Gold, Oil and EURUSD Weekly Analysis - Week 31

Gold tests 1900 for the first time in 10 years

The precious metal resumed its strong move to the upside as it attempts to close above the 1900 mark. Souring tensions between US and China is fueling a rally in gold pushing it to a fresh decade high. This comes amid fears that the economic hit due to the pandemic will push the world's largest economy into a recession. Gold prices have surged 24% this year underpinned by low interest rates and massive stimulus policies from central banks around the world.

The precious metal continues to post a steady gain with prices rising to intraday highs of 1906.46 before slightly pulling back into the day’s close. The strong gains come following nearly five consecutive daily gains in prices. Any declines could see gold prices to pullback to the 1850 level.

As a result, we could expect gold prices to remain within a range of 1900 and 1850. However, if price action closes above the 1900 level on a daily basis, then we could expect gold prices to rise to the 2000 level which will be the next target level for the precious metal.

Oil prices hold steady despite a weaker USD

Crude oil prices edged slightly higher on Friday supported by a weaker US dollar. Although the ongoing trade tensions between the United States and China might sour appetite for crude oil. Oil prices have been struggling near the 41- 42 level, weighed by the technical resistance and the 200-day moving average. A correction in the near term could be possible is demand continues to sour in the coming months.

Heading into the weekly close, the precious metal is being supported by the 20-day moving average. But there is an increasing risk of a decline if price loses the handle. This could see oil prices extending declines down to the 50-day moving average.

This level coincides with the confluence of the horizontal support level near the 38.00 level. As a result, we might get to see oil prices falling lower toward the 37.50 through 38.00 level in the medium term. To the upside, the bullish bias will pick up momentum on a daily close above the 42.00 level.

Euro remains a preferred currency bet against a weaker dollar

The US and China trade tensions alongside the Coronavirus pandemic is making the euro the preferred currency of choice. Latest PMI reports from the Eurozone are also supportive of the bullish bets, bolstering the rationale behind the recent surge in the euro currency. On Friday, China ordered the closure of the US embassy in Chengdu, in a retaliatory move following the closure of the US embassy in Houston.

The common currency is now trading above the 1.1600 level. We could expect price action to now target the 1.1900 level quite easily. However, for this to be confirmed, some upper support needs to form above the 1.1600 level. But at the same time, there is scope for prices to continue to push higher.

The bias to the downside is limited for the moment. But this could change if prices fall below the 1.1600 level. The next main support at 1.1400 is the target in case that the common currency heads for a correction.