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Gold, WTI Crude oil and EURUSD - Intra week technical outlook, 07/02/20

Gold prices recover, but will it hold?

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The precious metal is paring losses as the rebound is seen coming in for the second consecutive day. After posting double digit losses earlier in the week, the precious metal made up the losses quickly. The gains came despite investor sentiment riding high. Question is whether gold will be able to maintain this strong momentum.

Price action in gold currently indicates a possible move back to the price level of 1571.50. There is a high chance that gold prices will face resistance at this level. As long as this level holds, gold prices could be posting a reversal. If this is confirmed, we expect the downside to come into effect.

The lower target is seen at the 1523 level of support. However, given that the Stochastics oscillator is slightly inclining upward from the current oversold level, there is scope for a breakout higher.

Crude oil inventories rise

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The latest weekly report from the U.S. based Energy Information Administration (EIA) showed another week of rising inventory levels. Data showed that crude inventory rose 3.4 million barrels for the last week of January. This comes on up of a 3.5 million barrel increase from the week before. Despite the gains, oil prices remained muted.

Crude oil prices are showing signs of bottoming after price hit lows of 49.42. The strong rebound in price action on Wednesday suggests a possible retracement. However, price needs to break the strong confluence of the trend line and the horizontal resistance level. Therefore, only a close above 52.00 will confirm any further upside.

For the moment, the downside looks to be completed. Unless there is a reversal and a strong breakout below the lows of 49.42, we see the risks somewhat muted. Above the 52.00 level, crude oil prices could be on track to retest the 58.00 level.

EURUSD awaits payrolls data

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The euro currency remains trading flat. Economic data from the Eurozone was also grim. The latest manufacturing data from Germany showed that german manufacturing plunged 2.1% in December. This came after a modest 0.8% increase in the month before. Meanwhile, data from the U.S. continues to outperform that from the Eurozone.

The currency pair has been steadily declining following the break of the trend line. This indicates that price action could be on track for a move toward the 1.0958 level of support. A firm retest of this level will establish support level more strongly. It could also potentially indicate a rebound later on.

However, economic fundamentals need to be in place for such a recovery. Therefore, there are some risks that the EURUSD could slip below the 1.0958 level and extend declines further. This will push the common currency down to 1.0900 level. This will be a retest of the lows from October last year.

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