06-Sep-2021

1) GBP/USD Drops Below 1.3850 Amid Brexit Woes, USD Bounce
2) EUR/USD Remains Pressured Towards 1.1850 Amid USD Rebound
3) XAU/USD Bears Eye $1819 And $1814 As NFP Effect Fades

1) GBP/USD Drops Below 1.3850 Amid Brexit Woes, USD Bounce

GBP/USD is holding the lower ground near 1.3850 amid a US dollar rebound and Brexit woes. Brexit blamed for labor, food shortage, key members ask for “proportionate and structured” over NI border. Holiday in the US could restrict market moves amid improving risk appetite.

Looking at the technical picture, the recent move up stalled near a resistance marked by the top boundary of over a two-week-old ascending channel. The mentioned barrier is currently pegged near the 1.3890-1.3900 area, which should act as a key pivotal point for short-term traders. From current levels, any subsequent slide now seems to find decent support near the 1.3800 mark, representing the 200-period SMA on the 4-hour chart.

This is closely followed by the ascending channel support, around the 1.3785 region, which if broken decisively might prompt some technical selling. The pair might then accelerate the fall towards the 1.3740-35 support zone before eventually dropping to the 1.3700 mark. The downward trajectory could further get extended and turn the pair vulnerable to slide further towards retesting August monthly swing lows, around the 1.3600 round figure.

On the flip side, immediate resistance is pegged near the 1.3875-80 area ahead of the 1.3900 mark. A convincing breakthrough will mark a fresh bullish breakout and push the pair further beyond the 1.3950-55 intermediate hurdle, allowing bulls to aim back to reclaim the key 1.4000 psychological mark.

The GBP/USD pair built on the previous day’s bullish breakout momentum through the very important 200-day SMA and gained follow-through traction on Friday amid a broad-based US dollar weakness. The momentum pushed the pair to near four-week tops, through faltered just ahead of the 1.3900 round-figure mark. The greenback prolonged its recent weakening trend and lost some additional ground following the disappointing release of the US monthly jobs report, which showed that the US economy added only 235K new jobs in August. This marked the smallest gains in seven months and was well below market expectations for a reading of 750K. The data forced investors to push back their expectations about the likely timing when the Fed will begin rolling back its pandemic-era stimulus and weighed on the greenback.

Meanwhile, additional details revealed that the US unemployment rate dropped from 5.4% in July to 5.2% during the reported month. This, along with stronger wage growth data, kept hopes alive for an imminent taper announcement by the end of this year. Market participants still anticipate the Fed to signal to taper in September, but now expect it to begin in December and likely end the QE by the middle of 2022. This was evident from a sharp intraday spike in the US Treasury bond yields, which helped limit any deeper USD losses and kept a lid on any further gains for the major. In fact, the yield on the benchmark 10-year US government bond shot back above 1.32%. This, along with worries about the fast-spreading Delta variant, provided a much-needed respite to the USD bulls and capped gains for the major.

Meanwhile, the UK and EU remain at odds on the way forward for the Northern Ireland Protocol. This was seen as another factor that acted as a headwind for the British pound and prompted some selling around the pair during the Asian session on Monday. Market participants now look forward to the release of the UK Construction PMI during the early European session. Any market reaction, however, is likely to be limited amid relatively thin liquidity conditions on the back of the Labor Day holiday in the US. This makes it prudent to wait for a strong follow-through selling before confirming that the recent strong rebound from the 1.3600 mark has run out of steam already.

2) EUR/USD Remains Pressured Towards 1.1850 Amid USD Rebound

EUR/USD is pressured towards 1.1850 after the downbeat Eurozone Sentix data. The US dollar recovers ground following a disappointing NFP-led slide. The focus turns to the ECB meeting this week, with tapering expectations back on the table.

From a technical perspective, the pair’s inability to find acceptance above the 1.1900 mark and a short-term ascending channel resistance warrants some caution for aggressive bullish traders. That said, any subsequent pullback is more likely to find decent support near the lower boundary of the mentioned channel, currently around the 1.1835 region. This should now act as a key pivotal point for traders.

A convincing break below would suggest that the recent strong rebound from YTD lows, around the 1.1665 area has run out of steam and shift the bias in favor of bearish traders. The pair might then accelerate the fall towards the 1.1800 mark. This is closely followed by the 200-period SMA on the 4-hour chart, around the 1.1785 region, which if broken should pave the way for a fall back towards the 1.1700 round figure.

On the flip side, bulls might now wait for some follow-through strength beyond the 1.1900 mark and the mentioned trend-channel resistance before placing fresh bets. The pair might then climb further towards the 1.1940 supply zone, above which the momentum could further get extended towards the 1.1975 region en-route the key 1.2000 psychological mark.

The EUR/USD pair kicked off the new week on a defensive note and extended Friday’s late pullback from levels just above the 1.1900 mark, or the highest since late June. The pullback was sponsored by a goodish pickup in the US dollar demand, though any meaningful corrective slide still seems elusive ahead of the European Central Bank (ECB) meeting on Thursday.

The disappointing headline NFP print for August, to some extent, was offset by an upward revision of the previous month’s reading and a further decline in the US unemployment rate. This, along with strong wage growth data kept alive hopes for an imminent Fed taper announcement later this year. Investors now expect the US central bank to begin rolling back its pandemic-era stimulus in December and likely end the QE by the middle of 2022. This was reinforced by a sharp spike in the US Treasury bond yields on Friday, which, in turn, was seen as a key factor that assisted the USD to rebound from one-month lows.

Meanwhile, Monday’s release of upbeat German Factory Orders data did little to impress the euro bulls or lend any support to the major. In fact, the latest data published by the Federal Statistics Office showed that contracts for goods ‘Made in Germany’ rose 3.4% in July. This marked a notable drop from the 4.6% increase recorded in July but surpassed consensus estimates by a big margin, which pointed to a 1% decline. Nevertheless, the data suggested that the recovery in the manufacturing sector of Europe’s economic powerhouse is gaining momentum.

This comes on the back of the recent hawkish rhetoric from a host of ECB policymakers, which could act as a tailwind for the shared currency and help limit any deeper losses for the major. The ECB’s Klaas Knot said that he expects the central bank to start reducing the pace of its emergency bond purchases at this week’s meeting, with a view to ending them in March. Separately, Governing Council member Robert Holzmann noted that the ECB should start debating how it will phase out its pandemic-era stimulus and focus on tools that would help achieve its 2% inflation target sustainably.

Meanwhile, Bundesbank President Jens Weidmann said that Eurozone inflation is at risk of overshooting the ECB’s projections as the temporary factors could seep into underlying price growth. Adding to this, the ECB Vice President Luis de Guindos told a Spanish newspaper that there will logically be a gradual normalization of monetary policy if inflation and the economy continue to recover. This has been fueling bets that the ECB will pare back its purchases of government bonds, sooner rather than later. Hence, the focus will be on the upcoming ECB monetary policy decision on Thursday, which might hold investors from placing aggressive bets and further limit the downside for the major.

3) XAU/USD Bears Eye $1819 And $1814 As NFP Effect Fades

Gold price is consolidating its retreat from two-month highs of $1834, as the bulls continue to remain hopeful, despite the impressive US dollar rebound and the risk-on market mood.

Gold price is testing the powerful defense line at $1822, as it extends its pullback.

That level is the confluence of the SMA10 four-hour and Fibonacci 38.2% one-week.

The next relevant cushion is seen at the intersection of the SMA50 one-hour and Fibonacci 61.8% one day at $1819.

Further south, the bears will challenge a dense cluster of support levels around $1814, where SMA100 one-day, pivot point one-day S1, and Fibonacci 61.8% one-week meet.

On the flip side, the buying resurgence could drive the gold price back towards the $1827/29 supply zone, which is the convergence of the Fibonacci 23.6% one-day, the previous high four-hour, and Fibonacci 23.6% one-week.

The previous month’s high at $1832 could test the bullish interests, above which the previous day’s high and July tops at $1834 could be back in focus.

Buyers will then target the pivot point one-day R1 at $1838.

Gold price is consolidating its retreat from two-month highs of $1834, as the bulls continue to remain hopeful, despite the impressive US dollar rebound and the risk-on market mood. The change in expectations towards an extended period of monetary policy support likely from the Fed and China combined with looming covid concerns is keeping the buoyant tone intact around gold price. Meanwhile, investors are taking profits off the table after Friday’s $20 rally and ahead of this week’s ECB monetary policy meeting.