08-Sep-2021

1) XAU/USD Clings To Gains Near $1,800, Lacks Follow-Through
2) EUR/USD Drops Towards 1.1800 Amid Firmer USD, Mixed ECB-Speak
3) GBP/USD Remains On The Defensive Below 1.3800 Amid USD Strength

1) XAU/USD Clings To Gains Near $1,800, Lacks Follow-Through

Gold attracted some buying on Wednesday and was seen hovering near-daily tops, around the $1,800 mark during the early European session.

While extending the pullback from the triple tops formed since mid-July, gold prices dropped below the monthly support line, now resistance, while also breaking the convergence of 100-day and 200-day EMA.

Having breached crucial EMAs and trend lines, XAU/USD remains directed towards an ascending support line from August 16, near $1,790.

However, any further weakness won’t hesitate to challenge June’s low around $1,750 whereas an extended fall past $1,750 could make the commodity vulnerable to aim for the yearly low surrounding $1,676.

On the contrary, the stated EMA confluence near $1,805 guards immediate upside of the metal ahead of the support-turned-resistance line close to $1,825.

It should be noted that the gold buyers remain skeptical unless witnessing sustained trading beyond the $1,832-34 horizontal resistance area.

Gold attracted some buying on Wednesday and was seen hovering near-daily tops, around the $1,800 mark during the early European session. The uptick allowed the XAU/USD to recover a part of the previous day’s slump to one-and-half-week lows and snap two consecutive days of the losing streak. The risk-off impulse in the financial markets – amid worries about the fast-spreading Delta variant of the coronavirus – turned out to be a key factor that extended support to the safe-haven precious metal.

Meanwhile, the anti-risk flow triggered a sharp pullback in the US Treasury bond yields, which further benefitted the non-yielding yellow metal. That said, expectations for an imminent Fed taper announcement later this year might continue to act as a tailwind for the US bond yields. This, along with a modest US dollar strength, should hold traders from placing aggressive bullish bets around dollar-denominated commodities, including gold. Hence, it will be prudent to wait for a strong follow-through buying before confirming that the recent fall from the $1,834 strong resistance zone has run its course.

2) EUR/USD Drops Towards 1.1800 Amid Firmer USD, Mixed ECB-Speak

EUR/USD is edging lower towards 1.1800, as the US dollar firms up amid a cautious mood. Delta covid variant concerns keep investors unnerved. Conflicting messages from ECB policymakers weigh on the euro ahead of Thursday’s monetary policy decision.

EUR/USD bears attack the previous resistance line from late June, near 1.1830, while the 50-DMA level of 1.1800 adds to the downside filters. On the contrary, a horizontal area from June 30 highlights the 1.1910 level as the key hurdle to the north.

The major currency pair initially recovered after the US 10-year Treasury yields pause around the two-month top, down one basis point to 1.36% by the press time. However, the US Dollar Index (DXY) refrains from tracking the bond coupon to the south and stays firmer around 92.55 following the biggest daily jump in three weeks.

Other than the virus and stimulus chatters, market participants remain divided over the European Central Bank’s (ECB) next move and underpin the US dollar’s safe-haven demand. It’s worth noting that the recent improvement in the Eurozone Q2 GDP contrasts with the ZEW sentiment data and joins the mixed tone of the ECB policymakers to confuse EUR/USD traders ahead of the week’s key event.

For intraday, comments from the New York Fed President John C. Williams will be the key as traders weigh economic hardships in the US, due to the COVID-19, to forecast tapering. Additionally, risk catalysts like stimulus headlines and virus updates will also be important for near-term guidance.

3) GBP/USD Remains On The Defensive Below 1.3800 Amid USD Strength

GBP/USD records third straight day fall on Wednesday. US Dollar Index remains strong above 92.50 despite a downtick in the Treasury yields. Tax hike and Brexit concerns weighed on the prospects of the sterling.

From a technical perspective, the overnight fall confirmed a bearish breakthrough confluence support comprising of 200-period SMA on the 4-hour chart and the lower end of a short-term ascending channel. Some follow-through selling below mid-1.3700s will reaffirm the negative outlook and drag the pair back towards the 1.3700 mark. The downward trajectory could further get extended and turn the pair vulnerable to retest August monthly swing lows, around the 1.3600 mark.

On the flip side, any meaningful recovery attempt might now confront stiff resistance and remain capped near the 1.3800 confluence support breakpoint. A sustained move beyond might trigger a short-covering move and lift the pair towards the 1.3855-60 supply zone. Some follow-through buying should assist bullish traders to aim back to conquer the 1.3900 round figure.

The GBP/USD pair witnessed heavy selling on Tuesday and retreated further from the vicinity of the 1.3900 mark, or multi-week tops touched in reaction to dismal headline NFP print. The US dollar was back in demand in the wake of a strong follow-through positive move in the US Treasury bond yields. This, in turn, was seen as a key factor that exerted downward pressure on the major. In fact, the yield on the benchmark 10-year US government bond shot to 1.385%, or the highest level since mid-July amid expectations for an imminent Fed taper announcement in November.

On the other hand, the British pound was pressured by British Prime Minister Boris Johnson’s plans on Tuesday to introduce a new 1.25% health and social-care levy on earned income. This comes on the back of the UK-EU stand-off on the way forward for the Northern Ireland Protocol, which further acted as a headwind for the sterling. Apart from this, worries about the recent surge in COVID-19 cases provided an additional boost to the safe-haven greenback. This was seen as another factor that contributed to the pair’s overnight decline, taking along some trading stops near the 1.3800 mark.

Bulls largely shrugged off hawkish comments by the Bank of England’s Michael Saunders, saying that continuing with the asset purchase program would cause a rise in medium-term inflation expectation. Saunders added that the economy was now close to the pre-pandemic level and that maybe is right to think of rates going up in the next year or so. Nevertheless, the pair settled deep in the red and remained depressed for the third successive session on Wednesday. In the absence of any major market-moving economic releases from the UK, the pair remains at the mercy of the USD price dynamics. Later during the US session, traders might take cues from a speech by New York Fed President John Williams.