Image Source: Unsplash
 

EUR/USD rises above 1.1750 as the USD weakens

• EUR rises ahead of ECB speakers, consumer confidence data
• USD falls with Fed speakers in focus
• EUR/USD rises above 1.1750

EUR/USD is rising, bouncing off an earlier low of 1.1720, reclaiming the 1.1750 level amid a weaker USD and ahead of a series of speeches from ECB officials and Eurozone consumer confidence.

Consumer confidence is expected to improve very modestly to -15.4 in September, up from -15.5. ECB Chief Economist Philip Lane and Bundesbank President Joachim may give more clues over the ECB’s outlook for rates. With inflation at the 2% target level, policymakers have left rates unchanged for two straight meetings.

Over the weekend, ECB officials Khazaks and Scicluna assessed the bank’s monetary policy as being well placed with no rush to cut rates further.

The EUR is broadly supported by expectations that the ECB is at the end or at least near the end of its rate-cutting cycle. This is in contrast to the Federal Reserve, which cut rates last week, and the dot plot pointed to two further rate cuts this year. However, Powell said that the rate cut was more of a risk management move and was cautious regarding further rate cuts.

The USD will look to a plethora of Fed officials speaking this week, including Powell tomorrow. Stephen Miran’s speech today will be watched closely after he voted to cut rates by 50 bps. Comments from Waller and Bowman will also be closely monitored after they both voted for a 25-bps rate cut instead of a 50-bps rate cut.
 

EUR/USD forecast- technical analysis

EUR/USD broke out above the falling trendline resistance, reaching a 2025 high of 1.1915. The price reversed lower, finding support on the rising trendline support at 1.1730.

Should this support hold, buyers will look to extend gains towards 1.1830the July high, ahead of 1.1915 and fresh multi-year highs.

Should sellers break below this support and 1.17 round number, a break below 1.1580 creates a lower low.
 

(Click on image to enlarge)

XAU/USD hits a record high, but looks overstretched

• Gold rises after the Fed cut rates by 25 bps last week
• Geopolitical tensions weigh on equities
• Gold rises to 1760 but the RSI is overbought

Gold has extended gains from last week, rising to a record high above 3750 on Monday, as the fundamental backdrop remains supportive.

Worries over the Federal Reserve loosening monetary policy even as inflation remains sticky above the 2% target, has driven gains in both safe haven Gold and riskier assets such as stocks. Meanwhile, the USD is being sold as a hedge. The USD trades 10% lower this year and could come under further pressure if the Fed cuts again in October and December.

Non-yielding Gold performs better in a low interest rate environment because the opportunity cost of holding Gold is lower. Furthermore the weaker USD as a result of lower rates and lower rate expectations also lifts USD denominated Gold.

Fed speakers this week and US core PCE inflation data will be key in setting market expectations.

Meanwhile, European markets have opened lower as tensions remain high between Russia and Europe, and geopolitical tensions surrounding Israel and Gaza add to the bullish picture for safe-haven gold.

In addition to lower rate expectations, inflation worries and safe haven flows central banks continue to buy Gold at the fastest pace in decades amid diversification away from the USD.
 

Gold forecast – technical analysis

Gold extended its rally above Tuesday’s high of 3703 to a new record high of 3725. The RSI is well into overbought territory, so buyers should be cautious at these levels. Pullbacks will likely be seen as buying opportunities. Support can be seen at 36100, the September 9 low.

With blue skies above, 3750 and 3800 are the next logical levels to watch.
 

(Click on image to enlarge)

More By This Author: