Gold, WTI Crude oil and EURUSD - Intra week technical outlook, 12/07/19

Gold rallies on Powell dovish remarks

Gold prices posted strong gains on Wednesday evening after the Fed Chair Jerome Powell gave his testimony to U.S. Congress. In his prepared remarks, Powell hinted that the Fed could cut rates by 50 basis points at the next Fed meeting, due in July. The dovish remarks sent the precious metal higher.

However, following the gains, gold prices failed to make any further headway. Rather, we see a top being formed near the 1420 handle. This was the previous highs in the precious metal which failed to breach.

As a result, we expect to see some downside price action. The initial support at 1360 remains the short term target, while a larger than expected decline could push gold prices down to the 1320 level of support. Alternately, there is scope for gold prices to remain range bound, trading off the levels near the 1420 region.

Crude oil rebounds on larger inventory draw

WTI Crude oil prices posted strong gains on Wednesday. The gains came after the U.S. Energy Information Administration reported a larger than expected drawdown in U.S. stockpiles. This pushed oil prices higher on the day.

Following the gains, oil briefly tested the highs of 60.64 before easing back. If resistance is established here, we expect oil prices to continue its declines but staying within the range. The support level at 57.50 will be tested once again but we don’t expect this support to break in the near term.

The sideways range between 60.64 and 57.50 will eventually determine the direction of the breakout. Following this we could expect the new trend to be established. The Stochastics oscillator is currently posting a bearish divergence which could suggest a short term correction.

EURUSD attempts to bounce off support

The currency pair posted gains on Wednesday after the U.S. dollar fell due to Fed Powell’s remarks. Price action has been largely muted however. But the rebound off the price region near 1.1224 – 1.1200 indicates that this is a strong level of support.

On Thursday, price action in the EURUSD was subdued. This came after reports suggested that the ECB was reconsidering to start its QE program that it ended last year. However, Germany’s inflation edged closer to the ECB’s target which could see officials further contemplating the decision on QE.

From a technical outlook, EURUSD will continue its sideways trend within 1.1400 and 1.1200. A breakout from this level will be needed to confirm the direction in the currency pair.