Weekly data: Oil and Gold
This preview of weekly data looks at USOIL and XAUUSD where economic data coming up later this week are the main drivers in the markets for the near short term outlook.
The most important economic data for this week are:
1. British unemployment at 06:00 AM GMT for the month of August is expected to hold steady at 4.3% while the claimants are expected to increase to 2,300 for the month of September compared to the previous recording of 900.
2. German Flash Manufacturing PMI for October is expected to increase by 0.4 points reaching the 40 mark. Even though this might seem like a minor improvement it is still below the 50 level indicating that the manufacturing sector in Europe’s top economy is still not essentially growing.
3. Australian inflation rate is generally expected to decline and reach 5.3% against the previous 6%. If this is accurate then the Aussie dollar might face some minor losses against its pairs because it might pose a reason for dovish stance by the RBA at their next meeting on the 7th of November.
4. The Bank of Canada Interest rate decision at 14:00 GMT is expected to remain stable at 5%. In case of a surprise hike in the interest rates would support the loonie in the short term while in the unlikely event of a rate cut then it might create some turmoil for the currency.
5. ECB Interest rate decision at 12:15 PM GMT. The market consensus is that the central bank of Europe will take a pause at 4.5% at their meeting on the 26th. If there is a surprise rate hike then the Euro might find support against other major currencies while a cut might create some losses in the short term. Investors and traders are rather focused on the subsequent press conference following the release that will be focusing to get hints on the monetary policy steps ahead.
6. US GDP growth for the third quarter is expected to double and reach 4.2%. If this rather optimistic expectations are met then it might boost the Dollar while hurting many of its instruments traded against it.
7. The US core PCE price index for the month of September is expected to increase to 0.3% against the previous 0.1%. If these figures are broadly accurate then it might create some support for the Dollar whereas in the event of a more soft PCE reading then the Dollar might weaken.
Oil prices remained steady as talks over hostage releases were said to potentially delay a ground invasion of Gaza by Israel while Israel warned that Iran-backed Hezbollah could drag neighboring Lebanon into the war. There is a potential for a wider regional conflict, which could lead to a significant increase in oil prices. Aid convoys have started to arrive in Gaza from Egypt, and there is relief in the oil market that Israel is holding off on a ground incursion, allowing for diplomatic efforts. Meanwhile the risk of reduced oil supply due to the conflict may have been eased by the U.S. decision to suspend sanctions on Venezuela.
On the technical side the price has made a minor rally in an effort to retest the round number of $90 but it ran out of steam just short of this area mostly because of the inside resistance level of $89.50 where price reacted in late September. Currently the price of ‘black gold’ is just above the support area of the 38.2% of the weekly Fibonacci retracement level and the 50 day moving average. The Stochastic oscillator is near the extreme overbought level which might indicate that a short term continuation to the downside might be the dominant scenario. If this proves to be true then the area between $85-$86 could be the strong technical support area which consists of the 38.2% of the weekly Fibonacci retracement and the psychological support of the round number.
Gold prices held steady on Monday after reaching a five-month high in the previous session as the US dollar and Treasury yields strengthened ahead of important economic data this week. Investors are closely monitoring the escalating unrest in the Middle East and awaiting key U.S. economic data like the GDP growth and the PCE readings. The rise in U.S. Treasury yields has reduced the appeal of non-yielding gold, however if ETF investors return to the market, it could provide a boost for gold prices. COMEX gold speculators switched to a net long position, reflecting investor sentiment towards bullion.
From the technical point of view gold prices have found sufficient resistance on the upper band of the Bollinger bands which was just below the $2000 level and have since corrected to the downside. Currently the price is trading exactly on the 38.2% of the weekly Fibonacci retracement level testing its support strength. The 50 day moving average is still trading below the 100 day moving average validating the overall bearish momentum in the market is still valid for the time being. The extreme overbought reading on the Stochastic oscillator also supports the bearish narrative whereas in the event that this scenario prevails we might see some major support around the $1,940 area which consists of the 50% of the weekly Fibonacci retracement level as well as the psychological support of the round number.
Disclaimer: the opinions in this article are personal to the writer and do not reflect those of Exness or Finance Feeds.