31-Aug-2021

1) GBP/USD Advances Towards 1.3800 Amid USD Weakness
2) Why Are Gold Buyers Attracted By The 1830 Price?
3) EUR/USD Renews Three-Week Top Above 1.1800 Ahead Of Eurozone CPI

1) GBP/USD Advances Towards 1.3800 Amid USD Weakness

GBP/USD is edging higher towards 1.3800, having found strong bids near the 1.3750 region. The China slowdown-led risk-off flows drag Treasury yields lower alongside the US dollar. Looming Brexit concerns could cap the upside in the cable ahead of the key US data.

GBP/USD keeps the week-start inactivity around the mid 1.3700s during Tuesday’s Asian session. Even so, bears remain hopeful as the Daily Moving Averages (DMAs) hint at a bearish cross as the prices remain below an important resistance line stretched from June 01.

It’s worth noting that a descending Momentum line also backs the GBP/USD sellers who await a daily closing below the 1.3700 thresholds to confirm the pair’s further weakness.

Given the quote’s downside past 1.3700, the 50-DMA will drop below 200-DMA and suggest the pair’s further declines towards the monthly low near 1.3600. However, any further downside will be challenged by a seven-month-old horizontal support area surrounding 1.3570-65.

GBP/USD keeps the week-start inactivity around the mid 1.3700s during Tuesday’s Asian session. Even so, bears remain hopeful as the Daily Moving Averages (DMAs) hint at a bearish cross as the prices remain below an important resistance line stretched from June 01.

It’s worth noting that a descending Momentum line also backs the GBP/USD sellers who await a daily closing below the 1.3700 thresholds to confirm the pair’s further weakness.

Given the quote’s downside past 1.3700, the 50-DMA will drop below 200-DMA and suggest the pair’s further declines towards the monthly low near 1.3600. However, any further downside will be challenged by a seven-month-old horizontal support area surrounding 1.3570-65.

2) Why Are Gold Buyers Attracted By The 1830 Price?

Gold price pullback from the highest levels in about four weeks at $1823 on Monday, as it finished the day at $1810, posting moderate losses on the day. Gold’s hourly chart shows more room for the upside ahead of the US data.

The hourly chart shows that gold price remains on track to challenge $1830, especially after it confirmed a falling wedge formation on a sustained break above the hurdle at $1812. In doing so, the gold price has recaptured the horizontal 21-Hourly Moving Average (HMA), which aligns at the abovementioned level, forming strong support now. Any retracement below the latter could challenge the wedge hurdle, now at $1810.

Further south, the wedge support at $1804 could come into play. The Relative Strength Index (RSI) has turned lower but remains well above the midline, still keeping doors open for a fresh upswing. Therefore, if the bulls regain poise, then Monday’s high at $1823 could challenge the renewed upside towards $1830.

Ahead of the Eurozone inflation data and the US CB Consumer Confidence on Tuesday, the US dollar is extending its post-Powell declines to refresh two-week lows, benefiting gold price. The market sentiment is mixed to cheerful, as the rest of Asia ex-China is in the green, tracking the record close on Wall Street. China stocks bear the brunt of the country’s slowing manufacturing sector activity while the services contract. Additionally, the dragon nation’s regulatory crackdown on private industries unnerves investors.

However, an uptick in the S&P 500 futures and a minor bounce in the Treasury yields are checking gold’s rebound for now. Looking ahead, the gold price will remain at the mercy of the dynamics in the yields and the dollar. Meanwhile, the gold price could resume the previous decline should the US CB Consumer Confidence disappoint markets big time and trigger a strong comeback in the safe-haven greenback.

3) EUR/USD Renews Three-Week Top Above 1.1800 Ahead Of Eurozone CPI

EUR/USD is flirting with multi-week highs above 1.1800 ahead of the European open. The US dollar tracks treasury yields lower amid a mixed session. China’s slowdown concerns could check the gains in the euro. Eurozone CPI and US CB Consumer Confidence awaited.

As mentioned earlier, the four-hour chart is pointing to overbought conditions the Relative Strength Index (RSI) is above 70. Euro/dollar’s sharp maintains momentum to the upside and sets the price well above the 50, 100, and 200 Simple Moving Averages. All in all, technicals point to a temporary downside correction.

The next resistance line is 1.1860, which capped the pair in early August. It is followed by 1.1910, a peak in late July, and then by 1.1950 and 1.1980.

Support awaits at 1.1810, Monday’s peak, and then by 1.1780, which held EUR/USD down last week. Further down, 1.1740 and 1.1725 await.

“Markets can stay irrational longer than you can remain solvent” the words of famous economist John Maynard Keynes apply to EUR/USD as August draws to a close. Irrationality is oversold conditions on the four-hour chart but these upward moves seem justified.

The underlying boost for the currency pair is the dollar’s downside driver dovishness from the Federal Reserve, which is in no rush to taper its bond buys. The echoes of Fed Chair Jerome Powell’s speech from Friday are heard loud and clear.

He only “thought” tapering down the bank’s $120 billion/month bond-buying scheme is warranted, but seems unsure due to the spread of the Delta COVID-19 variant. Only a strong Nonfarm Payrolls report on Friday could change that impression. On Tuesday, there are other factors that could boost EUR/USD.

1) End-of-month flows: Money managers are rushing to adjust their portfolios as August draws to a close. While EUR/USD rose over 150 pips from the 1.1660 trough, it remains down on the month. If there is room for a monthly correction, it is to the upside in line with the current Fed-driven trend.

2) Strong eurozone inflation: Are price rises reaching the old continent? Inflation-averse Germans are beginning to worry after their country reported an annual increase of 3.4% YoY on Monday. Early on Tuesday, France’s figure hit 2.4% YoY, above expectations. Estimates for the entire currency bloc stand at 2.7%, but the releases from individual countries point to the upside.

Core inflation is projected to double from 0.7% to 1.5%. Any such developments could embolden the hawks on the European Central Bank and raise demands for reducing the institution’s bond-buying scheme. That would be euro-positive.

3) Downbeat US consumer? Perhaps one of the reasons that pushed Powell to refrain from committing to tapering came from the shockingly low Consumer Sentiment Index from the University of Michigan. The score of 70.3 was the lowest since 2011 below the pandemic bottom.