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Gold, Oil and EURUSD Weekly Analysis - Week 01

Gold prices settle near the top with a doji

XAUUSD 0401

The precious metal was trading rather flat in the final trading week of 2020. Heading into the year-end close, gold prices have closed flat farming a doji candlestick pattern. Price action still remains way off from the recent highs that were formed in August last year. For the moment, gold prices remain confined within the sideways range of 1900 and 1850.

A bearish follow through following the dodgy pattern could potentially indicate the onset of a decline in gold prices. However, to the downside, we have the 50 day moving average which could act as dynamic support. Still, price action will continue to maintain the sideways range which will eventually lead to a breakout in prices.

The bias is to the downside and following a breakdown below the 1850 level, we could expect gold prices to test the 200 day moving average which sits around the 1800 level. The stochastics oscillator is also kind of oversold and could indicate this downside movement in the near term. To the upside, gold prices will have to break out above 1900 and this will open the way for a test towards the 1950 level next.

Oil prices await further cues from OPEC+

WTI 0401

WTI crude oil prices have been trending higher, however price action turned flat into the final trading week of 2020. As a result, oil prices have been consolidating near the 48 level for the past week. The next big event for oil traders will be the OPEC+ meeting which is due to take place on the 4th of January.

OPEC+ leaders are likely to debate on whether to raise oil production by an extra 500,000 barrels. However, there are disagreements between Russia and Saudi Arabia. Russia is said to be in favor of raising oil production while Saudi Arabia is said to prefer a more cautious approach. As a result, the outcome of the meeting could see investors in the oil markets reacting accordingly.

The bias in the oil markets is to show a correction to the downside. Therefore, we could expect oil markets to potentially post a correction to the 50 day moving average which is likely to act as dynamic support. To the upside, oil prices will need to make a major breakthrough and target the psychological level of $50 a barrel.

EURUSD weakens into the year-end close

EURUSD 0401

The euro currency managed to post new highs heading into the yearly close, however price action gave back the gains from the previous two days on the last trading day of 2020. As seen from the charts, there is a strong bearish candle stick pattern which could suggest further follow through to the downside. This could mean that the euro currency could potentially start posting or short term correction.

The 50 day moving average which sits just above the 1.2000 level is likely to act as dynamic support for the moment. However, if the euro currency loses this support, then we could expect to see further declines. The next main support level resides near the 200 day moving average which sits just above the 1.1600 level.

The stochastics oscillator is also showing a bearish divergence. This is indicative of the correction which is evidenced from the bearish outlook as seen in the price action. Therefore, the EURUSD is likely to move lower in the coming sessions. To the upside, the euro currency will need to post new highs in order to confirm the continuation to the upside.

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