19-Aug-2020

1) Gold Price: XAU/USD Bulls Await FOMC Minutes For Next Direction
2) EUR/USD: Bullish Potential Intact, Focus Shifts To FOMC Meeting Minutes
3) Australian Dollar Marks Fresh Highs As US Slide Gathers Momentum

1) Gold Price: XAU/USD Bulls Await FOMC Minutes For Next Direction

Having witnessed good two-way businesses, Gold (XAU/USD) managed to close Tuesday above the critical $2000 mark. The spot reclaimed the latter amid an intrinsically weak US dollar, undermined by the slump in the US Treasury yields on doubts over the economic recovery. However, the sellers took over and downed gold as low as $1976, in the face of the record highs on the S&P 500 index. Fresh optimism over the US fiscal stimulus and ongoing uncertainty on the US-China trade front saved the day for the XAU bulls. US House of Representatives Speaker Nancy Pelosi said that Democrats in Congress are willing to cut their coronavirus relief bill in half to get an agreement. Meanwhile, US President Donald Trump said that he postponed talks with China and that he doesn’t want to talk to China now.

Gold prices are back under the $2000 level so far this Wednesday, dragged down by the bounce in the US dollar across the board. The bounce could be associated with the official announcement of Joe Biden as the Democratic nominee for the November US Presidential elections. However, the bright metal could regain poise should the minutes of the Fed’s latest meeting hint at yield curve control or project dour long-term economic outlook. Meanwhile, the sentiment on the global markets will continue to influence the gold price action.

fxsoriginalGold is consolidating Tuesday’s volatile trades while below the 21-hourly Simple Moving Averages (HMA) at $2003.

The immediate resistance for the spot is aligned at $1996, the 23.6% Fibonacci Retracement level of the latest advance from $1929 to $2015.

Acceptance above the 21-HMA will call for a test of the August 11 high at $2030.

To the downside, the $1980-75 zone is the level to beat for the bears. That area is the confluence of the upward-sloping 50-HMA, horizontal 200-HMA, previous day low and 38.2% Fib level of the same rally.

The hourly Relative Strength Index (RSI), currently at 45.00, points south, suggesting that the aforesaid support could be tested.

The next downside target is at $1972, the Fib 50% level below which the bullish 100-HMA at $1965 could stall the near-term downside momentum.

2) EUR/USD: Bullish Potential Intact, Focus Shifts To FOMC Meeting Minutes

The EUR/USD pair gained some strong positive traction on Tuesday and shot to its highest level since May 2018 amid the relentless selling around the US dollar. Investors remain concerned about the US economic recovery amid a standoff over the next round of the US fiscal stimulus and the ever-increasing coronavirus cases. This, in turn, continued weighing heavily on the greenback and was seen as one of the key factors that pushed the pair higher for the fifth consecutive session.

On the economic data front, the US Building Permits rose 18.8% MoM in July to 1495k annualized rate, while Housing Starts were up by 22.6% MoM. The readings were better than consensus estimates, though did little to provide any respite to the USD bulls. The pair surged past the double-top resistance near the 1.1910-15 region, which prompted some technical buying and further contributed to the strong intraday positive move. However, oversold conditions on short-term charts capped any further gains.

The pair finally settled around 35 pips off daily tops and held steady near the 1.1930 region through the Asian session on Wednesday. Market participants now look forward to the final Eurozone CPI print for some trading impetus. The key focus, however, will be on the release of the latest FOMC meeting minutes, which will play a key role in influencing the USD price dynamics and assist investors to determine the pair’s next leg of a directional move.

From a technical perspective, the pair stalled its strong momentum near a resistance marked by the top boundary of over a one-week-old ascending channel. Given the overnight breakthrough the 1.1910-15 strong barrier, the bias remains tilted in favour of bullish traders. Hence, any meaningful pullback below the mentioned resistance breakpoint will be seen as a buying opportunity and remain limited near the 1.1900 mark. That said, some follow-through selling might accelerate the fall further towards the trend-channel support, currently near the 1.1875 region. A convincing break below will negate the bullish outlook and pave the way for a further near-term corrective slide.

On the flip side, bulls might now wait for a sustained strength beyond the trend-channel hurdle before positioning for any further appreciating move. The pair might then surpass the key 1.2000 psychological marks and aim to reclaim the 1.2100 mark for the first time since April 2018.

3) Australian Dollar Marks Fresh Highs As US Slide Gathers Momentum

The Australian dollar extended its rally through trade on Tuesday amid record gains across equities and sustained US dollar weakness. The S&P 500 marked fresh highs and appears poised to close above the February 2019 peak. As confidence COVID-19 case numbers across the US are trending in the right direction markets have chased risk assets higher fuelling the fastest recovery on record. The AUD followed equities pushing through 0.7250 to touch intraday and year to date highs at 0.7265. The wide held market consensus is for a weaker US dollar. Having traded to its lowest level in 2 years amid a run of speculative short positions questions are being raised as to how far the dollar can slide. While we have seen a renewed demand to short the world’s base currency, when compared with past dollar downturns it would appear there is ample scope for further weakness, opening the door for the AUD to extend gains and test 0.73/0.74.

With little headline data on hand today attentions turn to the Federal Reserve and FOMC meeting minutes. With many expecting the Fed will amend its average inflation rate tolerance investors will be keenly attuned for any commentary that suggests a change is imminent.

The Pound outperformed all major counterparts through trade on Tuesday, pushing through 1.32 and marking a fresh 8-month-high amid ongoing US dollar weakness. The US Dollar index touched a two-year low overnight as a renewed influx of positive sentiment fuelled a move away from safe haven assets, while a declining yield advantage and an elongated economic recovery weigh further on the world’s base currency. Sterling touched intraday highs at 1.3249 while the Euro closes in on 1.20 touching 1.1966 before edging marginally lower into this morning’s open.

Bearish bets on the USD hit their highest level in almost 10 years last week and while we have seen a rapid sell off through the last 6 weeks momentum shows little sign of slowing, with ample room for the dollar to extend the downturn. Despite the largely bleak economic outlook positive sentiment continues to fuel demand for risk assets as unprecedented Fed monetary policy settings ensure liquidity across financial markets remains intact. With little of note on docket today attentions turn to the FOMC minutes for any signal or sign a change in monetary policy is imminent.