Market analysis

Week 8 data: Gold and GBPUSD. What’s in it for the short-term outlook?

By Antreas Themistokleous

19 February 2024

exness-gold-5

This preview of weekly data looks at XAUUSD and GBPUSD where economic data coming up later this week are the main drivers in the markets for the near short-term outlook. The most important economic data for this week are:

Tuesday:

  • RBA meeting minutes at 12:30 AM GMT are anticipated by the market participants to get a glimpse of the short-term action plan of the Reserve Bank of Australia. More dovish commenting might be seen as a weakness of the Aussie dollar creating some minor push on the price to the downside and vice versa.

  • Canadian Inflation rate at 13:30 GMT. The anticipation here is for a decline of around 0.2% reaching the figure of 3.2%. In the event of this anticipation becoming reality then the loonie might see some short-term losses against its pairs.

  • Japanese Balance of trade at 11:50 PM GMT where the expectations are for a decline in the figure from ¥62.1 billion to ¥-1,925.9 billion for the month of January. If the expectations are correct then the yen could face some pressure against the currencies traded against it. 

Wednesday:

  • FOMC Minutes at 19:00 GMT where investors and traders will be paying close attention to any hints from the Federal Reserve regarding future developments on the monetary policy. Currently, the possibilities of a rate cut have been pushed back to the June meeting according to the Fedwatch tool whereas any hawkish narratives might push the prospectus of a rate cut further down the road.

Thursday: 

  • Flash German Manufacturing PMI at 08:30 AM GMT where the market expectations are for a slight increase from 45.5 to 46.1 points for the month of February. Even though this is not the final figure the level of 50 points seems to be not achievable just yet. Although the German manufacturing sector has been consistently improving since July 2023 it is still below the 50-point mark therefore indicating no expansion of the specific sector for the time being. 

  • Final European Inflation rate at 10:00 AM GM. The rate for the month of January is expected to decline to 2.8% down from the previous reading of 2.9%. This could affect negatively the Euro against its pairs at least in the short term. 

Gold (XAUUSD)

Gold prices continue to rise after testing the support of the $2,000 (USD) level after some strong economic data from the United States last week. More specifically inflation in the USA proved to be stickier than expected with the actual figure published last Tuesday being 3.1% against the expected 2.9%. 

This delayed the prospects of an interest rate cut by the Federal Reserve and has pushed the probability of the rate cut happening back to the June meeting, instead of the May meeting as it was previously broadly anticipated by market participants.

From a technical point of view, the price has recently tested the psychological support of the round number at $2,000 and has since rebounded to the upside. At the time of this report being written, the price is trading at the resistance of the 38.2% of the weekly Fibonacci retracement level.

The Stochastic is not recording any overbought or oversold levels, while the 50-day moving average is trading above the 100-day moving average indicating that the bullish trend is still valid. If the price moves North in the near short term then the first area of possible resistance might be found around the $2,020 price area which is the level where the price reacted in early February and is also the psychological resistance of the round number.

GBPUSD

Last week was busy in terms of data on the economic calendar, especially for the USA and the UK, which had an impact on both countries’ 10-year bond yields. If we look at the British 10-year Gilt we will see that it is currently at around 4.1%, while the US 10-year Treasury is around 4.3%. This indicates that capital is flowing slightly in favor of the US dollar rather than the British quid.

Also, unemployment in the United Kingdom may have fallen by 0.1% in December, but people seeking unemployment benefits have almost tripled in January. This could be hinting that unemployment might increase in the next publication and therefore create some downward pressure for the British pound in the medium-term outlook.

From the technical point of view, the price has been trading in a bearish channel since the start of the year and is around the middle of the upper and lower boundaries of the current channel. The 50-day moving average is trading well above the 100-day moving average, indicating that the short-term direction might be bullish, given that the Stochastic oscillator is not recording any extreme overbought or oversold levels. If this scenario becomes a reality then the price might retest the upper boundary of the channel at around $1.27 before correcting again to the downside.


This is not investment advice. Past performance is not an indication of future results. Your capital is at risk, please trade responsibly.


Author:

Antreas Themistokleous
Antreas Themistokleous

Antreas Themistokleous is a trading specialist in Exness. He is a Certified Financial Technician since 2018. As a member of the Society of Technical Analysts, Antreas is implementing advanced use of indicators and patterns to conclude in an action plan for different trading strategies.