KVB Market Analysis | 20 August: Gold Prices Remain Near Record High Amid US Rate Cut Expectations

Product: EUR/USD

Prediction: Increase

Fundamental Analysis:

The Euro (EUR) rose against the US Dollar (USD) on Monday, reaching new highs for the year. This was driven by a weakening US Dollar, with investors expecting the Federal Reserve (Fed) to begin cutting interest rates in September. The Fed‘s potential rate cuts, combined with the European Central Bank’s (ECB) expected rate hikes, could further support the Euro. However, the US economy is expected to outperform Europe in the long run, which could limit the Euro‘s gains. Key events this week include the release of the FOMC Minutes, a speech by Fed Chair Jerome Powell at Jackson Hole, and testimony by the Bank of Japan’s Governor Kazuo Ueda.

Technical Analysis:

EUR is expected to continue its upward trend against the US Dollar , potentially reaching its 2024 high of 1.1083 and then its December 2023 high of 1.1139. However, if the pair falls below the crucial 200-day moving average (SMA) at 1.0842, the upward trend could be disrupted. The immediate support level is at 1.0949, followed by 1.0881 and the 200-day SMA. The technical indicators suggest a strong positive bias, with the Relative Strength Index (RSI) above 77.

Product: GBP/USD

Prediction: Increase

Fundamental Analysis:

The British Pound rose against the US Dollar since last Friday, driven by a continued decline in the US Dollar. The recent positive US economic data, including a decline in jobless claims and an increase in retail sales, initially boosted the US Dollar. However, risk appetite in the markets returned, causing the US Dollar to weaken and the GBP/USD to rise. The pair is expected to be influenced by risk sentiment in the second half of the day, with US stock market performance playing a key role.

Technical Analysis:

The British Pound (GBP) is expected to face resistance levels at 1.2900, 1.2950, and 1.3000 against the US Dollar (USD). These levels represent Fibonacci retracement levels of the recent downtrend. On the downside, support levels are located at 1.2850-1.2840, 1.2800, and 1.2760. These levels are also based on Fibonacci retracement levels and moving averages.

Product:XAU/USD

Prediction: Increase

Fundamental Analysis:

Gold prices are holding steady near a record high, supported by expectations of a US interest rate cut and a weakening US Dollar. Investors are looking ahead to the Jackson Hole Symposium, where Fed Chair Jerome Powell will speak on Friday. The Feds stance on interest rates remains a key driver for gold, with policymakers cautiously considering a rate cut. The upcoming release of US manufacturing data (PMIs) will also be closely watched.

Technical Analysis:

Gold prices (XAU/USD) are near a record high, holding onto recent gains. The price dipped to $2,385 but quickly recovered, showing that investors are eager to buy gold at lower prices. Technical indicators suggest that gold is in a strong upward trend, with the price trading above important moving averages, including the 20-day Simple Moving Average (SMA) at $2,429.00. The short-term outlook is positive, with the risk of gold prices going up being higher than the risk of them going down. This suggests that gold is likely to continue its upward climb in the near future.

Product: USD/JPY

Prediction: Decrease

Fundamental Analysis:

JPY strengthened against USD, driven by stronger-than-expected Japanese GDP growth. This raised expectations of a potential interest rate hike by the Bank of Japan (BoJ). However, the USD/JPY pair received support from a stronger US Dollar, boosted by higher Treasury yields. The potential for further gains in the US Dollar may be limited by expectations of a rate cut by the US Federal Reserve (Fed) in September. The Fed's decision on the size of the rate cut remains uncertain, with a 25 basis point cut being the most likely outcome, but a 50 basis point cut still possible.

Technical Analysis:

The US Dollar is trading near 146.60 against the Japanese Yen. Technical indicators suggest a short-term bearish trend, with the price below the 9-day EMA and the RSI slightly above 30, indicating potential for a correction. Support levels are at 141.69 (seven-month low) and 140.25. Resistance levels are at 147.53 (9-day EMA), 153.40 (50-day EMA), and 154.50. This suggests that the USD/JPY pair could move lower in the short term, but there is potential for upside movement if it breaks through the resistance levels.

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