KVB Market Analysis | 22 August: Gold Stays Strong Above $2,500 as Fed Rate Cut Hints Loom

Product:EUR/USD

Prediction: Increase

Fundamental Analysis:

The Euro rose against the US Dollar for a fourth consecutive day, reaching a new high for the year at 1.1170. 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 expected rate cuts, 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 flash PMIs, a speech by Fed Chair Jerome Powell at Jackson Hole, and testimony by the Bank of Japan's Governor Kazuo Ueda.

Technical Analysis:

The Euro (EUR) is expected to continue its upward trend against the US Dollar (USD), potentially reaching its 2024 high of 1.1173, followed by the 1.1200 level, and then the 2023 peak of 1.1275. However, if the pair falls below the crucial 200-day moving average at 1.0845, the upward trend could be disrupted. The immediate support level is at 1.1005 (55-SMA), followed by 1.0949 and 1.0881. The technical indicators suggest a strong positive bias, with the Relative Strength Index above 83.

Product: XAU/USD

Prediction: Increase

Fundamental Analysis:

XAU/USD is holding above $2,500, close to an all-time high, despite a slightly weaker market mood. Investors are awaiting further clues from the Federal Open Market Committee minutes, which are expected to confirm the possibility of a rate cut by the Federal Reserve in September. The Fed's shift to a more dovish stance, focusing on employment rather than inflation, has weakened the US Dollar  and supported gold prices. A recent revision of Nonfarm Payrolls showed that the US economy created 818,000 fewer jobs than originally reported, further supporting the case for a rate cut.

Technical Analysis:

Gold prices are holding above all their moving averages, suggesting an overall bullish trend. The 20-day Simple Moving Average is at $2,440, while the 100-day and 200-day SMAs are also trending upwards. Technical indicators are not showing a strong directional bias, but they are still above their midlines, suggesting that a downward correction is unlikely. However, a break below $2,500 following the release of the FOMC minutes could trigger a more significant correction in the short term.

Product: GBP/USD

Prediction: Increase

Fundamental Analysis:

GBP is strengthening against USD, reaching a 13-month high above 1.3100. This is driven by a weakening US Dollar, which was initially boosted by positive US economic data, including a decline in jobless claims and an increase in retail sales. 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 is expected to face resistance levels at 1.3120, 1.2320, and 1.3400 against the US Dollar. 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: USD/JPY

Prediction: Decrease

Fundamental Analysis:

JPY strengthened against the US Dollar on Thursday, driven by stronger-than-expected Japanese GDP growth. This raised expectations of a potential interest rate hike by the Bank of Japan. 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 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 is still possible.

Technical Analysis:

USD is trading near 145.60 against the JPY. 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.

Market Analysis Disclaimer: 

The market analysis provided by KVB Prime Limited is for informational purposes only and should not be construed as investment advice or a recommendation to buy or sell any financial instrument. Trading forex and other financial markets involves significant risk, and past performance is not indicative of future results. 

KVB Prime Limited does not guarantee the accuracy, completeness, or timeliness of the information provided in the market analysis. The content is subject to change without notice and may not always reflect the most current market developments or conditions.

Clients and readers are solely responsible for their own investment decisions and should seek independent financial advice from qualified professionals before making any trading or investment decisions. KVB Prime Limited shall not be liable for any losses, damages, or other liabilities arising from the use of or reliance on the market analysis provided.

By accessing or using the market analysis provided by KVB Prime Limited, clients and readers acknowledge and agree to the terms of this disclaimer.

RISK WARNING IN TRADING

Transactions via margin involve products that use leverage mechanisms, carry high risks, and are certainly not suitable for all investors. THERE IS NO GUARANTEE OF PROFIT on your investment, so be wary of those who guarantee profits in trading. You are advised not to use funds if you are not prepared to incur losses. Before deciding to trade, ensure that you understand the risks involved and also consider your experience.