Gold guards latest rebound, more obstacles ahead

(Christina Parthenidou – XM)

Gold guards latest rebound, more obstacles ahead

Gold continued to face mild bullish pressures during Monday’s early European trading hours, despite remaining compressed within the tight range of 1,660–1,676.

Although the broad negative trajectory shows no sign of abating, the momentum indicators are reflecting persisting buying presence. Particularly, the RSI has overcome its previous highs after exiting the oversold territory and is currently sloping upwards to meet its 50 neutral mark. The Stochastics are in a positive mood as well, but close to their 80 overbought level, while the MACD is gradually deviating above its red signal line.

However, the way higher may not be easy for bullion. The 1,676–1,688 region could immediately curb any upside pressures, delaying any recovery towards the channel’s upper boundary currently seen around 1,712. Then, the bulls will need to pierce through the 1,735 level, which overlaps with the constraining line drawn from the 2,079 record high, in order to meet the 1,765 barrier.

On the downside, a close below the 1,660–1,650 region could produce a quick decline towards the key 1,620 mark, which the bears could not successfully claim last week. Slightly lower, traders will look for a rebound near the bottom of the shorter-term bearish channel seen within the 1,600–1,585 zone. The 1,565 barricade taken from the first half of 2020 could next attract attention.

All in all, the precious yellow metal, although still within a bearish territory, is trying to tilt the short-term bias in favor of the buyers. Yet, there are a couple of tough obstacles nearby, which may easily ruin any progress.

EUR/USD holds bullish bias in very short-term

EURUSD posted almost 4% of gains after the bounce off the 20-year low of 0.9530 in the preceding week, remaining within the long-term downward sloping channel.

Technically, the RSI indicator is pointing upwards in the bearish region, while the MACD is trying to strengthen its bullish bias in the negative area, suggesting that the next near-term movements could be to the upside.

Currently, the price is approaching the 20-day simple moving average (SMA), which is standing slightly above the 0.9863 resistance, while more gains could open the way for the parity level and the 50-day SMA at 1.0020. Running higher, a break of the descending channel could add some optimism for bullish actions until the 1.0200 barrier.

In the negative scenario, a drop off again could hit the latest trough of 0.9530 before challenging the September 2001 inside swing high of 0.9335. Beneath these obstacles, the next marks to have in mind are the psychological levels such as 0.9300, 0.9200 and 0.9100.

Summarizing, EURUSD has been in a bullish movement in the very short-term; however, the bigger picture remains strongly bearish.

EUR/USD is too oversold

(Alexander Kuptsikevich – FxPro Financial Services Limited)

EURUSD, the world’s most liquid currency market pair, ended September down 2.5%, having consolidated below parity. A combination of technical and fundamental factors raises the chances of a rebound in the pair, potentially translating into long-term growth.

Last week ended on the bulls’ flag, which pushed the pair up by 3.2% to the week’s lows and allowed it to return to 0.9800 vs the lows of 0.9535 by the end.

Of the last 15 months, declines have been recorded on 12 occasions, indicating sustained bearish sentiment. However, the accumulated oversold conditions in the pair during this period show that ‘buying the dip’ has intensified.

A large lower shadow on a monthly candlestick in the EURUSD after a prolonged downward trend might also be an early sign of a positive month ahead. There are plenty of such examples in the pair’s history.

But an even stronger signal is the oversold RSI on the monthly charts. This index closed the month below the 25 levels. In the history of the Euro (including the one that has been emulated since 1971 based on its components), the index has reached such low levels five times, and for the following month, the rate rose by 3.9% with a range of 0.8% to 8.2%.

However, we also point out that the reversal from decline to rise occurred only in 1985. In the other cases, the low RSI signalled a switch from downside to sideways (October 2000, 2015) or a significant shake-up of some months (1981, April 2000).

In addition, there are signs that fundamental factors are increasingly supporting the corrective rebound. Monetary tightening in the eurozone is gaining momentum, preparing the markets for a rate hike of 75 points for the second time.

While the Fed is likely to slow down with policy tightening in the coming months in response to slowing inflation and the economy, this is not expected from the ECB, which will work to reduce spreads between European and US debt securities. This change would help to shift the balance of power in favour of the single currency.

In our view, it would not be surprising if market speculators saw the current low quotations for the Euro as a good buying point with a view to a possible long-term reversal.

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