Last week, global stocks posted gains while the US dollar slides as the recent rally takes a pause as optimism grows for inflation to continue to come down. This week, markets will now turn their attention to the U.S. inflation data that might influence the Federal Reserve’s decision on whether to act more aggressively. Economists predict an annual increase of 8.1 percent compared to the 8.5 percent rise recorded in July. On the other hand, China’s latest CPI data showed that inflation slowed in August, inflation declined to 2.5% on the year from 2.7% in July.
On the earnings front, the companies scheduled to release their last quarter financial results this week will be Oracle and Adobe.
The precious metal ended flat on Friday. The metal regained strong upside momentum on Wednesday but it failed to extend the rally on Thursday after the comments from US Fed chair Jerome Powel. Powell said at a conference Thursday he’s “strongly committed” to bringing down inflation, fueling speculation that the Fed will announce another rate hike in September. This week the main drivers for the precious metal remain the movement of the US dollar and US CPI data.
From a technical perspective, gold is maintaining a negative bias according to the weekly chart. This week, If the bearish momentum continues then the next key support area to watch is $1692 then $1680. On the upper side, If the metal regains upside momentum and presses back above $1730 then the key resistance area to watch is $1745 and $1760.
The dollar index, which tracks the U.S. currency against six major peers retreated from the multi-year highs and posted its first weekly decline in four weeks. Fundamentally the greenback is expected to be extra volatile this week due to a busy economic calendar and all eyes remain on Tuesday's US Inflation data.
For this week, considering heavy volatility there are chances the USD can rally back to near the 110 again. On the downside, the decline is more extensive, and it will be hard to rule out a run towards 107.60/40 if the index breaks below 108.30. This week's expected trading range for the index is between 107.40 support and 110 resistance.
EURUSD found buyers again near 0.9900 and climbs to three-week highs supported by the hawkish comments from the European central bank president Christine Lagarde. Meanwhile, the European Central Bank raised rates by a record 75 basis points on Thursday signalling further hikes to fight inflation. One of the key factors the Euro traders should monitor this week is the latest consumer inflation figures from Germany and the Eurozone.
This week, 1.0000 is the immediate support level, followed by 0.9980. If the pair breaks below 0.9980, the slump will quickly extend toward the 0.9930 mark. On the upper side, the euro is likely to find immediate resistance at 1.0130, any break above the 1.0130 level could lead the pair towards the next resistance levels of 1.0200 and 1.0230.
Dow Jones and other US indices rebounded last week after Fed Chair Jerome Powell reconfirmed that the central bank's priority is to tackle soaring price pressures. However, the US stock futures started the new week on a mixed note as investors across the globe remain concerned about the impact of aggressive monetary policy tightening on economic growth.
This week, the Dow needs to stay above 31,600 to have a chance to develop upside momentum in the near term. If the price break and closes above 32,400, the next upside level to watch is 32,800 then 33,100. On the downside, if the index break below the 31,600 area then the next immediate downside area is to watch 31,300 and 31,000.
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