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Gold, Oil and EURUSD Weekly Analysis - Week 10

Gold prices down over 3% into Friday’s close

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The precious metal was down over 3% into Friday’s close, following similar trends in the equity markets. Some investors believe that this comes as investors are booking profits are suffering major losses in other assets which have fared poorly in the current situation.

Gold prices touched a seven year high earlier this week before giving up the gains on Friday. The declines are currently close to the 1560 handle where support was previously established. If there is a rebound, we could expect gold to reverse the losses and retrace back slightly. However, unless there is a higher high forming, we do not expect this bullish trend to continue.

A breakdown below the support area of 1580 – 1560 will signal the move for further downside in gold. This can be further validated by gold likely to form a resistance level at the same region. The next main downside support is at 1522.

Oil prices see no recovery on coronavirus meltdown

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Crude oil prices are not letting up on their bearish outlook. Investors continue to remain bearish on the commodity, which fell a further 2.27% on the day into Friday’s close. This comes as more and more countries outside China are starting to report the victims. Reduced demand on account of the virus is causing this slump.

After slipping to a two year low of 43.88, crude oil prices pulled back slightly to close near the support level of 45.20. This level was previously tested in late December 2018 and earlier on in July 2017. There are some initial signs of a turnaround in the price action.

This comes from the fact that the support level is a multi-year support and could therefore stall the declines.

A reversal here will see prices retracing the losses with the likelihood of testing the 52.00 handle once again. A breakout above this level will see crude oil rising to test the 55.22 region. In the near term, watch for price action to consolidate near the current support level.

Euro maintains its bullish streak

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The euro currency went into Friday’s close with solid gains in the pocket. The reversal near the 1.0800 handle has led to a strong recovery. Price action has also clearly closed above the support/resistance area of 1.0958 and briefly touched 1.1028.

On the economic side, data from Germany was largely positive as inflation remained stable. The U.S. dollar was also trading weaker amid the global narrative. Currently, we could see some sort of a pullback toward the 1.0958 handle. Overall, the EURUSD will likely consolidate between 1.1111 and 1.0958.

A breakout from this range will set the tone for the next stage in the direction of the common currency. Given the strong hidden bearish divergence, watch for any signs of weakness to the current gains.

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