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:
- UK unemployment rate at 07:00 AM GMT. The market consensus is that the figure will be increased by 0.1% for the month of September. This might not have a major effect on the pound since the data might already be priced in and the change is not very influential.
- US Inflation rate at 13:30 GMT where the expectations are for a decline of around 0.4% reaching 3.3% for the month of October. If this is broadly accurate then it might influence a more dovish stance by the Federal Reserve on their next meeting in December and therefore creating minor losses for the Dollar at least in the short term.
- Japanese preliminary GDP growth at 11:50 PM GMT where the annualized figure is expected to drop from 4.8% to -0.6% and the quarterly figure from 1.2% to -0.1%. If these expectations are confirmed then the Japanese Yen might witness some short term losses against other currencies traded against.
- Chinese Industrial production at 02:00 AM GMT. The figure for the month of October is expected to decline to 4.3% against the previous reading of 4.5%. If this is confirmed on the publication of this data then it might create some losses on the production related commodities such as crude oil, silver and copper.
- UK inflation rate at 07:00 AM GMT. The consensus is for a decline from 6.7% to 4.8% in October. If the consensus is correct then it would be the yearly low figure of British inflation and could potentially create some short minor losses for the quid since it could influence the decisions of the Bank of England on their next meeting.
Oil prices fell on Monday due to concerns over waning demand in the United States and China, as well as mixed signals from the U.S. Federal Reserve. Weak economic data from China like the weaker than anticipated balance of trade and negative inflation figures and reduced demand from Chinese refiners added to the market’s worries. However, prices could be supported if Saudi Arabia and Russia continue their voluntary supply cuts.
On the technical side the price is trading on the resistance area of the 61.8% of the weekly Fibonacci retracement level while the Stochastic oscillator is shifting towards the neutral area but still in somewhat oversold levels. This might indicate that a correction to the upside might be imminent and adding to that correction narrative is the fact that the 50 day moving average is still trading above the slower 100 day moving average. Since there is no crossing below the slower moving average then the bullish momentum has still to be reversed therefore a correction to the upside is a highly possible scenario in the short term.
If this scenario plays out then the first area of possible resistance could be laying around the $80.50 which is the 50% of the weekly Fibonacci retracement level as well as the previous area of price reaction in early November.
Gold prices remained near a three-week low as the dollar remained strong and investors await U.S. inflation data to gauge the Federal Reserve’s stance on interest rates. The decline in gold prices last week was attributed to Fed Chair Jerome Powell’s hawkish remarks while the upcoming U.S. consumer prices index (CPI) data is expected to play a role in determining the Fed’s decision at their next meeting. The dollar’s strength made gold less attractive to other currency holders and the macroeconomic backdrop is supportive of gold, with the U.S. monetary tightening cycle seemingly near its end and the dollar peaking.
From the technical point of view gold price is currently testing a major technical support level which consists of the 38.2% of the daily Fibonacci retracement level, the lower band of the Bollinger bands and also is just above the area where the 50 and the 100 day moving averages touch. All of these aspects make the price area of $1,930 very strong support to the price and is also the psychological support of the round number. In addition the Stochastic oscillator is recording extreme oversold levels so the majority of the technical indicators point to a correction to the upside in the near short term outlook. If this proves to be accurate then the first area of possible resistance might be found around the $1,960 level which consists of the psychological resistance of the round number as well as the 23.6% of the daily Fibonacci retracement level.
Disclaimer: the opinions in this article are personal to the writer and do not reflect those of Exness or Finance Feeds.