KVB Market Analysis | 10 September: Gold Remains Range-Bound as Market Awaits U.S. Inflation Data

Product: EUR/USD

Prediction: Decrease

Fundamental Analysis:

The Euro fell 0.44% on Monday, extending its decline after breaking below the 1.1100 support level. This downward pressure comes from expectations of a European Central Bank rate cut on September 12, with EUR/USD trading around 1.1036 as the Asian session begins. The U.S. Dollar Index rose, testing 101.70, as mixed U.S. labor market data diminished hopes for a 50 basis point Fed rate cut.

Investors are focused on the upcoming U.S. Consumer Price Index report, which may influence the Fed's policy. Recent ECB minutes revealed divisions among policymakers regarding growth and inflation, with lower-than-expected CPI data possibly prompting discussions of rate cuts. Speculators have increased net long positions in the Euro, while commercial traders have raised net short positions.

Technical Analysis:

The EUR/USD is likely to test the 2024 high of 1.1201, followed by the 2023 peak of 1.1275 and the round number 1.1300. On the downside, the next target is the September low of 1.1026, followed by the preliminary 55-day SMA at 1.0930 and the weekly low of 1.0881. Below these, the critical 200-day SMA is at 1.0857, then the weekly low of 1.0777 and the June low of 1.0666.

The upward trend is expected to continue as long as the pair stays above the 200-day SMA. The four-hour chart shows a slight shift back to negative sentiment, with initial resistance at 1.1155, then 1.1190 and 1.1201. Immediate support is at 1.1026, then the 200-day SMA at 1.0997, followed by 1.0949. The relative strength index is around 40.

Product: XAU/USD

Prediction: Increase

Fundamental Analysis:

Gold prices are struggling to gain momentum after bouncing from a multi-day low, fluctuating in a narrow range just above the $2,500 mark during Tuesdays Asian session. A positive risk sentiment and some strength in the U.S. Dollar are limiting gains for XAU/USD.

Spot Gold is trading around $2,500, showing little change from Monday and remaining within a tight intraday range. It peaked at $2,505.18 earlier in the American session as Treasury yields began positively but later fell to 3.70% from a high of 3.76%.

Markets are awaiting U.S. inflation data, with the August Consumer Price Index set for release next Wednesday, expected to rise by 2.6% year-on-year, down from 2.9% in July. Following the Nonfarm Payroll report, there are growing expectations that the Federal Reserve may consider a 50 basis point rate cut next week, fueled by easing inflation pressures.

Technical Analysis:

From a technical perspective, the daily chart for XAU/USD indicates that buyers remain in control but are cautious. The pair is currently near a slightly bullish 20 Simple Moving Average, with buyers stepping in on dips below this level. However, technical indicators are around their midlines, showing no clear direction. Longer moving averages also have modest bullish slopes but are well below the current price.

In the near term, the outlook is neutral-to-bearish. The converging 20 and 100 SMAs provide resistance near the recent high, while the 200 SMA trends upward around $2,465. The Momentum indicator points lower, suggesting downside risk, and the Relative Strength Index is directionless at around 50.

Product: GBP/USD

Prediction: Decrease

Fundamental Analysis:

GBP/USD has extended its losses for a third consecutive day, trading around 1.3060 during Tuesdays Asian session. The decline is largely due to a stronger U.S. Dollar, supported by recent labor data that raised doubts about a significant interest rate cut by the Federal Reserve in September.

The pair faced bearish pressure during the American session on Friday, erasing gains and ending the week flat. It is now at its lowest level since August 22, below 1.3100. Despite weak labor market data, the U.S. Dollar benefited from a flight to safety ahead of the weekend.

The U.S. Bureau of Statistics reported a Nonfarm Payroll increase of 142,000 in August, below the expected 160,000, while the unemployment rate fell to 4.2%. In the European session, the UKs FTSE 100 Index rose over 0.5%, and U.S. stock futures gained between 0.4% and 0.75%. Without significant macroeconomic data, the U.S. Dollar may struggle to maintain its strength if risk appetite increases later in the day.

On Tuesday, the UKs Office for National Statistics will release employment data, and market participants will focus on the U.S. Consumer Price Index (CPI) data due Wednesday.

Technical Analysis:

GBP/USD closed a 4-hour candle below the 100-period Simple Moving Average for the first time since mid-August. The Relative Strength Index on the 4-hour chart is near 30, indicating that the pair may soon be oversold.

If 1.3100 (the 100-period SMA) remains as resistance, sellers could maintain control over GBP/USD. The next support level is at 1.3040 (Fibonacci 38.2% retracement), followed by 1.3000 (a psychological level) and 1.2960-1.2970 (Fibonacci 50% retracement and 200-period SMA).

If GBP/USD breaks above 1.3100, it may encounter resistance at 1.3130 (Fibonacci 23.6% retracement), then at 1.3150 (50-period SMA) and 1.3200 (another psychological level).

Product: USD/JPY

Prediction: Decrease

Fundamental Analysis:

The USD/JPY pair has turned positive for the second consecutive day after dipping to around 142.85 during the early Asian session, although it lacks strong bullish momentum. Prices are trading slightly higher just below the mid-143.00s, remaining close to a one-month low reached last Friday.

The pair has breached a significant multi-year trendline, indicating that the long-term uptrend may be weakening. To confirm a reversal, prices would need to break and close below the August 5 low of 141.69.

Strong support is found at 140.25, which could slow the pairs decline. A break below this level would further confirm a trend reversal.

Technical Analysis:

USD/JPY has broken below a significant multi-year trendline, indicating that the long-term uptrend may be weakening. To confirm a reversal, the price needs to drop and close below the August 5 low of 141.69, ideally on a daily or weekly basis.

There is strong support at 140.25, which could slow the pair's decline. If the price falls below this level as well, it would further signal a trend reversal.

In technical analysis, the idea that “the trend is your friend” suggests that understanding the trend direction can help predict future price movements, making a breakdown more likely to lead to further declines.

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