GOLD Price Analysis – Sep 04, 2024
Daily Price Outlook
Despite negative risk sentiment following weak US manufacturing data, Gold (XAU/USD) failed to halt its losing streak and remained under pressure around the 2,487 level, hitting an intra-day low of 2,472.
This decline can be attributed to the heavy long positions held by Commodity Trading Advisors (CTA) and institutional investors. With many large players already holding substantial amounts of gold, there is limited room for further price increases.
On the geopolitical front, there are no new major events driving up gold demand. Although Russia’s recent missile and drone attack on Ukraine, which resulted in 50 fatalities, is significant, such attacks have been frequent, and this ongoing situation hasn't provided a new impetus for gold.
Gold Prices Remain Unchanged Despite Rising Rate Cut Expectations
On the US front, gold isn’t benefiting from the growing expectation that the Federal Reserve might cut interest rates by 0.50% at its meeting on September 18. Before a recent weak report on US manufacturing, there was a 31% chance predicted for this big cut. Now, the probability has jumped to 41%. Normally, such a shift would be good for gold since lower interest rates make holding gold less costly. However, gold’s price hasn’t increased as expected.
On the data front, upcoming US employment reports could influence interest rate expectations. This week’s key releases include US JOLTS Job Openings on Wednesday, which are predicted to drop slightly to 8.1 million. A bigger drop could suggest a weakening job market and increase the likelihood of a larger rate cut.
Thursday’s ADP Employment Change and Jobless Claims will also be watched closely, with the most significant report being Friday’s US Nonfarm Payrolls (NFP). If NFP numbers are lower than expected, it could support the case for a larger rate cut and potentially impact gold prices.
Despite higher expectations for a significant Fed rate cut, gold prices haven’t risen. If employment reports indicate a weaker job market and support a larger rate cut, gold might eventually benefit, but currently, it’s not reacting as expected.
Geopolitical Tensions Fail to Boost Gold Demand
On the geopolitical front, there aren’t any new major events driving up gold demand. Although Russia recently carried out a large missile and drone attack on Ukraine, killing 50 people, this attack follows a pattern of similar incidents and hasn’t had a big impact on gold.
In Gaza, the situation remains tense. Israelis are protesting for a ceasefire to secure the safe release of hostages, and the US has charged Hamas leaders with crimes related to the October 7 attacks. Despite these ongoing issues, there hasn’t been a significant shift in gold demand.
Therefore, the ongoing geopolitical tensions, including Russia’s attacks and the situation in Gaza, haven’t led to a noticeable increase in gold demand. Despite these conflicts, gold prices have remained stable, suggesting that these events aren't significantly influencing its value.
GOLD (XAU/USD) - Technical Analysis
Gold is currently trading around $2,503, facing a critical juncture on the 2-hour chart. After breaking down from an ascending triangle pattern, the price has been hovering near the $2,503 level, struggling to reclaim its previous bullish momentum. This breakdown is significant as the ascending triangle was providing support around the $2,507 level, and the recent price action suggests that the bears are gaining control.
On the technical front, the pivot point is situated at $2,507, which is now acting as a critical resistance. Immediate resistance stands at $2,508, followed by stronger resistance levels at $2,514 and $2,517. On the downside, the immediate support is at $2,491, with subsequent support levels at $2,480 and $2,471. The 50 EMA, currently positioned at $2,508, is acting as a ceiling for the price, preventing any meaningful recovery.
The Relative Strength Index (RSI) is currently at 44.41, indicating neutral momentum but with a slight tilt towards oversold conditions. This could imply a potential reversal or consolidation phase if the selling pressure continues to mount. However, the key to watch is whether the price can break back above the 50 EMA at $2,508, which could signal a shift in momentum.
In conclusion, Gold's recent breakdown from the ascending triangle pattern around the $2,507 mark has opened the door for further downside potential. If the price remains below $2,507, the bearish momentum could accelerate, targeting the next support at $2,491 and potentially down to $2,480 or even $2,471.
Conversely, a recovery above $2,508 could challenge resistance levels at $2,514 and $2,517. For traders, an entry point could be considered at a sell position below $2,507, with a take profit target set at $2,492 and a stop loss at $2,517 to manage risk effectively.
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GBP/USD Price Analysis – Sep 04, 2024
Daily Price Outlook
During the European trading session, the GBP/USD pair remained subdued around the 1.3112 level as market sentiment weakened amidst rising uncertainty ahead of the release of the US Nonfarm Payrolls (NFP) data for August, due on Friday. Despite growing speculation that the Bank of England (BoE) will implement a shallower policy-easing cycle for the remainder of the year compared to other central banks, the British currency struggles to gain strength.
British Pound Weakens Despite Improving UK Economy and BoE Rate Cut Expectations
On the BoE front, the British Pound is struggling against major currencies. Despite speculation that the Bank of England (BoE) will ease its monetary policy only slightly for the rest of the year, the Pound remains weak.
Market expectations indicate the BoE might cut interest rates by 40 basis points (bps) this year. In comparison, the European Central Bank (ECB) is expected to cut rates by 65 bps, and the Federal Reserve (Fed) is projected to lower its rates by 100 bps.
Consequently, the UK economy is showing signs of improvement, with better-than-expected performance in manufacturing and services. The final S&P Global/CIPS Composite PMI for August was revised up to 53.8, surpassing the preliminary figure of 53.4.
This suggests that the UK economy is growing at its fastest pace since April. Despite this positive news, the Pound’s performance remains subdued, reflecting a cautious outlook on the BoE’s gradual approach to policy easing.
GBP/USD Pressured by US NFP Uncertainty and Fed Rate Cut Speculation
On the US front, the GBP/USD pair is struggling as market uncertainty grows ahead of the US Nonfarm Payrolls (NFP) data for August, due on Friday. S&P 500 futures have dropped further, showing decreased risk appetite among investors, while the US Dollar Index (DXY) slightly corrects to around 101.60.
The NFP report is crucial because it will influence expectations about the Federal Reserve's interest rate decisions in September. While the Fed is expected to adjust its policy this month, there's debate over whether it will cut rates significantly or take a more gradual approach.
If the NFP data shows a slowdown in job growth and higher unemployment, expectations for a 50 basis point (bps) rate cut by the Fed will likely rise. Fed Chair Jerome Powell has indicated support for the labor market if it worsens. Conversely, if the job data is steady or better than expected, hopes for a large rate cut may weaken.
Investors will also watch the US JOLTS Job Openings for July and the Fed’s Beige Book for more clues on the labor market, with job openings anticipated to decrease slightly from June.
Therefore, the uncertainty around the US NFP data and potential Federal Reserve rate cuts is likely to keep the GBP/USD pair under pressure. Weak job data could boost the Dollar due to expectations of aggressive Fed cuts, while strong data might weaken the Pound further.
GBP/USD - Technical Analysis
The GBP/USD pair is trading at $1.31136, with a modest gain of 0.01%. Currently, the pair is hovering near a crucial pivot point at $1.31620, signaling potential indecision in the market.
The 50-day Exponential Moving Average (EMA) rests at $1.31695, just above the current price level, reinforcing the significance of the resistance at $1.31880. A break above this resistance could open the door for gains toward $1.32269, but for now, the downside appears to dominate the outlook.
The Relative Strength Index (RSI) is at 39, suggesting that bearish momentum is gaining strength, but it is not yet in oversold territory. If the pair breaks below the immediate support at $1.31218, we could see a test of lower levels, with the next support sitting at $1.30784. Further declines may push GBP/USD toward $1.30410 and $1.30111, which will be key areas for bulls to defend.
For today, the key battle lies around the $1.31620 pivot. A failure to break this level would likely result in a bearish continuation, with selling pressure intensifying if $1.31218 is breached. On the upside, a break above $1.31880 could trigger a bullish reversal, but the pair remains constrained by the broader downward trend.
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EUR/USD Price Analysis – Sep 04, 2024
Daily Price Outlook
During the European trading session, the EUR/USD is consolidating within a narrow range close to a fresh two-week low of 1.1025. The major currency pair has turned sideways as the US Dollar (USD) adjusts following the release of the US ISM Manufacturing PMI data for August.
Meanwhile, the Euro’s near-term outlook remains negative as market participants anticipate that the European Central Bank’s (ECB) policy-easing cycle could be aggressive, given the steep decline in Eurozone inflationary pressures and weak economic growth.
USD Weakness and Upcoming Labor Data Could Boost EUR/USD
On the US front, the broad-based US Dollar (USD) is adjusting after the release of the ISM Manufacturing PMI data for August, which showed a reading of 47.2. This figure missed expectations of 47.5 but was an improvement from the eight-month low of 46.8. Despite this small uptick, a PMI below 50.0 still signals a contraction in manufacturing activity.
Consequently, the US Dollar Index (DXY) has dropped to around 101.60 after failing to regain a two-week high of 102.00. Investors are now looking ahead to Friday's US Nonfarm Payrolls (NFP) data for August, which will be crucial in determining the Federal Reserve’s next move on interest rates. There is a general expectation that the Fed might start reducing its key borrowing rates this month, but opinions vary on the size of the potential cut.
In addition to the NFP data, attention will also be on the US JOLTS Job Openings report for July and the ADP Employment Change data for August. The JOLTS report is anticipated to show about 8.1 million job vacancies, slightly down from the 8.184 million reported the previous month.
The Fed Chair Jerome Powell's recent comments at the Jackson Hole Symposium, highlighting concerns over weakening labor demand, have made these labor market reports even more significant for market participants.
Therefore, the weak ISM Manufacturing PMI and the upcoming US labor market data contribute to USD weakness, which could bolster the EUR/USD pair. If the Fed signals a rate cut, the EUR/USD might gain further, given the Eurozone's downbeat outlook.
ECB Rate Cut Expectations and Weak Eurozone Data Limit EUR Gains
On the EUR front, the shared currency shows a slight recovery as the US Dollar weakens. However, the Euro's near-term outlook remains negative. Market participants anticipate that the European Central Bank (ECB) might aggressively ease policy due to the sharp drop in Eurozone inflation and sluggish economic growth.
Bank of America (BofA) expects more ECB rate cuts through 2025 and 2026, forecasting a deposit rate of 2% by Q3 2025 and 1.5% in 2026. They note that Europe's recovery is fragile, affected by slow growth in China and political issues.
Furthermore, ECB officials express concerns about their policy stance being too restrictive. ECB Executive Board member Piero Cipollone warned about balancing inflation targets with economic growth. Investors are awaiting the Eurozone Retail Sales data for July, expected to show a slight 0.1% increase after a 0.3% contraction in June.
Despite a potential improvement, this may not alter market expectations of further ECB rate cuts. In the menatime, the Eurozone Producer Price Index (PPI) also showed slower deflation at 2.1%, better than the 2.5% estimate, but unlikely to change the ECB’s policy direction.
Therefore, the Euro's slight recovery against the US Dollar may be short-lived as expectations of aggressive ECB rate cuts and weak Eurozone economic data suggest continued EUR/USD pressure. The market anticipates further ECB easing, which could limit substantial gains for the EUR/USD pair.
EUR/USD - Technical Analysis
The EUR/USD pair is currently trading at $1.10568, gaining 0.13% during today's session. The price is edging closer to the pivot point at $1.11005, a crucial level that could set the tone for the day's trading.
Immediate resistance lies at $1.11395, with the next key levels being $1.11892 and $1.10337. On the downside, immediate support can be found at $1.09995, with further supports at $1.09685.
The 50-day Exponential Moving Average (EMA) sits at $1.11083, slightly above the current price. This EMA acts as a strong barrier for bulls trying to push the price higher.
A break above this could see the pair testing the next resistance at $1.11395, while a rejection could drive EUR/USD back toward its key support areas.
Technical indicators suggest a bearish bias for now. The Relative Strength Index (RSI) stands at 39, signaling that the market has room for further declines before reaching oversold conditions.
In the short term, selling pressure could dominate if the pair breaks below the immediate support at $1.10695. A fall below this level would likely accelerate the downward move toward $1.10208.
However, if EUR/USD manages to breach the $1.11005 pivot point and hold above it, we could see a shift in sentiment, potentially driving the pair toward $1.11395. Watch closely for a break or bounce around these key levels.
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USD/CAD Price Analysis – Sep 03, 2024
Daily Price Outlook
During the European trading session, the USD/CAD currency pair continued its upward trend for the second consecutive day, trading around 1.3534 and reaching an intraday high of 1.3550. This gain is largely due to the strengthened US Dollar, driven by reduced expectations of an aggressive interest rate cut by the US Federal Reserve in September.
However, the Canadian Dollar's decline may be capped by rising crude oil prices. West Texas Intermediate (WTI) oil has surged to approximately $73.60 per barrel, supported by concerns over potential supply disruptions in Libya.
US Dollar Strengthens Amid Mixed Economic Indicators and Fed Rate Cut Expectations
On the US front, the USD/CAD currency pair has risen due to a stronger US Dollar, fueled by reduced expectations of a major interest rate cut by the Federal Reserve in September. While US Treasury yields are climbing and supporting the Dollar, its gains could be limited by growing anticipation of a quarter-point rate cut.
The CME FedWatch Tool indicates a nearly 70% probability of at least a 25 basis point reduction in the Fed's September meeting. The core PCE price index, excluding food and energy, increased by 2.6%, matching previous data but falling short of the 2.7% forecast.
Additionally, the US GDP grew at a 3.0% annualized rate in Q2, exceeding the 2.8% expectation, and Initial Jobless Claims dropped to 231,000, slightly below the 232,000 forecast.
Looking ahead, markets are pricing in a nearly 69% chance of a 25 basis point rate cut in September, with a 31% probability of a 50 basis point reduction.
Upcoming data includes the US ISM Manufacturing PMI for August, expected to rise to 47.5 from 46.8, while the Services PMI may decrease to 51.1 from 51.4. Job additions for August are projected at 163,000, with the Unemployment Rate likely to edge down to 4.2%.
Rising Oil Prices and Bank of Canada Rate Cut Create Mixed Impact on CAD
On the other hand, the decline in the commodity-linked Canadian Dollar (CAD) is likely to be limited by rising crude oil prices. West Texas Intermediate (WTI) oil has surged to around $73.60 per barrel, driven by concerns over potential supply disruptions in Libya. Key oil ports in Libya have halted exports, and nationwide production has been reduced, according to Reuters.
Additionally, the upcoming Bank of Canada (BoC) interest rate decision on Wednesday will be closely watched. The BoC is expected to cut interest rates for the third time this year, with a projected reduction of a quarter percentage point to 4.25%.
Investors also anticipate further rate cuts throughout the rest of the year and into 2025. This potential rate cut could impact the Canadian Dollar's performance, as the central bank's actions are closely tied to economic conditions and currency values.
The rising crude oil prices and anticipated Bank of Canada rate cut could support the CAD, potentially limiting the USD/CAD pair's gains. While oil prices bolster the CAD, the BoC's rate cut may weaken it, creating mixed effects on USD/CAD.
USD/CAD - Technical Analysis
The USD/CAD pair is currently trading around $1.3525, showing signs of a potential bullish reversal after a period of decline. The pair has recently broken above the 50-day EMA, which is now acting as immediate support around $1.3502, suggesting a shift in momentum. The current price action indicates that if the pair maintains this level, it could extend gains towards higher resistance levels.
Key resistance levels to watch include $1.3549, which aligns with the 61.8% Fibonacci retracement level, followed by $1.3577 and $1.3614. These levels represent critical barriers where selling pressure could re-emerge. On the downside, immediate support lies at $1.3502 (pivot point), with further support levels at $1.3482 and $1.3447.
Technical indicators are favoring a continuation of the bullish trend. The RSI is currently at 60.80, reflecting the increasing buying momentum as the pair approaches overbought territory. The 50-day EMA at $1.3502 provides a critical support zone, and a close above this level would further validate the bullish outlook.
Given the recent breakout above key levels, a buy position above $1.3507 could be considered, targeting $1.3561 with a stop loss at $1.3470 to manage potential downside risk.
The overall sentiment is cautiously optimistic, with the potential for further gains if the pair sustains above the $1.3502 pivot point.
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AUD/USD Price Analysis – Sep 03, 2024
Daily Price Outlook
During the European trading session, the AUD/USD currency pair extended its bearish trajectory, slipping to an intra-day low of 0.6730 and hovering around the 0.6732 level. This downward movement is primarily driven by a strengthening US dollar, bolstered by upbeat US economic data and rising Treasury yields. However, the dollar's gains may be tempered by growing market expectations of a 25 basis point rate cut by the Federal Reserve in September.
Besides this, the Australian dollar faces pressure from domestic economic indicators. The unexpected decline in Australia’s Private Capital Expenditure and lower-than-anticipated CPI figures are weighing on the AUD, contributing to its weakness against the USD.
Traders are now eyeing Australia's Q2 Gross Domestic Product (GDP) and July Trade Balance data, along with a forthcoming speech by Reserve Bank of Australia (RBA) Governor Michele Bullock, for further insights into the central bank's monetary policy outlook.
US Dollar Strengthens Amid Mixed Economic Data and Rate Cut Speculation, Pressuring AUD/USD
On the US front, the broad-based US dollar strengthened as Treasury yields continued to rise. However, its gains could be limited by growing expectations that the Federal Reserve might cut interest rates by 25 basis points in September.
Traders are now looking ahead to the upcoming US employment data, especially the August Nonfarm Payrolls (NFP), for more clues on the timing and extent of potential Fed rate cuts.
Recent US economic data highlights mixed signals. The US Bureau of Economic Analysis reported that the headline Personal Consumption Expenditures (PCE) Price Index rose by 2.5% year-over-year in July, slightly below the expected 2.6%.
The core PCE, excluding food and energy, also grew by 2.6%, just shy of the 2.7% forecast. Meanwhile, US Gross Domestic Product (GDP) grew at an annualized rate of 3.0% in the second quarter, surpassing expectations.
Initial Jobless Claims fell to 231,000 for the week ending August 23, indicating a slight improvement in the labor market. However, Federal Reserve Atlanta President Raphael Bostic suggested that it might be time to consider rate cuts due to cooling inflation and rising unemployment, with his comments being rated as neutral on the hawkish-dovish scale.
Consequently, the mixed US economic data and rising Treasury yields, along with speculation about a Fed rate cut, have contributed to the US dollar's strength, putting downward pressure on the AUD/USD pair as the Australian dollar struggles to maintain its value.
Mixed Australian Economic Data Creates Uncertainty for AUD/USD Pair
On the other hand, Australia’s Building Permits surged by 10.4% month-over-month in July, recovering strongly from a 6.5% decline in June and marking the highest growth since May 2023. On an annual basis, building permits grew by 14.3%, a notable rebound from the previous 3.7% decline, indicating a positive trend in the construction sector.
However, Australia's economic outlook is mixed. Private Capital Expenditure unexpectedly dropped by 2.2% in the second quarter, reversing from a 1.9% expansion in the previous period and missing market expectations for a 1.0% increase.
This decline marks the first contraction in new capital spending since the third quarter of 2023. Additionally, Australia’s Monthly Consumer Price Index (CPI) rose by 3.5% year-on-year in July, down slightly from June's 3.8% but slightly above the expected 3.4%. Despite the decrease, this is the lowest CPI figure since March, reflecting some easing in inflation.
Traders are now watching closely for Australia's Q2 Gross Domestic Product (GDP) and July Trade Balance data, along with an upcoming speech by Reserve Bank of Australia (RBA) Governor Michele Bullock, for further clues on the central bank's approach to monetary policy.
Therefore, the mixed economic data from Australia, including a rebound in building permits and declines in capital expenditure and CPI, may create uncertainty for the AUD/USD pair. Traders will be closely watching upcoming GDP and Trade Balance reports for clearer direction.
AUD/USD - Technical Analysis
The Australian Dollar (AUD/USD) is currently trading around $0.6742, showing signs of a bearish continuation following a recent breakdown. The pair is under pressure as it trades below the key support level of $0.6754, now acting as immediate resistance. The breakdown below this level has opened the door for further declines towards the next support levels.
The pivot point for today’s session is at $0.6754, which also marks the immediate resistance. Should the pair attempt a recovery, it may find resistance at $0.6770, with the next levels of resistance at $0.6784 and $0.6793. On the downside, immediate support lies at $0.6720, followed by $0.6699 and $0.6677.
Technical indicators are pointing towards continued bearish momentum. The Relative Strength Index (RSI) is currently at 33.73, indicating oversold conditions, which could suggest a potential short-term rebound before the downtrend resumes. The 50-day Exponential Moving Average (EMA) is positioned at $0.6784, reinforcing the resistance around this level.
Given the recent price action and the technical indicators, a sell position below $0.6754 could be considered, with a take profit target at $0.6720 and a stop loss set at $0.6770 to manage risk. The breakdown below key support levels suggests that the bears are in control, and the pair could see further declines if it remains below the $0.6754 pivot point.
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GOLD Price Analysis – Sep 03, 2024
Daily Price Outlook
Gold prices (XAU/USD) continue their decline, trading around the 2490 level. However, this drop is attributed to a stronger US Dollar and rising US Treasury bond.
However, expectations of a potential US Federal Reserve (Fed) rate cut in September could support gold prices, as lower interest rates reduce the opportunity cost of holding non-yielding gold. Furthermore, ongoing geopolitical tensions in the Middle East may drive demand for gold as a safe-haven asset.
Looking ahead, the Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers Index (PMI) is set for release on Tuesday.
The key event this week will be the August US Nonfarm Payrolls (NFP) report, which could influence the Federal Reserve's decision on interest rate cuts and, in turn, affect gold prices in the short term.
Impact of Recent US Economic Data and Federal Reserve Expectations on Gold Prices
On the US front, the broad-based US dollar (USD) strengthened, and US Treasury bond yields rose on Tuesday as the US Bureau of Economic Analysis reported that the headline Personal Consumption Expenditures (PCE) Price Index increased by 2.5% year-over-year in July, matching the previous figure but missing the estimated 2.6%.
In the meantime, the core PCE, excluding food and energy, also rose by 2.6%, consistent with prior data but slightly below the forecast of 2.7%. Moreover, the US Gross Domestic Product (GDP) grew at an annualized rate of 3.0% in Q2, surpassing expectations of 2.8%. Initial Jobless Claims for the week ending August 23 fell to 231,000, slightly below the anticipated 232,000.
On the other hand, markets are currently pricing in a nearly 69% chance of a 25 basis points (bps) rate cut by the Federal Reserve in September, with a 31% probability for a 50 bps reduction.
Moving ahead, the US ISM Manufacturing PMI for August is expected to improve to 47.5 from 46.8 in July, while the Services PMI may decline to 51.1 from 51.4. Job additions for August are forecasted at 163,000, with the Unemployment Rate expected to decrease slightly to 4.2%.
Therefore, the stronger US dollar and higher Treasury yields could pressure gold prices down. However, expectations for a Fed rate cut and weaker PMI data might support gold, as lower rates reduce the opportunity cost of holding non-yielding assets.
GOLD (XAU/USD) - Technical Analysis
Gold is currently trading around $2,503, facing a critical juncture on the 2-hour chart. After breaking down from an ascending triangle pattern, the price has been hovering near the $2,503 level, struggling to reclaim its previous bullish momentum. This breakdown is significant as the ascending triangle was providing support around the $2,507 level, and the recent price action suggests that the bears are gaining control.
On the technical front, the pivot point is situated at $2,507, which is now acting as a critical resistance. Immediate resistance stands at $2,508, followed by stronger resistance levels at $2,514 and $2,517. On the downside, the immediate support is at $2,491, with subsequent support levels at $2,480 and $2,471. The 50 EMA, currently positioned at $2,508, is acting as a ceiling for the price, preventing any meaningful recovery.
The Relative Strength Index (RSI) is currently at 44.41, indicating neutral momentum but with a slight tilt towards oversold conditions. This could imply a potential reversal or consolidation phase if the selling pressure continues to mount. However, the key to watch is whether the price can break back above the 50 EMA at $2,508, which could signal a shift in momentum.
In conclusion, Gold's recent breakdown from the ascending triangle pattern around the $2,507 mark has opened the door for further downside potential. If the price remains below $2,507, the bearish momentum could accelerate, targeting the next support at $2,491 and potentially down to $2,480 or even $2,471.
Conversely, a recovery above $2,508 could challenge resistance levels at $2,514 and $2,517. For traders, an entry point could be considered at a sell position below $2,507, with a take profit target set at $2,492 and a stop loss at $2,517 to manage risk effectively.
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GOLD Price Analysis – Sep 02, 2024
Daily Price Outlook
Gold prices (XAU/USD) failed to stop their early-day decline, trading around $2,497.91 and hitting an intraday low of $2,490.12.
This drop is mainly due to a stronger US dollar, which gained strength as traders adjusted their expectations for significant Federal Reserve policy easing.
This change in outlook followed the release of the US July Personal Consumption Expenditures (PCE) Index, indicating a less aggressive stance on monetary policy.
Meanwhile, the increasing concerns about China’s sluggish economy, the world’s largest gold consumer, have intensified pressure on gold prices.
It should be noted that the Chinese Manufacturing Purchasing Managers' Index (PMI) fell to 49.1 in August, down from 49.5 in July and below the expected 49.5.
This decline signals a contraction in the manufacturing sector, further exacerbating downward pressure on gold prices.
Looking ahead, investors will closely monitor key economic data, including the US ISM Manufacturing PMI on Tuesday and the Nonfarm Payrolls report on Friday.
These reports are expected to be closely watched by traders for potential impacts on market trends.
Stronger Dollar and Lower Fed Rate Cut Expectations Weigh on Gold Prices
On the US front, the broad-based dollar rose to a two-week high on Monday, as traders lowered their expectations for aggressive interest rate cuts by the Federal Reserve.
Markets are now pricing in a 70% chance of a 25 basis point rate cut by the Fed in September, with only a 30% likelihood of a larger 50 basis point reduction.
Meanwhile, the US Personal Consumption Expenditures (PCE) Price Index for July rose by 2.5% year-on-year, matching the previous month's increase but falling short of the 2.6% expected by the market.
The core PCE, which excludes food and energy, increased by 2.6% year-on-year, also below the anticipated 2.7%.
Therefore, the stronger dollar and reduced expectations for aggressive Fed rate cuts put downward pressure on gold prices.
The gold market is impacted by the increased dollar strength and lower-than-expected inflation data, leading to reduced investor demand for the precious metal.
Geopolitical Tensions Drive Investors Towards Gold as Safe-Haven Asset
On the geopolitical front, a general strike has been called across Israel by the Histadrut labor federation, urging the government to negotiate with Hamas for the release of hostages held in Gaza.
This follows the recovery of six hostages' bodies, leading to widespread protests and mourning. Hamas claims Israeli airstrikes have killed some hostages, adding to the tension.
Meanwhile, Yemen's Houthi rebels have attacked a Panama-flagged oil tanker in the Red Sea, though no casualties were reported.
The UN reports that 87,000 children in Gaza have received their first polio vaccine dose, but calls for a ceasefire continue as airstrikes persist. The vaccination effort aims to protect over 640,000 children but is hampered by ongoing violence.
Therefore, the ongoing geopolitical tensions and violence, including strikes and attacks, can increase market uncertainty and drive investors towards safe-haven assets like gold. This could lead to a rise in gold prices as traders seek stability amidst the turmoil.
China's PMI Drop Pressures Gold Prices Amid Economic Slowdown
Gold prices are being pressured by concerns about China’s economy, the largest consumer of gold. In August, China’s Manufacturing Purchasing Managers' Index (PMI) dropped to 49.1 from 49.5 in July, missing the expected 49.5 and signaling a slowdown in manufacturing activity.
This decline suggests that the manufacturing sector is contracting, which negatively impacts gold prices because it reflects weaker economic conditions in China, leading to reduced gold demand.
GOLD (XAU/USD) - Technical Analysis
Gold (XAU/USD) is currently trading at $2,497.50, reflecting a decline of 0.30% as it remains under pressure amidst a strengthening US Dollar.
The 4-hour chart reveals that Gold is trading just below a key pivot point at $2,504.66, which serves as a critical level for determining the near-term direction.
A break above this pivot could see the precious metal testing immediate resistance at $2,514.84, with subsequent targets at $2,529.23 and $2,540.41.
However, the technical indicators suggest a bearish bias. The Relative Strength Index (RSI) stands at 40, indicating that momentum is leaning towards the downside but is not yet in oversold territory.
Additionally, Gold is trading below its 50-day Exponential Moving Average (EMA) at $2,512.02, reinforcing the bearish outlook. Immediate support is located at $2,491.71, with further levels at $2,480.08 and $2,471.29.
Given the current technical setup, traders may consider short positions below the pivot point at $2,504.66, targeting the $2,487.00 level.
Conversely, a break above $2,505 could invalidate this bearish view, paving the way for a potential rally towards higher resistance levels.
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EUR/USD Price Analysis – Sep 02, 2024
EUR/USD Price Analysis – Sep 02, 2024
Daily Price Outlook
During the early European trading session, the EUR/USD currency pair reversed its downward trend, turning bullish at around the 1.1071 level and reaching an intra-day high of 1.1078.
This shift is primarily due to renewed selling pressure on the US dollar, driven by increased market optimism and expectations of a dovish stance from the US Federal Reserve (Fed).
Additionally, comments from European Central Bank (ECB) Governing Council member François Villeroy de Galhau, who hinted at the possibility of a rate cut in the upcoming September meeting, are influencing the EUR. This potential ECB rate cut could put additional downward pressure on the Euro (EUR).
US Dollar Faces Renewed Bearish Pressure Amid Dovish Fed Expectations
On the US front, the broad-based US dollar has struggled to maintain its early bullish momentum, facing renewed bearish pressure amid growing market optimism and expectations of a more dovish Federal Reserve (Fed).
The CME FedWatch Tool indicates a 70% chance of a 25 basis point rate cut by the Fed at its September meeting. However, recent economic data has led traders to reconsider the probability of a significant rate cut this month.
On the data front, July's Personal Consumption Expenditures (PCE) Index rose by 2.5% year-over-year, matching the previous month's figure but falling short of the 2.6% forecast.
The core PCE Index, which excludes food and energy, increased by 2.6% year-over-year in July, in line with the prior reading but slightly below the anticipated 2.7%.
These results suggest that while inflation remains stable, it may not be weak enough to justify a more substantial rate cut by the Fed.
Therefore, the renewed bearish pressure on the US dollar, coupled with stable yet insufficiently weak inflation data, supports a bullish outlook for the EUR/USD pair. Market optimism and dovish Fed expectations could drive further gains for the euro against the dollar.
Potential ECB Rate Cut Could Weaken Euro Against US Dollar
On the EUR front, European Central Bank (ECB) Governing Council member François Villeroy de Galhau recently hinted at a possible interest rate cut. According to Bloomberg, he believes there are "good reasons" for the ECB to lower its key interest rates in September.
Villeroy de Galhau emphasized that taking action at the upcoming meeting on September 12 would be both fair and prudent. He suggested that adjusting rates now could be beneficial for the Eurozone's economic stability.
This potential rate cut is being considered to support growth and address any economic challenges facing the region.
Therefore, the potential ECB interest rate cut could weaken the Euro against the US Dollar as lower rates might lead to reduced returns on Euro-denominated assets, making the EUR less attractive compared to the USD, leading to a decline in the EUR/USD pair.
EUR/USD - Technical Analysis
The EUR/USD pair is currently trading at $1.10620, experiencing a slight gain of 0.02% in early trading. The currency pair is hovering near the pivotal level of $1.1070, which serves as a crucial point for determining the next directional move.
The 4-hour chart shows immediate resistance at $1.1101, followed by higher resistance levels at $1.1140 and $1.1189. A successful break above these levels could set the stage for further bullish momentum.
On the downside, immediate support lies at $1.1034, with additional support at $1.1000 and $1.0969. The Relative Strength Index (RSI) is currently at 42, suggesting that the pair is leaning towards a bearish bias but is not yet in oversold territory.
This implies that there may be room for additional downside movement if the pair fails to hold above the key pivot point at $1.1070.
The 50-day Exponential Moving Average (EMA), currently positioned at $1.1109, is acting as a resistance level, reinforcing the bearish outlook.
Given the current technical setup, traders might consider selling positions below $1.10831, with a potential target near the $1.10338 level.
Conversely, a break above $1.1101 could invalidate this bearish outlook, potentially paving the way for a rally toward $1.1140 and beyond.
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GBP/USD Price Analysis – Sep 02, 2024
GBP/USD Price Analysis – Sep 02, 2024
Daily Price Outlook
During the early European trading session, the GBP/USD currency pair reversed its downward trend and turned bullish at around the 1.3135 level, reaching an intra-day high of 1.3146.
This upward movement is largely attributed to renewed selling pressure on the US dollar. The USD is under pressure due to increased market optimism and growing expectations of a dovish stance from the US Federal Reserve (Fed).
Meanwhile, the Bank of England (BoE) is anticipated to gradually lower interest rates later this year, which could support the Pound Sterling (GBP).
Investors are now focusing on upcoming economic data, including the US ISM Manufacturing PMI on Tuesday and the Nonfarm Payrolls report on Friday. These reports will be key for traders looking to gauge potential market impacts.
Impact of Fed Rate Cut Expectations and PCE Data on GBP/USD Pair
On the US front, the US dollar is facing renewed bearish pressure due to growing market optimism and increasing expectations that the Federal Reserve (Fed) might adopt a more dovish stance.
According to the CME FedWatch Tool, there is a 70% chance that the Fed will cut rates by at least 25 basis points at its September meeting.
However, the recent economic reports have led traders to rethink the likelihood of a significant rate cut by the Fed in September.
On the data front, July's Personal Consumption Expenditures (PCE) Index data showed a 2.5% increase year-over-year, matching the previous month’s reading but falling short of the 2.6% forecast.
Additionally, the core PCE Index, which excludes food and energy, rose by 2.6% year-over-year in July, consistent with the prior figure but slightly below the expected 2.7%.
These figures suggest that while inflation remains steady, it may not be weak enough to prompt a more aggressive rate cut by the Fed.
Therefore, the bearish US dollar and mixed PCE data could support the GBP/USD pair. However, the weaker dollar and uncertainty around aggressive Fed rate cuts might boost the GBP, leading to potential gains for the GBP/USD pair.
BoE's Gradual Rate Cuts Support GBP/USD Amid Cautious Approach
Another factor that has been boosting the GBP/USD pair is the Bank of England's (BoE) plan to gradually lower interest rates for the rest of the year.
This move is expected to support the Pound Sterling (GBP) and help it maintain its position in the market.
At the recent Jackson Hole Symposium, BoE Governor Andrew Bailey mentioned that the impact of inflationary pressures would be less severe than previously thought.
However, Bailey also cautioned against rushing into further rate cuts too quickly. This balanced approach aims to stabilize the GBP while managing inflation concerns.
According to Reuters, the BoE is taking a careful approach to ensure that any changes in interest rates are well-measured and do not negatively affect the economy.
GBP/USD - Technical Analysis
The GBP/USD pair is currently trading at $1.31347, showing a slight uptick of 0.02% in early trading. The currency pair is hovering just below the pivotal $1.3156 level, which serves as a crucial point in determining the next directional move.
The 4-hour chart indicates that the pair faces immediate resistance at $1.3188, which aligns closely with the 50-day Exponential Moving Average (EMA). A break above this level could push the pair towards the next resistance levels at $1.3227 and $1.3265.
On the downside, GBP/USD finds immediate support at $1.3119, with further support levels at $1.3078 and $1.3041.
The Relative Strength Index (RSI) is currently at 40, signaling that the pair is leaning towards a bearish trend, but is not yet in oversold territory. This suggests that there could be more room for downside movement if the pair fails to hold above the key pivot point at $1.3156.
Given the current technical setup, traders might consider short positions below $1.3156, with a potential target around $1.3111.
Conversely, a break above $1.3188 would likely invalidate this bearish outlook, potentially setting the stage for a rally towards the $1.3227 level and beyond.
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EUR/USD Price Analysis – Sep 02, 2024
EUR/USD Price Analysis – Aug 30, 2024
Daily Price Outlook
During the European trading session, the EUR/USD currency pair extended its downward trend and remained well-offered around the 1.1069 level.
This decline can be attributed to the bullish US dollar, which gained traction due to upwardly revised US Q2 GDP figures, reducing the chances of a more significant Federal Reserve rate cut.
Furthermore, the previously released soft German inflation data has bolstered expectations for another ECB interest rate cut in September.
Meanwhile, the Eurozone flash annual Harmonized Index of Consumer Prices (HICP) declined as expected in August, which typically weakens the EUR by suggesting lower inflation pressures and potentially prompting the ECB to maintain or adopt a dovish stance.
Strong US Economic Data and Lower Rate Cut Expectations Boost USD, Weigh on EUR/USD
On the US front, the broad-based US dollar is gaining strength due to strong economic data. The US Gross Domestic Product (GDP) grew by 3.0% annually in the second quarter, surpassing the initial estimate of 2.8%. Besides this, Initial Jobless Claims for the week ending August 24 fell to 231K from 233K, coming in below the expected 232K.
This economic strength has reduced expectations for a significant Federal Reserve rate cut in September. The US Dollar Index (DXY), which tracks the dollar against six major currencies, is trading just below a fresh weekly high of 101.58 as investors await the US Personal Consumption Expenditure (PCE) Price Index for July.
Currently, financial markets are confident that the Fed might start reducing interest rates in September, but there is uncertainty about the extent of the cut. According to the CME FedWatch tool, there's a 33% chance of a 50-basis points cut, while others expect a 25-basis points reduction.
The likelihood of a larger rate cut has decreased slightly since the BEA reported a higher-than-expected GDP growth rate of 3% for the second quarter.
Therefore, the strong US economic data and reduced rate cut expectations have strengthened the US dollar, leading to a decline in the EUR/USD pair. The higher GDP growth and lower jobless claims support a firmer dollar, weakening the euro.
Eurozone Inflation Data and Economic Weakness Pressure EUR/USD
Another factor that kept the EUR/USD pair lower is the Eurozone’s inflation data for August, which shows a decline. The flash annual Harmonized Index of Consumer Prices (HICP) dropped to 2.2% from 2.6% in July, mainly due to lower energy prices.
Core HICP, which excludes volatile items like food and energy, rose by 2.8%, slower than the previous 2.9%. This weaker inflation data is likely to boost speculation that the European Central Bank (ECB) will cut interest rates again in September and potentially more later in the year.
Market expectations for an ECB rate cut increased after data showed that inflation in Germany, the Eurozone’s largest economy, fell to 2% for the first time in over three years. Additionally, Germany's economy contracted by 0.1% in the second quarter, suggesting a technical recession.
Other Eurozone countries, like France and Spain, also reported significant inflation declines. Analysts, such as Carsten Brzeski from ING, believe that the combination of fading inflation and weak growth makes a strong case for more rate cuts.
EUR/USD - Technical Analysis
The EUR/USD pair is currently trading at $1.10757, down 0.01% as it hovers just above a key support level at $1.10695. The market sentiment appears cautious, with the Relative Strength Index (RSI) at 40, signaling a slight bearish bias in the short term.
This reflects some downward pressure as the pair remains below the 50-day Exponential Moving Average (EMA) of $1.11355, indicating that the bears might still have some control.
The immediate pivot point at $1.11005 serves as a critical juncture for traders. A decisive break above this level could signal a potential recovery, with immediate resistance at $1.11395 and further targets at $1.11892.
On the downside, if the price slips below $1.10695, the next support lies at $1.10337, with additional support levels at $1.09995 and $1.09685. These levels are crucial for maintaining the current range, and a breach could open the door to more significant declines.
Given the current technical setup, traders might consider entering a long position above $1.10697, with a take profit target near $1.11188. A stop loss placed around $1.10430 could help mitigate downside risk if the support fails to hold.
Overall, EUR/USD is trading within a tight range, with the possibility of a breakout depending on how the price interacts with the $1.11005 pivot point. As the market awaits further directional cues, the pair’s movement around these key levels will be pivotal in determining the next trend.
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