As you must already know, the direction of Gold is mainly dependent on the Price action of DXY (US Dollar index). So first, we take a look at the US Dollar index.
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Last week was bearish for risky assets such as stocks, oil, gas, and crypto. S&P500 dropped 5%, Nasdaq fell by 6%, WTI and Brent slid below 110, and BTCUSD crossed the 20 000 level to the downside. Will the upcoming week change the situation across the markets? Let’s look at it in detail!
The strength of the US dollar was pulling other currencies lower against it. This way, EURUSD retested June's low at 1.0400, AUDUSD fell to the low of June 2020, and USDJPY retested 136.70. This week additional volatility of the major pairs is expected with the FOMC Meeting Minutes on Wednesday and Nonfarm payrolls on Friday. If the USD keeps strengthening, EURUSD will cross the support area between 1.0400-1.03800 and target 1.0200. However, the chances of the reversal from this zone are high. If it breaks the resistance at 1.0500, a further rise to 1.0600 will be in focus. Also, USDJPY may show us interesting movements since the pair has formed a double top on the chart. Don’t underestimate the RBA Rate Statement on June 5, where the bank is expected to raise the interest rate to 1.35%.
The week was full of ups and downs for oil prices. If we look at the daily chart of both XBRUSD and XTIUSD, we notice that both instruments were balancing between 50- and 100-day SMA. Consider opening long positions for both assets when they stick above the 50-day SMA. The target for Brent will lie at $115; the next one lies at $118. As for WTI, after the breakout of $115, the target will lie at $120.
Gold finally broke the lower border of the triangle at 1800. A strong USD may pull it even lower to the next support area at $1750. If it rises back, the first resistance will lie at $1835.
Stocks moved lower last week after the Fed Chair Powell hinted at more aggressive monetary policy amid rising inflation. If a downtrend in the US stocks continues, US500 (S&P500) will cross the 3700 level and reach 3500. As for Nasdaq, after the crossover of the support at 11 000, the next target will lie at 9500.
On January 12, the Bureau of Statistics will publish the Consumer Price Index (CPI) figures, a key index for determining interest rates. While we await the release, experts forecast a decline in the CPI data, a hint at weaker Dollar values in the global markets.
The trend in the scenario above is clearly bearish. We have also had a recent break of structure at the marked horizontal arrows, which means we can expect price to react from the supply zone that broke the structure.
On Thursday, the 2nd of February, the Bank of England will publish its report concerning interest rates and inflation data for the Eurozone. Professionals and investors anticipate that Andrew Bailey’s lead team of policy makers will likely raise interest rates to 4%; the highest in over a decade, for the tenth time in a row.
The first FOMC meeting comes after a buildup of anticipation from traders and investors alike, as the markets await what posture the Fed will take regarding the interest rates; would there be a hike or a cut in interest rates?
Western countries are trying to find other options for oil and gas supplies after a 10th package of sanctions, which will put more pressure on Russian oil and decrease global oil supply. Italy, for example, is in talks with Libya.