Global equities keep climbing
With the risk-on investors’ sentiment across global financial markets, equities were supported by carry-trade flows and sustainable demand. Geopolitical tensions went off the market’s focus this past week, while macroeconomic data in leading regions showed a pick up in the pace of economic growth.
The only fundamental factor which held the U.S. and global stock indices from a more significant bullish rally was the markets’ expectation of the upcoming FOMC meeting and rate decision on September 18. That was the main reason why major benchmarks printed a slower appreciation compared to previous weeks. For instance, the S&P 500 index added only +0.84% to its value on a weekly basis, tech-heavy NASDAQ climbed only +0.33%, while the Dow Jones Industrial Average benchmark gained +1.50%.
The same trend was noticed in Europe as German DAX 30 surged +2.27% on the back of stimulus measures promised by the European Central bank, while French CAC 40 index renewed all-time high record, adding +0.92%. Asian stock indices soared led by Japanese Nikkei 225, which impressed investors with +3.72% weekly result.
Safe Haven currencies decline - Emerging Markets gain strength
The U.S. dollar index had a mixed performance this past week. On one side, the greenback was supported by short-squeezing flows in safe haven currencies (Swiss Franc and Japanese yen weakened) and commodity currencies (the Canadian and New Zealand dollars were also underperforming the rest of the currency market). On the other hand, a sudden demand for European currencies (Euro and British Pound surged) and high-yield emerging markets (USD/CNH, USD/MXN and USD/ZAR all in the red) weighed on DXY, which slid -0.16% this past week after testing resistance levels above 99.00 points.
Such a mix of multidirectional capital flows influenced sharp price action for cross-rates. For example, GBP/JPY soared +2.85% (400 pips), EUR/JPY added +1.56% (almost 300 pips) to the exchange rate, while EUR/GBP dropped -1.26% (115 pips).
Commodities headed South
The price of gold printed third consecutive weekly candlestick in the red. The yellow metal tested the long-term support level at $1484 per ounce after failing to hold previous gains above the psychological mark of $1500. Gold finished the trading week with -1.2% result at $1488.58 per ounce. The selling pressure could resume this upcoming week as other precious metals are also vulnerable to heavy-volume offers. Silver dropped more than 4%, closing the week at $17.44 per ounce. Platinum was flat while Palladium continued the bullish rally, closing the week above $1600 per ounce for the first time ever (+4.54%).
Oil traders were disappointed as WTI Crude could not hold mid-week gains above $58.50 per barrel, and reversed the price action south. As a result, oil price declined by 3% to $54.87. Brent Crude oil held above $60.00 support.
The most impressive action was seen in the fixed-income market as U.S. 10-year Treasury yields surged 21.49% to 1.899% on the back of the upcoming FOMC meeting this Wednesday.
Euro to Dollar forecast - EUR/USD for today and weekly
The heaviest volume-weighted currency pair had an extremely volatile week as European Central Bank was meeting for a rate decision and economic statement. Although the regulator stayed pat on the deposit facility rate, ECB President Mario Draghi promised more stimulus this year. That fundamental impact shifted the technical analysis on the second place, however, EUR/USD did not go off the recent descending channel.
The highest volatility was noticed on Thursday as the pair was sliding in the first half of the trading week, reflecting the technical sentiment. The lowest daily close rate was noticed at 1.10109 as the Bears failed to push EUR/USD below the psychological round-figure support at 1.10000. Thursday’s bearish action was nothing but whipsaw as the bulls stepped in with heavy-volume buy-orders at 1.09268 low, which was just 8 pips (5-digit quotes) higher than the multi-year low printed on September 3. EUR/USD surged almost 200 pips (counting from the bottom to top) in two days on the back of strong demand. However, the bulls failed to breach the descending formation of the green asymmetric triangle, closing Friday right under the resistance trendline.
The general technical outlook remains mixed with a bearish bias on the daily timeframe (see the screenshot below). The biggest achievement of bulls was that EUR/USD closed two days above 21-days Exponential Moving Average resistance, which used to hold rates since August 13. MACD histogram turned green, reflecting the bullish momentum, while its lines crossed each other, pointing to possible bullish continuation in the near future. However, 21-days Relative Strength Index remained below the 50% threshold, which divides uptrend from decline. The pair has to more obstacles before reversing the recent downtrend - EMA55 (1.11240) and EMA89 (1.11626).
Aggressive traders could consider going short on the pair, counting on a bearish bounce back to former resistance now support median line coming at 1.10000 approximately. However, such a scenario suggests quite a deep stop-loss order as buying pressure could keep lifting EUR/USD further North toward resistance levels mentioned above. Going long on the pair would be too dangerous as the technical analysis indicates that the long-term bearish trend is far from an end, and the bulls have to print more impressive achievements before making such an optimistic conclusion as the trend reversal. Therefore, conservative traders should have a wait-and-see position, especially in the light of upcoming crucial events on the fundamental front this week.
GOLD forecast for today and weekly: Bearish and Bullish Indicators
Although the long-term technical outlook remains in favour of the bullish continuation on weekly charts, the short-term momentum points to lower prices of gold. The past week’s performance was bearish with three consecutive candlesticks in the red. The bulls had an attempt to lift the price of gold back above Ichimoku’s resistance lines (former supports) on the daily chart below. However, the only thing left from that bullish run toward $1520 was just a shadow. After breaking through the Baseline support, the Ichimoku Cloud trend indicator suggests a deeper bearish retracement toward the span ($1453 per ounce) at least.
Secondary technical indicators point to a stronger bearish momentum compared to the end of August. Commodity Channel Index dropped back below the oversold threshold, indicating weakness. Awesome Oscillator turned negative as its red bars of the histogram had a declining formation. The last time AO was negative was at the end of May this year as the market was expressing indecisiveness at around the crucial level of $1280 per ounce. That does not mean such a low price of gold this Autumn, however, a deeper retracement might weigh on the yellow metal. It’s recommended to apply the sell-highs trading strategy, targeting the support range at $1440/50 per ounce.