Global markets ended with notable losses on Friday driven by the hawkish US Federal Reserve outlook and mixed flash purchasing managers' index results from the European economies. Going forward, the overall market sentiment is expected to remain lukewarm as investors worry about the possibility of higher interest rates.
This week, Investors and traders should shift their emphasis from central bank meetings to the comments from the FED policymakers and major economic data from the US and Europe. While important economic news to watch includes, inflation data from Germany and the Eurozone, US consumer confidence data on Tuesday, the US GDP and weekly unemployment claims on Thursday and the US PCE price index report on Friday.
On the earnings front, the companies scheduled to release their last quarter financial results this week will be Accenture, Nike, Micron and Costco.
The precious metal closed last week slightly higher but it is far too early however to suggest the gold will extend the upside momentum. This week, gold traders and investors largely focused on the FED policymaker's comments for insights into the central bank's rate hike path. Looking ahead, it seems safe to assume that movement in the precious metals will remain highly volatile. The metals market may remain in a state of anticipation until the announcement of US PCE numbers by the end of the week, which will have a strong reaction on the future of US Federal Reserve policy.
Technically for gold this week, immediate support is expected at the $1914 area, with this zone having held last week while further down, demand is also expected around $1900, which will act as the next area of support. On the upper side, in case the metal manages to settle above 1940, it will regain upside momentum and head towards the next resistance level at $1955/60.
The dollar index, which measures the US currency against six others recorded 10th consecutive weekly gains after the "hawkish pause" taken by the US Fed following its September meeting. The US dollar also received strong upside momentum after the release of better-than-expected US macroeconomic data. The U.S. Labor Department reported that initial jobless claims in the U.S. fell to an 8-month low last week. This week, the US Personal Consumption Expenditures (PCE) Price Index data will likely have a significant effect on the dollar because the PCE data is said to be the Federal Reserve’s preferred measure of inflation.
According to the performance on the daily chart above, the general trend of the DXY is still upward. While considering the strong bullish momentum the index may find strong resistance above 106 this week. On the downside, the move of the bears towards the support levels of 105/104.90 is important for the general trend to turn bearish.
The euro continues to consolidate losses against the US Dollar. The currency pair hit a fresh 6-month low of 1.0616 on Friday. The general trend of the euro against the dollar remains bearish. The trend will not abandon it without a weekly close above the psychological resistance of 1.0700 again. The crucial Eurozone and German inflation figures this week will be the key economic data points which could determine the next move for the currency.
Technically the current price action signals suggest that a medium-term bearish trend remains intact. On the downside, the decline is more extensive, and it will be hard to rule out a run towards 1.0600 and 1.0570 if the bearish sentiment continues. On the flip side, the euro needs to stay above 1.0720 to have a chance to develop upside momentum in the near term. If the pair breaks and closes above 1.0720, the next upside level to watch is 1.0770.
It has been expected that the downward trend of the Dow will become stronger. An attempt for the Dow to rebound upwards may be an opportunity to sell as this happened last week when it jumped up towards the resistance level of 34,770. For Dow, the key events to focus on for this week are Wednesday’s US durable goods orders data and PCE inflation data on Friday. Both the numbers could help investors determine how the Federal Reserve will move ahead with its interest rate policy.
Dow extended the declines as it slipped below 34,000 level of support. Oscillators on the daily chart remain firmly in the bearish territory, suggesting further downside potential. This raises the possibility of the Dow sliding towards the 33,600 level, followed by the 33,450/300 area. On the flip side, a recovery move requires a break of 34,400. This opens the door toward 34,750 and a further price advance makes 34,900 available.
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