The Gold
We previously indicated that gold might confirm a breakout from its trading range, signaling an upward trend, provided there were no significant disruptions in other markets. No such disruptions have occurred in the precious metals sector, and the US Dollar Index has weakened, exerting downward pressure. Considering the upcoming Federal Reserve meeting and the potential for a 50-basis-point rate cut, we anticipate further declines in the US Dollar Index next week, which should support gold prices.
The Euro
The Euro is regaining its upward momentum ahead of the Federal Reserve meeting.
This currency pair may challenge the 1.12 resistance level if the Federal Reserve decides to implement a 50-basis-point interest rate cut. Furthermore, a weakening US dollar could provide additional support for this pair.
Markets anticipate significant shifts as the Federal Reserve embarks on a new era of rate cuts, with recent expectations leaning towards a 50-basis-point reduction.
Given the recent volatility in the US dollar, market participants are closely scrutinizing the Federal Reserve’s actions and statements for their impact on market dynamics.
Additionally, the Eurozone’s inflation data, due to be released on Wednesday, could influence the European Central Bank’s monetary policy decisions. Should the data support further interest rate cuts, it may present a significant challenge for the Euro to overcome the 1.12 resistance level.
The Oil
WTI futures prices experienced a slight uptick last week, halting a four-week decline. Conversely, Brent crude prices continued to fall.
Weak economic data from China, coupled with elevated oil inventories, has exacerbated concerns over waning demand.
The increase in the rig count and bearish technical indices suggest that WTI prices may extend their downward trajectory.
WTI futures contracts registered a slight uptick last week, halting a four-week losing streak. The disruptions caused by economic storms appear to have aided WTI in recouping its weekly losses, while Brent crude contracts continued their decline for a fifth consecutive week.
Consequently, both oil contracts remain at risk of resuming their downward trajectory as investor concerns over demand in China have intensified following the release of further negative economic data from the world’s second-largest economy over the weekend.
A primary concern among oil investors is that demand growth will not be robust enough to offset supply increases. These concerns have been exacerbated by energy agencies such as the International Energy Agency and OPEC, which have downgraded their demand growth forecasts in light of weak data from key economic regions.
These regions include China and the Eurozone. While WTI successfully closed above its recent lows last week, it may now resume its downward trend as it faces a key resistance level and amid renewed weakness in Chinese economic data.