28-Sep-2020

1) EUR/USD: Bears Are Taking A Breather After Last Week’s 1.8% Drop
2) GBP/USD: Short-Covering Kicks In Ahead Of Brexit Talks On Tuesday
3) Gold Technical Analysis: Fades From Restrictive Line To 100-Day SMA

1) EUR/USD: Bears Are Taking A Breather After Last Week’s 1.8% Drop

The Euro bounces from two-month low in European session on Monday, driven by fresh risk mode in the market, that lifted global stocks and deflates dollar

Larger bears are taking a breather as traders book some profits on last week’s 1.8% drop, with oversold daily studies contributing to corrective attempts.

Limited upside attempts could be anticipated following negative signal generated on weekly close below key 1.1700 support zone, as last week’s massive bearish candle weighs and threatens of deeper pullback from new 2020 high (1.2011).

Broken 1.1700 support now marks initial resistance with extended upticks expected to stall under barriers at 1.1743/54 (10/55DMA’s / daily cloud top), to offer better opportunity to re-enter bearish market.

Bears look for attempts towards key support at 1.1485 (38.2% retracement of Mar/Aug 1.0635/1.2011 / rising 100DMA) after correction is complete.

Only break and close above falling 20DMA (1.1790) would neutralize bears and shift near-term focus higher.

2) GBP/USD: Short-Covering Kicks In Ahead Of Brexit Talks On Tuesday

The GBP/USD pair caught some fresh bids on the first day of a new trading week and spiked to four-day tops, around mid-1.2800s during the early European session. The British pound got a lift after both, the UK and the EU made key concessions to avoid no-deal Brexit. The latest round of discussions are set to begin on Tuesday and reports indicate that negotiators will begin the process to finalise a deal by the end of this week. This would mean that a final agreement would be in place just after the next EU summit in Brussels in mid-October.

On the other hand, the US dollar witnessed some profit-taking amid a goodish recovery in the global risk sentiment. Adding to this, concerns that the lack of any additional fiscal stimulus could halt the current US economic recovery and the political uncertainty in the run-up to the US Presidential election in November further undermined the greenback and provided an additional lift to the major. Hence, the key focus will be on the first US presidential debate on Tuesday. This, along with the release of the US economic data later this week, will play a key role in influencing the near-term USD price dynamics.

Apart from this, the incoming Brexit related headlines with drive the sentiment surrounding the British pound and produce some meaningful trading opportunities amid absent relevant market-moving economic releases, either from the UK or the US.

Given that the pair has been showing some resilience below the very important 200-day SMA, the strong recovery could be attributed to some short-covering move and runs the risk of fizzling out rather quickly. That said, some follow-through buying beyond the 1.2865 immediate resistance might still push the pair further to the 1.2900 round-figure mark. A convincing breakthrough will negate any near-term bearish bias and pave the way for a move back towards conquering the key 1.3000 psychological mark.

On the flip side, any meaningful pullback now seems to find decent support near the 1.2800 mark. Failure to defend the mentioned level might turn the pair vulnerable to accelerate the slide back towards challenging the 1.2700 mark (200-DMA), with some intermediate support near the 1.2740-35 region. This is closely followed by the 38.2% Fibonacci level of the 1.1412-1.3482 positive move, which if broken decisively will set the stage for the resumption of the recent downward trajectory. The pair might then accelerate the fall further towards mid-1.2500s before eventually dropping to the key 1.2500 psychological mark.

3) Gold Technical Analysis: Fades From Restrictive Line To 100-Day SMA

Gold has found some footing on the 100-day simple moving average (SMA), after deflecting off a preventive line drawn from the all-time high of 2,074 and dropping below the Ichimoku cloud. The paused bearish Ichimoku lines transmit weakness in negative momentum, while all SMAs maintain a bullish tone.

That said, the MACD and the RSI reflect the stall in downwards price action, while the stochastics aim to improve. The MACD has eased in bearish territory, while the RSI floats above the 30 mark. The stochastic %K line has nudged above its red %D line but has yet to confirm its desire to shift bullish.

To the downside, tough support may occur from the 100-day SMA at the 1,848 immediate low, before a prohibitive section from the inside swing high of 1,818 to the 1,828 barrier. Deteriorating past these obstacles, the key 1,789 trough may attempt to halt further loss of ground. However, if steeper declines prevail, the precious metal may then target an area of lows from 1,746 to 1,757.

Alternatively, if buyers take advantage of the foothold on the 100-day SMA, initial resistance may arise from the lower band of the cloud around 1,886, ahead of the Ichimoku lines from 1,910 to 1,920. Pushing upwards, the descending line may test the climb ahead of the 50-day SMA currently at 1,946. Overrunning these, a buffer zone from the cloud’s upper surface at 1,960 to the 1,974 high may attempt to prevent the commodity from appreciating towards the 1,992 and 2,016 peaks.

In brief, the short-term picture of gold is looking weak under the cloud and dropping diagonal line. Yet, if the price is sustained above the 100-day SMA and creeps sideways, a second test to break the restrictive line would confirm the next direction.