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Gold, WTI Crude oil and EURUSD - Intra week technical outlook, 05/02/20

Gold prices fall for two consecutive days


The precious metal is retreating, just two days after it attempted to break to new higher close. The retreat in gold prices comes amid a strengthening U.S. dollar. The dollar has been trading higher amid a strong patch of economic reports. Also, investors seem to be more optimistic despite the possible economic impact due to the Coronavirus.

The current declines are pushing gold prices below the key level of 1556 – 1557. If we see a daily close below this level, we expect prices to touchdown to the 1522.80 level eventually. However, a price correction could see gold retesting the 1556 – 1557 level. If resistance forms here, then we anticipate a move lower.

To the upside, in the unlikely event that the resistance holds, then gold prices could maintain a sideways range. Given the fact that price action failed right after a new high, we expect some consolidation to take place.

Crude oil weaker on lower demand

WTI 0502

Crude oil prices have gained the bearish momentum into the week. The declines were set off after reports of a possible lower demand for crude oil. This comes largely as the Chinese economy is expected to be hit the hardest. This has prompted OPEC officials to consider cutting production even further. However, oil prices did not react much to the comments.

The current declines pushed oil prices to briefly retest the 50.00 psychological support level. The rebound could now face a minor resistance at the 52.00 level. However, if prices breakout above this level, then we expect to see a move to the upside. The next major resistance levels are found at the 54.00 level followed by the 60.65 region.

There is a risk for oil prices to drift lower. This will be confirmed if prices close below the 50.00 level. For the moment, the price action remains bullish, meaning that the downside remains limited for now.

Euro slips on dollar strength


The euro currency maintains its flat trading as the common currency gave up the gains from earlier. The dollar is stronger, largely thanks to a strong ISM manufacturing report. The U.S. manufacturing PMI from ISM beat estimates to break a five month contraction period. At the same time, economic data from the Eurozone continues to remain sluggish.

The currency pair reversed gains after a rebound that pushed prices back to the trend line. With the trend line acting as a dynamic resistance, the move lower could be confirmed. But the EURUSD will need to test the previously established lows near 1.1000. A close below this level will confirm further downside.

Given the fact that the support area 1.0958 is pending retest of support, we expect the declines to continue in the medium term horizon.

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