11-Nov-2020

1) GBP/USD: Bulls In Control Near Two-Month Tops Amid Hopes For A Brexit Trade Deal
2) EUR/USD: Recent Positive Move Might Have Already Run Out Of The Steam
3)  XAU/USD: Gold Bulls Losing Conviction While Below $1900

1) GBP/USD: Bulls In Control Near Two-Month Tops Amid Hopes For A Brexit Trade Deal

The GBP/USD pair gained some strong positive traction on Tuesday and rallied to fresh two-month highs, around the 1.3275-80 region. The British pound strengthened across the board renewed hopes for a last-minute Brexit deal and got an additional boost from mostly upbeat UK employment details. As Britain and the EU resumed crucial negotiations in London on Monday, the EU’s chief Brexit negotiator Michel Barnier said that they are redoubling the efforts to reach an agreement on the future UK-EU partnership. Adding to the optimism, Britain said that it was open to a sensible compromise on fishing.

The bullish sentiment surrounding the sterling was further supported by a mostly upbeat UK jobs report, which showed that the number of people claiming jobless benefits unexpectedly dropped by 29.8K in September. Adding to this, a larger-than-expected jump in wage growth, which accelerated at the fastest pace since March, helped offset a rise in the unemployment rate to 4.8% from 4.5% previous. This comes on the back of promising development in the late-stage COVID-19 vaccine, which forced investors to push back expectations for negative BoE interest rates and remained supportive.

On the other hand, the US dollar trimmed a part of its overnight gains led by the euphoric market reaction to the positive COVID-19 vaccine news. Questions about the efficacy and the length of immunity provided by the vaccine, along with concerns about the continuous surge in new cases in the US curbed investors’ enthusiasm. This, in turn, held the US dollar bulls on the defensive and further contributed to the momentum. The GBP bulls also cheered the fact that the UK House of Lords voted against the controversial part of the UK Internal Market Bill, which acknowledged to break international law.

The bill is designed to enable goods and services to flow freely after the end of the transition period on December 31 and gives the government the power to change aspects or overrule parts of the UK’s Brexit agreement with the EU. The thumping rejection of the government’s plan, followed by the confirmation that the legislations will not return to the Commons until the end of this month was seen as signs that a Brexit deal is now imminent. That said, traders turned cautious, instead preferred to wait for additional updates before placing fresh bullish bets. This was evident from a consolidative price action through the Asian session on Wednesday.

The pair was last seen hovering around mid-1.3200s and remains at the mercy of incoming Brexit-related headlines amid absent relevant market moving economic releases. Meanwhile, the US bank will be closed in observance of Veterans Day. However, the broader market risk sentiment and developments surrounding the coronavirus saga will still influence the USD price dynamics, which might further assist traders to grab some meaningful opportunities.

From a technical perspective, the overnight sustained breakthrough of the 61.8% Fibonacci level of the 1.3482-1.2676 downfall shifted the near-term bias back in favor of bullish traders. Hence, some follow-through strength beyond the 1.3300 mark, towards testing September daily closing highs resistance near the 1.3385 region, now looks a distinct possibility.

On the flip side, any meaningful slide now seems to find immediate support near the 1.3200 mark. This is closely followed by the 1.3175-70 support (61.8% Fibo. level), which if broken decisively might prompt some technical selling. The pair might then turn vulnerable to accelerate the fall further towards the 1.3100 round-figure mark en-route the 50% Fibo. level, around the 1.3070 area.

2) EUR/USD: Recent Positive Move Might Have Already Run Out Of The Steam

The EUR/USD pair seesawed between tepid gains/minor losses and finally settled nearly unchanged on Tuesday. The two-way move was influenced by a combination of factors – dismal Eurozone data and the US dollar price dynamics. The pair failed to capitalize on its early uptick, instead met with some fresh supply near the 1.1845 region following the release of the softer-than-expected ZEW Survey. In fact, the German Economic Sentiment Index fell to 39 in November from 56.1 previously. The same trend was observed in the broader Eurozone Economic Sentiment Index, which dropped to 32.8 from 52.3 in October and took its toll on the shared currency.

On the other hand, the US dollar trimmed a part of its previous day’s strong gains that followed the news of progress towards a COVID-19 vaccine. The euphoric market reaction faded rather quickly amid questions about the efficacy and the length of immunity provided by the vaccine. Adding to this, concerns about the continuous surge in new infections in the United States curbed investors’ enthusiasm and held the US dollar bulls from placing aggressive bets. This, in turn, was seen as one of the key factors that helped limit losses, rather than assisted the pair to rebound around 30-35 pips from an intraday low level of 1.1780.

The USD remained depressed on the back of a positive tone around the equity markets and assisted the pair to regain some positive traction during the Asian session on Wednesday. There isn’t any major market-moving economic data due for release on Wednesday, leaving the pair at the mercy of developments surrounding the coronavirus saga and the broader market risk sentiment. That said, investors might refrain from positioning for any big moves in either direction as the US banks will be closed in observance of Veterans Day.

From a technical perspective, this week’s sharp pullback from two-month tops indicated a possible false breakout set-up and favors bearish traders. However, the lack of any strong follow-through selling below the 1.1800 mark warrants some caution. Hence, it will be prudent to wait for a sustained weakness below the overnight swing lows, around the 1.1780 region, before placing fresh bets for any further depreciating move. The pair might then accelerate the fall further towards the 1.1700 round-figure mark. The latter coincides with 100-day SMA and should now act as a key pivotal point for short-term traders.

On the flip side, the 1.1840-50 region, which is closely followed by the 1.1880-85 supply zone might now act as immediate resistance. A sustained strength beyond the 1.1900 mark would negate prospects for any further decline, instead lift the pair towards the 1.1945-40 intermediate resistance. Bulls might eventually aim back towards reclaiming the key 1.2000 psychological mark in the near-term.

3)  XAU/USD: Gold Bulls Losing Conviction While Below $1900

Gold’s (XAU/USD) rebound from six-week lows of $1850 faltered near the $1891 barrier on Tuesday, although the spot managed to hold on to the recovery gains. The bright metal settled the day around $1878 levels. Pfizer Inc’s vaccine progress led euphoria in the global markets subsided, as investors re-thought about its implications on the global economic recovery and prospects for further stimulus, limiting the downside in gold. However, the US dollar remained relatively stronger amid mixed sentiment on Wall Street, which capped the gains in XAU/USD.

Amid a partial US market holiday this Wednesday, gold wavers in familiar ranges below the $1891 critical resistance, underpinned by renewed hopes of additional fiscal and monetary policy stimulus to spur the global economic growth. Surging coronavirus cases in the US and Europe could threaten the economic recovery worldwide, rekindling additional stimulus expectations. However, should the virus concerns aggravate and translate into broad risk-aversion, the US dollar could pick up bids as a safe-haven, rendering gold-negative.

Despite a symmetrical triangle pattern confirmed on the hourly chart, the bulls are struggling to extend the upside while trading above the horizontal 21-hourly moving average (HMA) at $1879.

The hourly Relative Strength Index (RSI) remains side-lined just below the midline, indicating that the bulls could be losing conviction for a follow-through upside bias.

The bearish 50-HMA resistance at $1889 will offer immediate resistance, above which the bulls need to take out the horizontal 200-HMA hurdle at $1903 to reviving the recovery momentum.

Alternatively, acceptance below powerful support of $1878 could expose the previous month low of $1860. The next downside target awaits at $1850-49, the November 9 low and September 28 low.