists.

On the flip side, horizontal 21-DMA offers immediate support at 109.89, below which the daily low at 109.77 will get tested.

The last resort for USD/JPY buyers is envisioned at the 100-DMA cap at 109.66.

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Daily Analytics: XAU/USD loses traction before testing $1,800

Gold Price Forecast : XAU/USD loses traction before testing $1,800

XAU/USD: Daily chart

The XAU/USD pair closed the fourth straight day in the negative territory and preserved its bullish momentum during the first half of the day on Tuesday. After reaching its highest level in 10 days at $1,795, however, gold lost its traction and was last seen posting small daily gains at $1,790.

The risk-averse market environment at the start of the week helped XAU/USD gather bullish momentum. Nevertheless, the greenback also capitalized on safe-haven flows and didn’t allow the pair to push higher in the early American session.

Reflecting the dismal market mood, the S&P Futures and the Nasdaq Futures indexes are down 0.43% and 0.52%, respectively. Meanwhile, the US Dollar Index is rising 0.31% on the day at 92.90. In case Wall Street’s main indexes suffer heavy losses after the opening bell, the USD could continue to outperform its rivals and force XAU/USD to extend its downward correction.

The data published by the US Census Bureau showed on Tuesday that Retail Sales declined by 1.1% on a monthly basis in July to $617.7 billion. This reading came in worse than the market expectation for a decrease of 0.2% and revived concerns over the coronavirus Delta variant crippling the economic recovery.

Gold technical outlook

Key resistance for gold seems to have formed at $1,800 (psychological level, 50-day SMA). In case buyers manage to carry the price beyond that level and confirm it as support, the next target on the upside could be seen at $1,807 (100-day SMA) and $1,815 (200-day SMA). 

In the meantime, the Relative Strength Index (RSI) indicator on the daily chart is moving sideways near 50, suggesting that the pair could have a difficult time clearing $1,800 unless it’s supported by a fundamental driver. 

On the flip side, the 20-day SMA at $1,790 is the first technical support. With a daily close below that level, gold could edge lower toward 1,760 (static level) and $1,750 (static level, June 29 low).

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Daily Analytics: EUR/USD Price Analysis Charting a bear

EUR/USD Price Analysis: Charting a bear pennant on the daily sticks

EUR/USD : Daily chart

EUR/USD is back in the green zone, reversing Thursday’s bearish momentum, as the US dollar remains on the back foot amid risk aversion-led weakness in the Treasury yields.

Despite the latest bounce, the spot remains below the key 1.1750 barrier, now trading at 1.1736, up 0.08% on the day.

From a near-term technical perspective, EUR/USD’s daily chart has taken the shape of a bear pennant formation, in the wake of the recent sell-off that followed a brief consolidative phase.

A daily closing below the rising trendline support at 1.1712 is needed to validate the bearish formation, which will confirm deeper losses in the coming days.

The 14-day Relative Strength Index (RSI) trades flat but remains below the midline, keeps floors open for further downside.  

Confirmation of the bearish continuation pattern could expose the September lows at 1.1612.

Alternatively, Wednesday’s high of 1.1754 offers immediate resistance to the euro buyers.

Acceptance above the latter would invalidate the potential bear pennant, calling for a test of the August 9 high of 1.1769.

Further up,  a test of the bearish 21-Daily Moving Average (DMA) at 1.1798 cannot be ruled out.

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