This preview of weekly data looks at USOIL and XAUUSD where economic data coming up later this week are the main market drivers for the near short-term outlook.
Highlights this week: British inflation rate, Fed interest rate decision, BoE interest rate, Japanese inflation, BoJ interest rate
Wednesday:
- UK inflation rate at 06:00 AM GMT. The consensus is for a pause at the current level of 2.2%. If the publication comes out higher than expected then the pound might find some short-term support against its pairs. On the other hand, if the figure is lower than expected it could influence a more dovish stance from the Bank of England on their next meeting.
- Fed interest rate decision at 18:00 GMT is broadly expected to be the first rate cut since the beginning of the ticketing by the central bank. According to the Fedwatch tool there are 41% chance of a 0.25% cut and 59% of a 0.50% cut. Participants are focusing closely on what the comments in the subsequent press conference will be in an effort to get some hints as to the future direction of monetary policy.
Thursday:
- The Bank of England decides on their interest rate at 11:00 PM GMT. The general expectation is that the central bank will hold their rate stable at 5% but in the event that we witness another rate cut it could put some pressure to the quid in many of its pairs, especially against the US dollar whereas in the unlikely event of a hike it might give some support on the British pound in the aftermath of the release.
- Japanese inflation rate at 23:30 GMT. The expectations for the month of August is that the rate could go up to 3% from the previous 2.8%. This might be somewhat bullish news to the market participants trading the yen.
Friday:
- Bank of Japan Interest rate decision at 04:00 AM GMT. The market consensus is that the rates will remain static at 0.25% while in the unlikely scenario of any shift away from this figure will most certainly create volatility on the yen pairs.
US OIL daily
Oil prices rose slightly on Monday, with U.S. crude oil prices trading around the $68 price area. Gains were limited by weak Chinese economic data and ongoing demand concerns. Despite easing supply disruptions as Gulf of Mexico oil production resumed after Hurricane Francine, about 20% of oil and 28% of natural gas production remain offline. The market is focused on the U.S. Federal Reserve’s interest rate decision, with traders expecting a rate cut, possibly 50 basis points, which could affect oil demand. Chinese industrial output and fuel demand have slowed, increasing bearish sentiment in the oil market. Speculators are also taking short positions in Brent crude as demand fears grow.
On the technical side, the price is testing the support of the 161.8% of the daily Fibonacci retracement level after finding sufficient support on the lower band of the Bollinger bands. The faster moving average (50-days) is trading below the slower (100-days) moving average validating the overall bearish trend in the market while the Stochastic is near the extremely oversold level hinting that there might be a bullish correction in the coming sessions. If this becomes reality then the first area of possible resistance might be seen around the $72 price area which consists of the area just below the 78.6% of the daily Fibonacci retracement as well as the area of price reaction in early and late August.
Gold-dollar, daily
Gold prices extended gains and were recording a new peak around $2,589-$2,590, as investors just built on rate-cut hopes from the Federal Reserve. The rise of gold as a perceived safe-haven asset, while U.S. bond yields may remain at lower levels and the US dollar softer due to political uncertainty also ahead of the U.S. economic month elections, coupled with increasing geopolitical risks keep supporting gold but positive global market mood capped further gains. The next likely source of volatility, and guidance on the future direction for gold prices comes from this week’s FOMC meeting as well as policy meetings this week by both the Bank of England (Thurs) and Bank of Japan (Fri).
From a technical point of view, the price hit a new all-time high pushing the Stochastic oscillator to the extreme overbought level possibly hinting at a potential bearish correction in the near short term. On the other hand, it would not be strange for the oscillator to remain in extreme overbought level for a prolonged period of time if we don’t see a new catalyst in the market to create selling pressure. The moving averages validate the overall bullish trend in the market for gold and no other major indications are there to support a bearish reversal for the time being.
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