EURUSD has continued to rise for the second straight day as the Dollar continues to retreat. However, the recent upward correction of the Euro is not due to a change in fundamental economic reasons, rather the Euro was able to advance due to fatigue from buying the Dollar. Economic data released from Europe has continued to paint a harsh outlook. The German consumer price index rose at an annual pace of 10.9%, and the EU economic sentiment indicator printed 93.7 in September, missing the 95 market expectation. U.S. GDP for Q2 came in in line with market expectations at -0.6%.
On the technical side, EURUSD has continued to move towards our previously estimated support level of 0.98. Consolidation should happen around this level as the EURUSD eyes recover above parity. RSI for the pair sits at 44.09, as of writing. On the four-hour chart, EURUSD currently trades above its 50-day SMA but below its 100 and 200-day SMA.
Resistance: 1.0011, 1.0055
Support: 0.98, 0.96
Cable has continued to rise on the back of the upward momentum of the previous trading day. The British Pound was saved by the BoE’s announcement that it would begin purchasing long-dated Gilts at stable exchange rates. After falling to historical lows on the 26th, Cable has recovered more than 6.5%. The weaker Dollar over the past two days has also acted as a tailwind for the British Pound. However, the long-term economic outlook for Britain grows worse by the day due to, previously mentioned, the widening fiscal deficit and price impacts from its European neighbours. Long-term credit risk could cause financial turmoil in the U.K. should the BoE play its cards wrong.
On the technical side, GBPUSD has found support at our previously estimated support level of 1.053 and is heading towards the next level of support for the pair at 1.12. RSI for the pair sits at 62.48, as of writing. On the four-hour chart, GBPUSD currently trades above its 50-day SMA but below its 100 and 200-day SMA.
Resistance: 1.1561, 1.1854
Support: 1.08, 1.053
The Dollar denominated gold rose more than 1.8% over the previous trading day. The non-yielding metal continues to find bidding as the Dollar weakens. Global markets continue to be extremely risk-averse as equity indices around the globe struggle. Geopolitical events happening around the globe have also acted as tailwinds for the precious metal. The U.S. 10-year treasury yield has fallen for the second straight day and is last seen trading at 3.72%. Much of the rise in Gold prices, however, should be attributed to the weakened Dollar. The non-yielding metal, despite being a traditional inflation hedge asset, has been proven to underperform under a rising interest rate environment; in fact, the idea of Gold being an inflation hedge tool only becomes true over a 50-plus year horizon.
On the technical side, XAUUSD has rebounded strongly off of our previously estimated support level of $1640 per ounce and is heading towards the next level of support at $1,660 per ounce. RSI for the pair sits at 41.4, as of writing. On the four-hour chart, XAUUSD currently trades above its 50-day SMA but below its 100 and 200-day SMA.
Resistance: 1695, 1724
Support: 1660, 1640