Market Wrap (Weekly Basis)
It has been a choppy week for EURUSD, but it still managed to push its price higher over the past week, growing from 1.1300 region to 1.1443 and heading to its best level since the spike in March. Looking ahead, news such as WH Economic Advisor Kudlow’s statement of potentially raising fiscal stimulus at the end of July might be able to boost the greenback’s performance; on the flipside, as major US cities began to halt the reopening of local economy, the anticipation of a better economic outlook across the US is becoming more improbable. Nonetheless, as we have found from the technical point-of-view, the MACD is looking particularly positive with the signal lines all set firmly above the zero level, we believe the pair is going to test the resistance level around 1.14 in the upcoming week and is likely to break through. At the same time, we are experiencing an optimistic perspective in 1-year bearish market that we keep mentioning earlier, our book exposure is in our flavor at the same time. We believe that there will be a significant resistance level at 1.15, which was the last highest price level.
Gold spent some time consolidating in the $1,795-1818 range, and there are some mixed clues this week. Ideally, the COVID-19 spread and the Sino-US dispute should suppress the market’s risk sentiment and help gold maintain its strength. However, Friday’s optimism was supported by expectations of further stimulus measures and virus vaccine news, which seemed to limit the safe-haven demand. Although the yellow metal has not accelerated at the rate we have seen in last week, the bulls are not ready to let go. On Thursday, due to optimism about the COVID-19 vaccine and US President Donald Trump will not impose further sanctions on Chinese officials responsible for enacting the Hong Kong National Security Law, which caused price of gold fell $13 per ounce intraday. After struggling around $1797, the gold steadily climbs back to $1805 mark with the deterioration of US-China relations and the surge in COVID-19 cases on Friday.
For the next week, the gold price not only be affected with the US-China relation and the update of COVID-19 vaccine, but it also be limited by US Treasury bond yields. In the technically side, looking at the chart below, there is a clear channel formation, but it is very steep. The first support will be the $1800 per troy ounce level but beyond that, the channel low could be next up. Any break of the channel low could take the price to the next support near $1786.11 per ounce. In the long run, prices are in a very strong upward trend. This retracement may be a trivial matter as the price makes its way toward $2000 per ounce or the all-time high at $1920.94 per ounce.
Cable made a strong push after testing the support line at 1.25129 early this week; afterward, it pulls back near to 1.2650 level after testing the resistance at 1.26359. Cable made a U-turn after crossing the 21-day EMA, then found a support at the 50-day EMA. The selling pressure held the upward momentum.
The upward momentum is held due to a lack of a catalyst to get the market moving. Both the U.S. Federal Reserve and the Bank of England are loosening their monetary policies. For an instance, both central banks are working hard to help their households financially improved by providing stimulus. That being said, Cable might react depending on the figures of coronavirus. At the moment, the British pound will probably do better against the U.S. dollar because UK seems to handle the second peak better and the U.S. does. There are more than 70,000 new cases reported and 900 dead daily this week in the U.S. The effort of administrating this pandemic is an essential factor to examine these two currencies.
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