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Over the past several weeks, the EURUSD currency pair has exhibited a strong and consistent bearish trend, starting from its peak in mid-July. This prolonged downward movement has caused the pair to trade well below its crucial 200-day Simple Moving Average (SMA), indicating sustained selling pressure.
As we look ahead to the upcoming trading week, there are two significant events that will probably impact the forex market’s dynamics: the release of the US Consumer Price Index (CPI) data and the European Central Bank (ECB) interest rate decision.
In terms of inflation dynamics, while there have been occasional CPI results that surpassed consensus estimates, indicating some inflationary pressures in the US economy, a noteworthy factor to consider is the sharp increase in oil prices. This rise in oil prices is expected to filter into the broader level of prices, which is likely to be observed as we enter the last quarter of the year. Therefore, the overall inflationary environment remains a point of attention for traders.
On the other side of, the performance of the US dollar has been noteworthy. Economic data releases from the US have consistently outperformed expectations, bolstering the strength of the US dollar. Unless there is a significant disappointment in the upcoming CPI figures for August, it is challenging to identify clear headwinds that would reverse the US dollar’s positive momentum.
Turning our attention to the ECB meeting scheduled for the upcoming week, there is speculation that the ECB may decide to increase interest rates by another 25 basis points. However, the economic environment in the Eurozone has been showing signs of deterioration, which raises the possibility that the ECB council might opt for a more cautious approach and keep interest rates unchanged.
Finally, in terms of technical analysis, it’s important to note that the EUR/USD pair faces a significant level of support at 1.0700. This level has played a pivotal role in the pair’s price action in the past, making it a critical challenge that traders will closely monitor in the near term. Should this level break, it could signal further downward pressure on the EUR/USD pair.
The current forex market outlook for the week leans towards a neutral stance, mainly due to the recent weakness observed in the British pound (GBP). This depreciation of the GBP has prompted a cautious approach among traders and investors. However, the direction of the pound’s movement in the coming days relies on several key factors.
Firstly, there’s the possibility of better-than-expected GDP data, coupled with potentially more than-average earnings data for August. This presents an opportunity for the GBP to rebound as positive economic indicators could restore market confidence. It’s noteworthy that inflation in the UK has exhibited remarkable resilience, suggesting the potential for wage pressures to increase. If the UK’s GDP follows the upward trajectory witnessed in July, it could serve as a catalyst for the pound to regain some of its recent losses.
From a technical analysis perspective, the currency pair, EUR/GBP, finds itself in a somewhat ambiguous position. It’s currently trading within a well-established range but is approaching a critical level of around 0.8610. This level has historical significance, as it previously triggered price reversals before testing higher channel resistance. As a result, market participants are closely monitoring this level, as it could significantly influence price dynamics in the near term.
Furthermore, the European Central Bank (ECB) is unlikely to add another interest rate hike in the near future. This lower probability suggests that the bullish momentum for EUR/GBP may start to wane in the upcoming week. However, it’s important to consider the broader context in the forex market, where major central banks are at a potential turning point concerning their peak interest rates. Given this backdrop, market participants are increasingly attuned to incoming economic data releases, and this data-driven approach may lead to the market downplaying recent directional movements. Forex traders and investors are keenly seeking fresh economic data for guidance as central banks adjust their monetary policies.
GOLD (XAUUSD) Forecast
In our recent updates shared in the free XOXO TraderFX’s Telegram group, we’ve provided insights into what to anticipate for this week regarding this pair. These insights are based on a combination of technical and fundamental analysis, which we’ll further elaborate on below.
Gold (XAUUSD), often referred to as the “yellow metal,” experienced a notable recovery in the previous month. This rebound was particularly significant as it originated from robust support levels, including the 200-day moving average and the June low, which was at 1890. Such support levels are closely monitored by traders and investors, as they often act as critical turning points in the market.
The rebound in gold prices can be attributed to several factors. Firstly, there was a temporary decline in US real yields, which are a crucial driver of gold’s performance. Additionally, economic data released in the latter part of August didn’t meet the exceedingly optimistic expectations that had been set. To provide context, the US Economic Surprise Index, which gauges how economic data compares to expectations, reached a two-year high at the end of July. However, as August progressed, the data began to fall short of these heightened expectations, impacting market sentiment.
Looking ahead, there’s a key resistance level at 1952 that gold needs to surpass to continue its upward momentum. If it fails to breach this level, we might see a retracement in gold prices. In such a scenario, the metal could potentially return to the critical support zones mentioned earlier, specifically the 200-day moving average and the range of 1885-1890, which represents the June and August lows. These levels are vital as they’ve proven to be pivotal in the recent price action.
It’s essential to watch for potential downside scenarios. If gold experiences a significant break below the aforementioned support levels, especially the 1885-1890 range, it could signal a shift in the broader trend. Such a break would not only put the February low of 1805 into focus but also pose a significant threat to the uptrend that commenced back in 2022. Therefore, these support levels hold immense significance for both short-term and long-term traders and investors, as they have the potential to shape the future trajectory of gold prices.
USOIL (WTIOIL) Forecast – Bullish
Over the past week, WTI crude oil prices displayed notable strength, posting a 1.4 percent gain. This rise contributes to an impressive 4.4 percent increase since the beginning of September. What makes this development even more noteworthy is the potential for the commodity to achieve a fourth consecutive monthly gain, a streak not seen since March 2022. This signals a sustained bullish sentiment surrounding oil markets.
Delving into the technical aspects, an examination of the monthly chart reveals a crucial juncture for oil prices. They are nearing a significant resistance level around the 93.16 mark. This level has historical importance and has acted as both support and resistance in the past. Therefore, it becomes a pivotal point to watch, as a breach or rejection at this level could influence future price movements.
Taking a closer examination of the daily chart, we observe an intriguing candlestick pattern known as a “Bearish Harami.” This pattern typically suggests a potential reversal of the prevailing uptrend. However, it’s essential to consider the context. On Friday, oil prices demonstrated strength by pushing higher, effectively challenging the significance of the Bearish Harami formation.
Despite this push higher, it’s crucial to remain vigilant as downside follow-through remains a possibility. Such a scenario could reinforce the bearish technical outlook suggested by the Bearish Harami pattern. Therefore, traders and investors are closely monitoring price action in the coming sessions to gauge whether the bullish momentum will continue or if a reversal is on the horizon.
These expansions provide a deeper insight into the recent performance of WTI crude oil prices, the critical technical levels, and the significance of the Bearish Harami candlestick pattern in the context of current market dynamics.
Key Economic Data This Week
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