GOLD Price Analysis – Aug 16, 2024
Daily Price Outlook
Gold prices (XAU/USD) were unable to stop their early-day losing streak and remain under pressure around the $2,454 level, hitting an intraday low of $2,450.
This decline is driven by recent positive US economic data, which has alleviated fears of a sharp economic slowdown and bolstered investor confidence, reducing the demand for gold as a safe haven.
Conversely, rising concerns about a potential escalation in the Middle East conflict and expectations of an imminent Federal Reserve (Fed) policy easing have helped to temper gold's losses.
Traders are now looking ahead to upcoming US macroeconomic releases, including Building Permits, Housing Starts, and the Preliminary Michigan Consumer Sentiment Index, for potential short-term trading opportunities.
Impact of Fed Rate Cut Expectations and Strong US Data on Gold Prices
On the US front, the broad-based US dollar struggled to gain bullish momentum and edged lower as markets fully anticipated a 25 basis point (bps) rate cut at the upcoming Federal Reserve (Fed) meeting in September.
This expectation led to a slight retreat in US Treasury bond yields, restricting the dollar's ability to capitalize on recent gains despite strong US macro data, including better-than-expected Retail Sales for July and a resilient labor market.
Fed officials, such as Atlanta Fed President Raphael Bostic and St. Louis Fed President James Bullard, have suggested that a rate cut could be appropriate soon, given the cooling inflation and shifting risks to economic growth.
On the data front, US Retail Sales rose by 1.0% month-over-month in July, rebounding sharply from June's 0.2% decline and surpassing the 0.3% forecast.
Initial Jobless Claims for the week ending August 9 dropped to 227,000, better than the expected 235,000 and lower than the previous week's 234,000.
Meanwhile, the US headline Consumer Price Index (CPI) increased by 2.9% year-over-year in July, down from June’s 3% rise and below expectations.
The Core CPI, excluding food and energy, rose by 3.2% year-over-year, slightly down from 3.3% in June but in line with forecasts.
Therefore, the bearish US dollar and expectations of a Fed rate cut may help limit gold's losses, even as strong US data puts pressure on gold prices.
GOLD (XAU/USD) - Technical Analysis
Gold is currently hovering around $2,454.84, down 0.15% for the day. The metal is showing signs of consolidation as it trades within a broad range, with the immediate pivot point at $2,477.00 acting as a crucial level.
The $2,477.21 resistance level is proving to be a significant barrier for gold's upward momentum. If gold manages to break through this level, the next targets are $2,496.82 and $2,515.33.
However, failure to do so could see gold retreat toward its immediate support at $2,432.56, with further support levels at $2,416.68 and $2,400.29.
Technical indicators are showing a mixed picture. The Relative Strength Index (RSI) is currently at 52, indicating a neutral stance, leaving room for either upward or downward movement.
Meanwhile, the 50-day Exponential Moving Average (EMA) at $2,433.43 is providing strong support, suggesting that the bullish trend could continue if prices stay above this level.
Given the current setup, the strategy is to buy gold above $2,452, with a target of $2,477. A stop-loss should be placed at $2,440 to manage downside risk.
The $2,477.21 level will be key in determining whether gold can push higher or if it will face more selling pressure.
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EUR/USD Price Analysis – Aug 16, 2024
S&P500 (SPX) Price Analysis – Aug 16, 2024
Daily Price Outlook
During the European trading session, the S&P 500 index has experienced a robust upward trend recently, driven by renewed investor confidence in the U.S. economy.
On Thursday, the index climbed 1.61% to close at 5,543.22, marking its sixth consecutive gain. This rally has pushed the index up by approximately 8% from its intraday low on August 5.
However, the primary reason behind this surge has been stronger-than-expected consumer and labor data.
July's retail sales increased by 1%, far exceeding expectations of a 0.3% rise, while weekly jobless claims fell, indicating a resilient labor market.
These encouraging figures have alleviated recession fears and bolstered market sentiment, contributing to the S&P 500's impressive performance.
Strong Economic Data and Fed Rate Cut Expectations Propel S&P 500 Higher
On the US front, the Federal Reserve's anticipated rate cuts and the subsequent weakening of the US dollar have significantly contributed to the S&P 500's upward momentum.
With inflation pressures easing, the market is now fully expecting a 25 basis point rate cut at the Fed's September meeting.
This has driven a slight decline in US Treasury yields, softening the dollar's recent strength. Additionally, robust economic indicators, such as stronger-than-expected retail sales and a resilient labor market, have bolstered investor confidence.
On the data front, US Retail Sales rose by 1.0% month-over-month in July, rebounding sharply from June's 0.2% decline and surpassing the 0.3% forecast.
Initial Jobless Claims for the week ending August 9 dropped to 227,000, better than the expected 235,000 and lower than the previous week's 234,000.
Meanwhile, the US headline Consumer Price Index (CPI) increased by 2.9% year-over-year in July, down from June’s 3% rise and below expectations.
The Core CPI, excluding food and energy, rose by 3.2% year-over-year, slightly down from 3.3% in June but in line with forecasts.
Therefore, the stronger-than-expected retail sales and resilient job market boosted investor confidence, while easing inflation pressures supported expectations of Fed rate cuts, driving the S&P 500 index higher
Geopolitical Tensions Exert Downward Pressure on S&P 500
On the geopolitical front, the increasing tensions, particularly in the Middle East and the ongoing Russia-Ukraine conflict, have capped gains in the S&P 500.
Recent events, such as the assassination of a Hamas leader and the ongoing violence in Gaza and the West Bank, have heightened market anxieties.
Hence, the heightened geopolitical tensions, including Middle East violence and the Russia-Ukraine conflict, have increased market anxiety, leading investors to seek safer assets, thereby exerting downward pressure on the S&P 500.
S&P 500 - Technical Analysis
The S&P 500 is showing strong upward momentum, currently trading at $5,543.21, up 1.61% for the day.
This surge positions the index above its pivot point at $5,512, suggesting that the bulls are firmly in control.
The next immediate resistance is seen at $5,586, and a break above this level could push the index toward $5,666, with a further target at $5,763.
However, traders should be cautious as the RSI is approaching overbought territory, currently sitting at 64.
The 50-day Exponential Moving Average (EMA) at $5,454 provides a solid support base, reinforcing the current bullish trend.
Immediate support lies at $5,441, with additional safety nets at $5,343 and $5,234. These levels are crucial for maintaining the upward momentum.
If the price dips below $5,441, we might see a short-term correction, but as long as it stays above the $5,454 EMA, the outlook remains positive.
For those looking to enter the market, buying above $5,510 could be a strategic move, targeting a take-profit at $5,644.
A stop-loss should be placed at $5,440 to manage downside risk. The key to watch will be how the index reacts around the $5,586 resistance level, which could determine the sustainability of this bullish run.
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EUR/USD Price Analysis – Aug 16, 2024
GOLD Price Analysis – Aug 15, 2024
Daily Price Outlook
Gold (XAU/USD) has reclaimed its momentum, drawing bids around the $2,459.10 level and reaching an intra-day high of $2,460.36.
This surge is primarily fueled by expectations of a potential Federal Reserve rate cut in September, which weakens the US dollar and supports gold prices.
Additionally, escalating geopolitical tensions in the Middle East are bolstering gold’s appeal as a safe-haven asset. Iran's decision to ignore Western nations' warnings against retaliating after a Hamas leader was killed in Tehran is making the Middle East more unstable.
This rising tension is leading investors to buy more gold as a safe investment, which increases gold prices.
Impact of Changing Rate Cut Expectations and Fed Caution on Gold Prices
On the US front, the US dollar is weakening as expectations grow for a Federal Reserve rate cut in September.
This weaker dollar is making gold more attractive to investors, pushing up its price. Investors are now looking forward to important economic reports coming later this week, such as US Retail Sales, Initial Jobless Claims, the Philly Fed Manufacturing Index, and Industrial Production.
Recent inflation data from July showed that the Consumer Price Index (CPI) rose by 0.2% from the previous month, with an annual increase of 2.9%.
Core CPI, which excludes food and energy prices, also rose by 0.2% month-over-month and 3.2% year-over-year.
These figures will help investors gauge the future direction of the economy and Federal Reserve policies, influencing gold and other financial markets.
Phillip Streible from Blue Line Futures mentions that market expectations have changed from a 50 basis point rate cut to a smaller 25 basis point cut, which is slowing gold's price increase.
Now, there is a 41% chance of a 50 basis point cut, down from 50% before the recent inflation data was released.
Additionally, Federal Reserve officials, including Atlanta Fed President Raphael Bostic, are being cautious and not committing to a specific rate cut schedule. This uncertainty is affecting gold’s momentum as investors adjust their expectations.
Therefore, the expectation of a smaller 25 basis point rate cut, along with cautious Fed officials, is likely to slow down gold's price increase. While a weaker dollar helps support gold, the reduced likelihood of a bigger rate cut may limit how much gold can rise.
GOLD (XAU/USD) - Technical Analysis
Gold is showing some strength as it edges higher, currently trading at $2,456.89. The price is slightly above the pivot point at $2,452.47, suggesting a bullish bias in the near term.
The 4-hour chart shows that the price has been supported by the 50-day Exponential Moving Average (EMA), which is currently at $2,451.75, reinforcing the bullish sentiment.
Immediate resistance is seen at $2,477.21, followed by more substantial resistance levels at $2,496.82 and $2,515.33.
If gold can break through these levels, it could signal a stronger upward move. On the downside, immediate support lies at $2,433.75, with further support at $2,416.68 and $2,397.96.
These levels are crucial to watch, as a break below the pivot point could shift momentum to the bears.
The Relative Strength Index (RSI) is currently at 52, indicating that the market is neither overbought nor oversold, leaving room for further movement in either direction.
However, with the price holding above the pivot and the 50 EMA, the short-term outlook remains positive.
For those looking to enter a position, buying above $2,452 with a take-profit target at $2,477 could be a strategic move. A stop-loss at $2,440 would help manage risk if the market reverses.
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USD/JPY Price Analysis – Aug 15, 2024
USD/JPY Price Analysis – Aug 15, 2024
Daily Price Outlook
During the European trading session, the USD/JPY currency pair experienced a bearish trend and edged lower around 147.28 level as the Japanese Yen (JPY) gaining strength against the US Dollar (USD).
This downward movement in the USD/JPY pair was driven by Japan's stronger-than-expected Gross Domestic Product (GDP) data for Q2, raising expectations for a potential hawkish stance from the Bank of Japan (BoJ).
While the Japanese Yen strengthens on the back of positive GDP figures, the US Dollar faces pressure from potential Fed rate cuts and mixed economic signals.
This combination of factors is driving the USD/JPY pair lower, with ongoing market adjustments to central bank expectations likely to influence future movements.
Japan's Robust GDP Growth and BoJ Policy Expectations Bolster JPY
On the JPY front, Japan's GDP growth for Q2 surged by 0.8%, surpassing market forecasts of 0.5% and marking the strongest quarterly growth since early 2023.
The annualized GDP growth also reached 3.1%, exceeding the expected 2.1%. This robust economic performance is bolstering expectations that the BoJ might shift towards a more hawkish policy.
This underpinned the JPY currency and contributed to the USD/JPY pair. Japanese Economy Minister Yoshitaka Shindo's remarks about a gradual economic recovery driven by improving wages and income, along with the BoJ's goal of a neutral rate "at least around 1%" as a medium-term target, support the Yen's strength.
Impact of Fed Rate Cut Expectations and US CPI Data on USD/JPY Decline
On the US front, the pair decline is also influenced by the Federal Reserve’s potential policy decisions.
Despite recent improvements in Treasury yields, the anticipation of a potential 25 basis point rate cut by the Fed in September is pressuring the US Dollar, which was seen as another key factor that put pressure on USD/JPY pair.
On the data front, US CPI data for July showed a moderate 2.9% annual increase, leading to speculation about the extent of future Fed rate cuts.
Traders are leaning towards a smaller 25 basis point reduction, with a 36% chance of a larger 50 basis point cut, as indicated by CME FedWatch.
This dovish sentiment from the Fed, coupled with concerns about labor market conditions, is adding to the downward pressure on the USD.
USD/JPY - Technical Analysis
USD/JPY is currently trading at $147.211, showing a slight decline as it moves closer to the pivot point at $147.864.
The pair has been in a tight range, reflecting a cautious market sentiment. The 4-hour chart reveals that the 50-day Exponential Moving Average (EMA) at $146.386 is providing solid support, suggesting that the pair might find some stability at these levels before making its next move.
Immediate resistance is seen at $149.365, with further resistance at $150.900 and $152.597. If USD/JPY breaks above these levels, we could see a continuation of the uptrend.
However, the downside risks are also significant. Immediate support is at $145.514, followed by $143.462 and $141.787. A break below these supports could accelerate the downward momentum.
The Relative Strength Index (RSI) is hovering near neutral levels, indicating that the market is neither overbought nor oversold, leaving room for potential volatility.
Given the current setup, traders should be cautious about both upside and downside risks.
For those looking to trade, a sell limit order around $147.850 could be effective, with a take-profit target at $145. Setting a stop-loss at $149.350 would help manage potential losses if the market unexpectedly turns bullish.
Overall, while the technical indicators suggest some downside risk, it’s essential to watch the key levels closely.
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AUD/USD Price Analysis – Aug 15, 2024
AUD/USD Price Analysis – Aug 15, 2024
Daily Price Outlook
During the European trading session, the AUD/USD currency pair experienced a bullish trend and drew strong bid around the 0.6628 level, and reaching an intra-day high of 0.6631.
This recovery was fueled by the release of upbeat employment data in Australia and supportive economic signals from China.
The Australian Dollar (AUD) managed to regain some ground after facing downward pressure due to declining commodity prices and mixed economic indicators.
In contrast, the US Dollar (USD) weakened following moderate inflation data that led investors to reassess Federal Reserve (Fed) interest rate expectations.
Impact of Australian Economic Data and RBA Stance on AUD/USD Pair
On the AUD front, the AUD/USD pair's recovery is partly attributed to the Reserve Bank of Australia's (RBA) monetary policy outlook.
Despite challenges from falling copper and iron ore prices, which have added pressure on the commodity-linked currency, the RBA's hawkish stance remains a key support factor.
RBA Governor Michele Bullock emphasized that the central bank is vigilant about inflation risks and is prepared to increase rates further if necessary.
On the data front, the Australian Employment Change for July showed a robust increase of 58.2K, surpassing expectations of 20.0K, although the Unemployment Rate edged up to 4.2% from the anticipated 4.1%.
Additionally, China's economic data, including a 2.7% increase in Retail Sales and a moderate 5.1% rise in Industrial Production, provided a backdrop of cautious optimism.
Despite the positive employment data, Australia's Westpac Consumer Confidence increased by 2.8% in August, reversing a 1.1% decline in July, reflecting improved sentiment.
However, the Wage Price Index for Q2 was slightly below expectations at 0.8%, highlighting ongoing economic uncertainties.
Therefore, the RBA's cautious approach and high wage growth expectations continue to influence the AUD/USD pair, with market participants closely monitoring the central bank's next moves.
Impact of US Economic Data and Fed Rate Cut Expectations on AUD/USD Pair
On the US side, the AUD/USD pair gained momentum as the US Dollar (USD) lost its traction and edged lower amid dovish Federal Reserve’s (Fed) interest rate outlook.
It should be noted that the moderate increase in July’s Consumer Price Index (CPI) to 2.9% year-over-year, coupled with a slight decrease in Core CPI to 3.2%, has fueled speculation about potential Fed rate cuts.
Market expectations currently lean towards a modest 25 basis point cut in September, with a 36% chance of a larger 50 basis point reduction.
However, Federal Reserve officials, including Chicago Fed President Austan Goolsbee and Governor Michelle Bowman, have expressed concerns about inflation risks and the labor market.
These remarks suggest that substantial rate cuts may be less likely, which could temper the US Dollar’s weakness.
AUD/USD - Technical Analysis
The AUD/USD pair is showing a modest uptick, currently trading at $0.66210, which is slightly above its pivot point of $0.66058.
This positioning suggests a bullish sentiment in the short term, especially as the price is holding above the 50-day Exponential Moving Average (EMA) at $0.66015.
The 4-hour chart indicates that the pair is trying to build momentum, with the immediate resistance at $0.66434 being the next hurdle for bulls to overcome.
If the pair can break through this resistance, it may target higher levels at $0.66696 and $0.67019, signaling a continuation of the upward trend.
However, on the downside, the immediate support lies at $0.65809, followed by $0.65471 and $0.65127. These support levels are crucial; a break below them could indicate a shift in sentiment towards a bearish outlook.
The Relative Strength Index (RSI) is currently at 54, which suggests that the market is neither overbought nor oversold, allowing room for further movement in either direction.
With the price hovering around the pivot point and supported by the 50 EMA, the technical outlook leans slightly bullish for now.
For traders looking to enter the market, a buy limit order at $0.66051 could be strategic, with a take profit set at $0.66666. Setting a stop-loss at $0.65707 would help manage risk in case of an unexpected downturn.
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GOLD Price Analysis – Aug 15, 2024
EUR/USD Price Analysis – Aug 14, 2024
Daily Price Outlook
During Wednesday's European trading session, the EUR/USD currency pair reclaimed a seven-month high, trading around 1.1023 level.
This upward momentum was driven by the Euro's strong performance against its major peers, as market participants anticipate further interest rate cuts from the European Central Bank (ECB).
The pair's strength was also supported by the subdued outlook for the US Dollar (USD) amid growing speculation of Federal Reserve rate cuts later this year.
EUR/USD Reaches Seven-Month High on ECB Rate Cut Expectations and Steady Eurozone Growth
The shared currency gained traction during European session, with the EUR/USD pair reaching its highest level in seven months. This surge was fueled by expectations that the ECB will continue its gradual policy-easing cycle, following its first rate cut in June.
Market sentiment has been bolstered by a Reuters poll, which showed that over 80% of respondents expect the ECB to cut rates two more times this year, once in September and again in December.
Meanwhile, the ECB's cautious approach to interest rate cuts stems from concerns about re-accelerating inflation, despite confidence that price pressures will return to the bank’s 2% target by 2025.
The central bank has refrained from committing to a predefined interest-rate cut trajectory, as aggressive expansionary policies could potentially reignite inflation.
On the economic front, Eurostat's revised estimates for Q2 Gross Domestic Product (GDP) confirmed that the Eurozone economy expanded by 0.3%, in line with initial flash estimates and the growth rate recorded in the first quarter.
This steady economic performance further supports the Euro’s recent strength, contributing to the positive sentiment surrounding the EUR/USD pair.
As the ECB navigates its cautious rate-cutting path, the EUR/USD pair may experience volatility, especially as investors digest upcoming economic data and further ECB commentary.
Impact of Federal Reserve Rate Cut Expectations and US CPI Data on EUR/USD
On the US front, the EUR/USD pair continues to benefit from the weakening US Dollar, driven by speculation that the Federal Reserve will start reducing interest rates as early as September.
The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, is hovering near a weekly low at 102.55, reflecting the market's anticipation of Fed rate cuts.
The US Producer Price Index (PPI) report for July, which showed softening price pressures, has reinforced expectations that the Fed might need to ease its monetary policy sooner rather than later.
The headline and core PPI both declined on a monthly and annual basis, suggesting that producers are losing pricing power amid weakening demand conditions.
Traders are now focusing on the upcoming US Consumer Price Index (CPI) data for July, scheduled for release at 12:30 GMT.
The CPI report is expected to show a 0.2% increase in both headline and core inflation on a monthly basis, with annual headline and core CPI projected to have decelerated to 2.9% and 3.2%, respectively.
However, the softer-than-expected CPI reading could further boost expectations for Fed rate cuts, potentially weakening the US Dollar and supporting the EUR/USD pair.
Conversely, if inflation numbers come in hotter than expected, it could dampen speculation of aggressive Fed rate cuts, which might exert downward pressure on the EUR/USD pair. Market participants will closely monitor the CPI data, as it will significantly influence the near-term direction of the EUR/USD pair.
EUR/USD- Technical Analysis
EUR/USD is trading at $1.10062, up slightly by 0.02%, as it hovers near its pivot point at $1.1010.
The pair has shown resilience, holding above key support levels, but it's facing strong resistance ahead. The daily chart indicates that the euro is testing crucial levels that could determine its next move.
Immediate support is found at $1.0963, with further support at $1.0946 and $1.0883. These levels are critical; if the euro slips below $1.0963, it could trigger a more significant decline.
On the upside, resistance is at $1.1043, followed by $1.1073 and $1.1105. A break above the pivot point at $1.1010 could signal a continuation of the recent bullish trend, potentially driving the price toward these higher targets.
The RSI is currently at 74, indicating that the pair is overbought and may be due for a pullback.
However, the 50-day Exponential Moving Average (EMA) at $1.0928 is trending upward, suggesting that the broader trend remains bullish.
This alignment of indicators supports a cautious approach, favoring buying opportunities above key levels while being mindful of the potential for a short-term correction.
For those looking to trade this pair, an entry above $1.09805 with a take profit target at $1.10356 could be strategic.
A stop-loss at $1.09461 would help protect against downside risk. The overall outlook suggests that while EUR/USD has the potential to climb higher, traders should be prepared for volatility as the pair tests these key levels.
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GOLD Price Analysis – Aug 14, 2024
Daily Price Outlook
Gold prices (XAU/USD) managed to halt their downward trend and regained bullish momentum, reaching an intraday high of 2,478.40 on Wednesday, after stabilizing around the 2,475.31 level.
The gains were primarily driven by renewed selling pressure on the US dollar, which weakened amid soft U.S. producer inflation data, heightening expectations for more significant interest rate cuts. Moreover, the escalating geopolitical tensions in the Middle East and concerns over a potential regional conflict provided further support to the gold price.
Cooling Inflation and Rate Cut Expectations Boost Gold Prices Amid Weaker US Dollar
On the US front, the Bureau of Labor Statistics (BLS) will release the July Consumer Price Index (CPI) inflation data on Wednesday at 12:30 GMT, which is expected to cause significant volatility in the US Dollar (USD). This report could shape market expectations for potential Federal Reserve interest rate cuts in September.
As inflation appears to be cooling, there is growing anticipation of deeper rate cuts, which could benefit gold prices, especially as the USD weakens and US Treasury bond yields decline. Atlanta Fed President Raphael Bostic even mentioned he might support a rate cut by the end of the year if the data continues to confirm this trend.
Recent data shows that the US Producer Price Index (PPI) rose by 2.2% in July, down from 2.7% in June, signaling cooling inflation. The CPI for July is expected to show a 2.9% annual rise, slightly lower than June’s 3%, with core CPI projected to decrease slightly.
This cooling inflation, along with a weaker-than-expected jobs report, has increased speculation about multiple rate cuts by the Fed, with market expectations split on whether a 50-basis point cut will occur in September.
This news supports gold's bullish momentum, as expectations of deeper Federal Reserve rate cuts amid cooling inflation weaken the US Dollar and lower Treasury yields. This environment boosts demand for gold as a safe-haven asset, driving prices higher.
GOLD (XAU/USD) - Technical Analysis
Gold (XAU/USD) is currently trading at $2,469.29, down 0.23% for the day, as it hovers near a critical juncture.
The price is sitting just below the pivot point at $2,488.00, which serves as a significant level to watch.
The daily chart shows that gold has been in a consolidation phase, bouncing between key support and resistance levels.
The immediate support is at $2,444.65, followed by stronger support at $2,421.89 and $2,394.40.
If gold continues its descent and breaches these levels, we could see a more pronounced bearish trend emerge.
On the flip side, the immediate resistance is at $2,496.82, with further resistance at $2,515.33 and $2,535.14.
A break above the pivot point could signal a bullish move, potentially driving the price toward these higher levels.
The RSI is currently at 65, indicating that gold is nearing overbought conditions but still has room to move higher if bullish momentum picks up.
The 50-day Exponential Moving Average (EMA) at $2,427.92 is providing underlying support, aligning with the broader uptrend seen over the past few weeks.
Given the current setup, a potential buy entry above $2,455 could be a strategic move, with a take profit target at the pivot point of $2,488.00.
A stop-loss placed at $2,437 would help manage risk in case the bearish scenario plays out. The key is to watch how gold reacts around the pivot point; a clear move above it could open the door for further gains, while failure to break it may lead to a deeper correction.
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GBP/USD Price Analysis – Aug 14, 2024
Daily Price Outlook
During Wednesday's European trading session, the GBP/USD currency pair faced significant volatility, initially dropping to an intraday low of 1.2815 before recovering to near 1.2840 as the US Dollar weakened ahead of crucial US inflation data.
The GBP's recovery was driven by market anticipation of softer US CPI figures for July, which could influence the Federal Reserve's monetary policy decisions.
Despite the intraday recovery, the GBP remains under pressure due to easing inflation in the UK, which has increased the likelihood of future rate cuts by the Bank of England (BoE).
GBP/USD Volatility Expected Amidst BoE Rate Cut Speculations and Inflation Concerns
The Pound Sterling struggled against most major currencies during Wednesday’s London session after the UK’s Consumer Price Index (CPI) report for July came in softer than expected.
The annual headline CPI rose by 2.2%, below the forecasted 2.3%, and core inflation decelerated to 3.3%, compared to 3.4% expected. These figures have heightened market expectations for the BoE to initiate sequential interest-rate cuts, further pressuring the GBP.
Despite the softer inflation data, BoE MPC member Catherine Mann has expressed concerns about persistent inflation, particularly driven by the service sector, which has seen slower wage growth.
The recent UK Employment report showed a decline in wage growth, with Average Earnings Excluding Bonuses rising at a slower pace of 5.4%, the lowest in two years. This decline in wage growth is expected to ease some of the inflationary pressures in the UK economy, potentially supporting the BoE's case for more dovish monetary policy.
As a result, the GBP/USD pair is likely to remain volatile, with investors closely monitoring further UK economic data and BoE commentary for clues on future rate cuts.
Impact of Federal Reserve Rate Cut Expectations and CPI Data on GBP/USD
On the US front, the GBP/USD pair is heavily influenced by growing speculation of a Federal Reserve rate cut in September.
The latest US Producer Price Index (PPI) report for July showed softer-than-expected inflation, reinforcing expectations that the Fed might need to ease its monetary policy.
According to the CME FedWatch Tool, traders now see a 54.5% chance of a 50 basis point rate cut in September, a slight increase following the PPI data release.
The upcoming US Consumer Price Index (CPI) data for July is expected to show a slight deceleration in both headline and core inflation, with annual rates projected at 2.9% and 3.2%, respectively. If the CPI data confirms this slowdown, it could further weaken the US Dollar, supporting the GBP/USD pair's recovery.
However, if the CPI figures come in higher than expected, it could dampen market expectations for aggressive Fed rate cuts, potentially strengthening the US Dollar and applying renewed pressure on the GBP/USD pair.
Traders will be closely watching the CPI release at 12:30 GMT, as it will significantly influence the near-term direction of the GBP/USD pair.
GBP/USD - Technical Analysis
GBP/USD is currently trading at $1.28398, down 0.06% as it edges closer to key support levels. The currency pair is slightly below its pivot point of $1.2873, which is a critical level to monitor.
The daily chart shows that GBP/USD is in a delicate position, balancing between potential further losses and a possible recovery.
Immediate support is found at $1.2803, with subsequent supports at $1.2756 and $1.2701. If the pair breaks below these levels, it could signal a bearish continuation, potentially driving the price lower.
On the upside, resistance lies at $1.2934, followed by $1.2978 and $1.3030. A move above the pivot point at $1.2873 could shift momentum back in favor of the bulls, setting the stage for a test of these resistance levels.
The RSI is at 65, indicating that the pair is nearing overbought territory but still has some room to climb if buying pressure increases.
The 50-day Exponential Moving Average (EMA) at $1.2757 is providing solid support and aligning with the overall uptrend seen in recent sessions.
For traders considering a short position, an entry below $1.28551 could be strategic, with a take profit target at $1.27910. A stop-loss at $1.29034 would help manage risk if the pair unexpectedly moves higher.
The current technical setup suggests that GBP/USD could experience further downside pressure, but a break above the pivot could quickly change the outlook.
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- GOLD Price Analysis – Aug 14, 2024
GOLD Price Analysis – Aug 13, 2024
Daily Price Outlook
Gold prices (XAU/USD) struggled to stop the early-day's downward momentum, remaining under pressure around the $2,460.07 level and reaching an intra-day low of $2,458.56.
This decline can be attributed to risk-on sentiment, which tends to reduce demand for safe-haven assets like gold.
However, rising geopolitical tensions in the Middle East and fears of a broader conflict in the region could help limit further losses for gold.
Moreover, heightened expectations that the Federal Reserve (Fed) might begin aggressively cutting interest rates in September have weakened the US dollar, potentially supporting gold prices in curbing further declines.
US Dollar Weakness and Fed Expectations Impact Gold Prices
On the US front, the broad-based US dollar is losing traction as dovish expectations for the Federal Reserve (Fed) weaken the currency, which is helping to cushion gold’s losses.
Markets are anticipating a significant 50 basis point interest rate cut by the Fed in September, providing further support to the yellow metal.
Meanwhile, upcoming US inflation data, including the Producer Price Index (PPI) on Tuesday and the Consumer Price Index (CPI) on Wednesday, are expected to show cooling inflation in July, potentially giving the Fed more room to ease policy.
Market forecasts suggest a 0.2% increase in both headline and core CPI, following June's 0.1% decline in headline inflation.
However, if the CPI readings exceed expectations, it could dampen hopes for aggressive Fed rate cuts, potentially putting downward pressure on gold prices.
Rising Middle East Tensions and Global Uncertainty Drive Gold Demand
On the geopolitical front, rising tensions in the Middle East are driving demand for safe-haven assets like gold.
Israel has intensified operations near Khan Younis in southern Gaza, sparking fears of a broader regional conflict, especially as Israel prepares for possible retaliation from Iran and Hezbollah following the assassination of Hamas leader Ismail Haniyeh in Tehran.
Meanwhile, Russian President Vladimir Putin has warned Ukraine of a strong response to its recent incursion into the Kursk region.
These developments are creating uncertainty and supporting gold prices. In Gaza, an overnight Israeli strike killed at least 10 people, and the conflict has resulted in nearly 40,000 deaths and over 92,000 injuries in Gaza, with more than 1,100 killed in Israel during the October 7 Hamas-led attacks.
GOLD (XAU/USD) - Technical Analysis
Gold (XAU/USD) is currently trading at $2,462.635, down 0.32% on the 4-hour chart. The precious metal seems to be facing a period of consolidation as it hovers just above key support levels.
The pivot point at $2,473.57 is crucial today; if prices remain below this level, we could see further downside momentum.
Immediate resistance is found at $2,496.82, followed by stronger barriers at $2,515.33 and $2,535.14.
On the flip side, immediate support lies at $2,439.98, with subsequent support levels at $2,417.59 and $2,392.62.
The 50-day Exponential Moving Average (EMA) is positioned at $2,425.35, providing a solid floor for now.
The RSI is currently at 65, indicating that while the market isn't overbought, there is limited room for a further upward push before selling pressure increases.
Given the current setup, a sell limit at $2,473 with a target of $2,440 and a stop loss at $2,497 seems prudent.
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USD/CAD Price Analysis – Aug 13, 2024
USD/CAD Price Analysis – Aug 13, 2024
Daily Price Outlook
During the European trading session, the USD/CAD currency pair continued its downward trend, trading around the 1.3735 level and reaching an intra-day low of 1.3727.
This bearish movement is due to the weakening US dollar, which has been pressured by market expectations of potential Federal Reserve interest rate cuts.
On the other hand, the decline in crude oil prices is putting downward pressure on the commodity-linked Canadian dollar, which is somewhat mitigating the overall decline of the USD/CAD pair.
US Dollar Weakness and Fed Rate Cut Expectations Impact USD/CAD
On the US front, the broad-based US dollar has continued to weaken, driven by the dovish stance of the Federal Reserve. This decline is largely due to market expectations of a potential 50 basis point interest rate cut by the Fed in September.
Meanwhile, the upcoming US inflation data, including the Producer Price Index (PPI) on Tuesday and the Consumer Price Index (CPI) on Wednesday, are expected to show cooling inflation for July.
This could further support the Fed's potential easing of policy, contributing to the ongoing bearish trend in the dollar.
Therefore, the US dollar's ongoing weakness, driven by expectations of a 50 basis point rate cut and cooling inflation data, is putting downward pressure on the USD/CAD pair. This trend is exacerbated by the dovish Federal Reserve stance.
Impact of Falling Oil Prices and Bank of Canada Rate Cuts on the USD/CAD Pair
On the CAD front, the upticks in the USD/CAD pair might gain traction due to falling crude oil prices, which impact the Canadian dollar, a commodity-linked currency.
Canada’s largest export is crude oil, and the recent drop in West Texas Intermediate (WTI) oil prices to around $75.40 per barrel poses challenges for the CAD.
This decline is due to concerns about weaker demand and OPEC's reduced 2024 growth forecast for China, which continues to pressure the CAD.
Meanwhile, the Bank of Canada (BoC) is expected to cut interest rates by 25 basis points at both the September and October meetings, which could further weaken the Canadian dollar.
The combination of lower oil prices and potential rate cuts could fuel the CAD's strength, influencing the USD/CAD pair's movements.
USD/CAD - Technical Analysis
The USD/CAD pair is currently trading at $1.37326, down 0.02% on the 4-hour chart, showing a slight decline as it hovers just below the pivot point at $1.3748.
This level is crucial as it represents a potential turning point for the pair. If USD/CAD fails to break above this pivot, we might see further bearish movement.
The immediate resistance is at $1.3789, aligned with the 50-day Exponential Moving Average (EMA) at $1.3788. This area is a key resistance zone; a break above it could shift the momentum back to the bulls.
However, if the pair continues to trade below this resistance, the bearish outlook remains strong.
The next resistance levels are at $1.3841 and $1.3890, but these will only come into play if the pair manages to climb above $1.3789.
On the downside, immediate support is found at $1.3688, with further support levels at $1.3645 and $1.3603.
The Relative Strength Index (RSI) is at 41, suggesting there’s room for more downside before the pair becomes oversold.
Given the current technical setup, selling below $1.37475 with a target of $1.3688 and a stop loss at $1.37834 seems to be a sound strategy.
The market's inability to clear the 50-day EMA indicates that sellers are likely to maintain control in the short term.
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AUD/USD Price Analysis – Aug 13, 2024