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Gold, Oil and EURUSD Weekly Analysis - Week 36

Gold marks a bearish close in four weeks

Gold 0209

Gold accelerated the declines for three consecutive days and closed the week on a bearish note. This was the first bearish close in nearly four weeks. The declines however come as gold prices marked a new six year high this week.

Following the bearish close below the support area of 1534, we expect the precious metal to continue to push lower. This basically starts the correction in the precious metal. We expect the declines to however be limited in scope. Unless gold rebounds and tests the 1535 level for resistance, further declines could be risky.

The data comes as traders look to a new trading month. Lot of economic data and central bank policy meetings will keep gold traders busy. Also, the ongoing narrative about the trade wars will see the volatility alive in the precious metal. Watch for a top to be confirmed around the 1534 area ahead of further declines.

WTI Crude oil fails to clear resistance

WTI 0209

Crude oil prices attempted to break past the resistance area that has been clearly established near the 56.00 handle. Multiple tests to these levels were met with sharp declines. Similarly, on Friday, crude oil prices erased part of the gains made from earlier in the week.

The commodity is likely to remain trading flat in the short term. Fundamentally, the markets remain mixed on the global outlook for crude oil. With the lower growth rates that are being forecasted, the demand for crude oil remains subdued.

While the resistance area of 56.00 has proven strong so far, this has led to oil prices forming higher lows. As a result, there is a good chance that the current consolidation is seen as a formation of an ascending triangle pattern. A breakout above the 56.00 level as a result will put oil prices on track to target $60.00 handle.

Euro falls to a two-year low

EURUSD 0209

The euro currency was seen closing the week on a bearish note. The common currency fell to a two-year low by Friday’s close at 1.1099. The declines come amid the euro currency trading flat for the most part. Deteriorating economic conditions in the Eurozone keep the currency biased to the downside.

By Friday’s close, the EURUSD was seen testing the lower trend line. While price closed below this trend line, we expect to see some rebound in the short term. As long as the EURUSD does not settle back close to the 1.1111 region, we expect further declines along the way.

Part of the declines are also attributed to traders taking positions ahead of the ECB meeting in a few week’s time. The central bank’s pledge to restart the QE program and possibly cut interest rates keeps the bias to the downside in the euro for now.

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