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Gold, Oil and EURUSD Weekly Analysis - Week 11

Gold prices log solid gains on the week


The precious metal recovered from the sell from last week and fully retraced the losses. By Friday’s close, gold prices settled back close to the yearly highs formed just a week ago. However, failure to break past the previous highs near the 1690 region could suggest some kind of weakness.

The main resistance area is seen at the 1680 level. Therefore, if there is a reversal at this level with a bearish follow through then we expect to see some correction. Alternately, a breakout above 1680 will indicate further upside with a target to the 1700 region.

To the downside, the minor support at 1640 will be critical in the short term. If there is a break down below this level, then gold prices could advance lower. The next main support is seen at the 1580 handle which could be easily tested. However, a lot will depend on how the fundamentals will turn out over the week.

Crude oil prices tumble to a three-year low

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Oil prices continue to suffer as OPEC and Russia failed to reach an agreement on production cuts. Earlier in the week, Saudi Arabia and other member nations agreed to cut production by over a million barrels. The OPEC members were waiting for Russia to buy in as well. But Russia refused and instead asked OPEC member nations to pump oil at will.

This sent oil prices stumbling sharply as it lost the 45.20 handle. By Friday’s close, oil closed at 41.50. The declines in oil prices could indicate further pain in the near term. However, a lot will depend on how prices will react to the 41.50 which is a support level over the long term.

The Stochastics are currently pointing to a higher low against the lower low in price. Thus, we anticipate a rebound. But a lot will be seen on how price will follow through there, as there is a strong chance for a dead cat bounce.

Euro hits a one and half year high


The euro currency continues to maintain the front foot as it finally broke past the resistance level that it was struggling at over the week. By Friday’s close, the EURUSD briefly high 1.1350 before retracing back some of the gains. The gains come against the USD which remains weak.

The breakout above the resistance level of 1.1200 and 1.1224 indicates that price action could see further gains in the near term. However, considering that we have the ECB meeting later this week, this bullish view could be at risk.

The ECB could be looking into cutting interest rates, taking a cue from all other major central banks. Therefore, there is a risk that the EURUSD could give back the gains. Watch for a close below 1.1200 which will suggest some consolidation on the horizon.

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