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 Unemployment, US Inflation rate, ECB interest rate decision
Tuesday:
- British unemployment at 06:00 AM GMT for the month of July is expected to decrease to 4.1% while the claimants are expected to also decrease to 95,500 for the month of August compared to the previous recording of 135,000.
Wednesday:
- British GDP growth at 06:00 AM GMT. The market consensus is that the figure will be increased from 0% to 0.2% month over month. This might not have a major effect on the dollar since it is for the month of July however it would provide some hints on the overall economic performance of the British economy.
- US Inflation rate at 12:30 GMT where the expectations are for a decline of around 0.3% reaching 2.6% for the month of August. If this is broadly accurate then it might influence a more dovish stance by the Federal Reserve on their next meeting and therefore creating minor losses for the Dollar at least in the short term.
Thursday:
- ECB Interest rate decision at 12:15 GMT. The market consensus is that the central bank of Europe will make their second rate cut going from the current 4.25% to 4%. On the other hand, a lower rate would create some minor losses for the Euro against its pairs mainly the US dollar. Investors and traders are also focused on the subsequent press conference following the release which will be rather insightful on getting hints on the monetary policy steps ahead.
- S Producers Price Index (PPI) at 12:30 GMT. Market participants are expecting the figure to come out at 0.2% over 0.1% of the previous reading. If this is confirmed then it could potentially contribute to slightly higher inflation figures in the coming months since higher producers’ costs usually roll down to consumers pushing inflation figures to the upside.
USOIL, daily
The price of oil is recovering after a significant drop last week, with Brent reaching close to $72 a barrel and West Texas Intermediate above $68. The drop in oil prices was driven by concerns over economic slowdowns in the US and China, which could reduce demand despite ample supply. Market analysts suggest that the recent losses may have been excessive, as indicated by the 14-day relative strength index reaching 33, a level considered oversold. Upcoming reports on demand and weather risks are expected to provide further clarity on the outlook for oil demand. The commitment of traders report shows an uptick in commercial traders hinting that there might be a bullish correction in the near short term.
On the technical side, the price has been testing the support area of the 161.8% Fibonacci extension level and the lower band of the Bollinger bands which still holds for now since there is no valid break below it yet. The 50-day moving average is still trading below the slower 100-day moving average validating the bearish trend in the market while the RSI indicator is in the oversold levels hinting that a correction move up might incur in the upcoming sessions.
Gold-dollar, daily
Gold prices dipped as the dollar strengthened, with investors closely monitoring upcoming U.S. inflation data to assess potential Fed interest rate cuts. Gold price faces selling pressure as the reduced likelihood of a larger rate cut by the Fed boosts US dollar and bond yields. The possibility of a 25 or 50 basis point cut at the upcoming Fed meeting next week hinges on the outcome of the August U.S. consumer price data and Thursday’s Producer Price Index. On the other hand, worries about the US economic downturn and geopolitical tensions limit gold price downside, offering support as a safe-haven asset.
From a technical point of view, the price is once again testing the support area of the 23.6% of the daily Fibonacci retracement level without breaking below while the Bollinger bands have shrunk indicating that volatility is somewhat limited. The 50-day moving average is trading well above the 100-day moving average validating the overall bullish trend in the market while the Stochastic oscillator is in neutral levels hinting that the short-term direction of the trend might go either way. Despite potential rate cuts, gold prices are not expected to see a dramatic loss, with key support at $2,470 and resistance at $2,525.
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