• The gold markets have fallen a bit during the day on Monday to drop about two-thirds of a percent in the spot market.
• The market now looks as if it is paying close attention to the $1725 level, an area that was previous resistance.
• This is a market that is going to move counter to the US dollar and interest rates, as is the longer-term trend.

When you see this chart, you can also see that we have been in a long-term downtrend, and it’s worth noting that the US dollar itself is strengthening based on tightening concerns. With the Jackson Hole Symposium going on this week, it does make a certain amount of sense that traders are focusing on the speeches of central bankers. If they are going to continue to tighten monetary policy, that works against gold, due to the fact that the interest rates will be higher, and therefore it’s easier to make a return holding paper than it is storing gold.

See where Gold is headed next

The candlestick for the trading session on Monday is relatively negative, but it’s not necessarily something that I’m overly concerned about. I believe that the market is going to not only pay attention to the $1725 level, and then again at the $1690 level. That’s an area that needs a hold in order for gold to perhaps keep its head above water. If we were to break down below that level, then the market is likely to go looking to much lower levels, with perhaps an eye on the $1500 level.

If we can try to break above the $1770 level, we may make a run toward the $1800 level above, which is a large, round, psychologically significant figure, and an area that we have seen the market pullback from as well. All things being equal, this is a market that has been in a downtrend for a while, and even though we had a nice rally recently, it did not change much. In fact, it’s not until we break above the 200 Day EMA, which is currently hanging around the $1820 level, that I would consider this market to be changing over into a longer-term bullish trend. This is a market that I think will remain noisy, as there are a lot of crosscurrents going on at the same time.

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The Dow Jones Industrial Average declined during its recent trading at the intraday levels, to record losses in its last sessions, by -0.86%, to lose the index towards -292.30 points. It settled at the end of trading at 33,706.75, after it slightly increased during Thursday’s trading by amounting to 0.06%. The index ended the week declining by -0.16%.

Louis Fed President James Bullard is open to the idea of ​​another massive interest rate hike at next month’s central bank meeting, the Wall Street Journal reports. “We must continue to move quickly to the level of the policy rate that will put significant downward pressure on inflation,” he said, and “I don’t really understand why you would want to drag the rate increases into next year.”

The Federal Reserve raised its benchmark overnight interest rate by 225 basis points since March to fight inflation that has reached its highest level in four decades.

The focus next week may be on Federal Reserve Chairman Jerome Powell’s speech on the economic outlook at the annual conference of global central bankers in Jackson Hole.

Dow Jones Economic News

A survey from the Bureau of Labor Statistics showed that the unemployment rate fell in 14 states in July, rose in three states, and stabilized elsewhere. The national unemployment rate fell to 3.5% in July from 3.6% in June, marking the lowest level since February 2020 just before the pandemic began. Nonfarm payrolls nationwide increased by 528K jobs in July after increasing 398K jobs in a revised reading in June.

Technical Outlook

Technically, the index’s decline came as a result of the stability of the important resistance level 34,118.

• This is the resistance that we had referred to in our previous reports.
• The index is trying to reap the profits of its previous rises, and it is also trying to gain positive momentum that may help it recover and penetrate that resistance in the future.
• It is also trying to drain some of its saturation of the clear buying of the relative strength indicators, especially with the influx of negative signals from them.

All of this comes because of the continuation of the positive support for its trading above its simple moving average for the previous 50 days. In addition, it is being affected by leaving the range of a descending price channel that was limiting its previous trading in the short term, as shown in the attached chart for a (daily) period.

Our expectations suggest a return to the index’s rise during its upcoming trading, especially throughout the stability of the support level 33,240, to target again the resistance level 34,118 in preparation for attacking it.

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The next key catalyst for the EUR/USD price will be the latest European consumer inflation data

Bearish view

• Set a sell-stop at 1.0150 and a take-profit at 1.00.
• Add a stop-loss at 1.0250.
• Timeline: 1-2 days.

Bullish view

• Set a buy-stop at 1.0235 and a take-profit at 1.0300.
• Add a stop-loss at 1.0150.

The EUR/USD price rose slightly after the Federal Reserve published minutes of the last monetary policy meeting. The pair rose to 1.0200, which was a few points above this week’s low of 1.0120. It remains substantially lower than last week’s high of 1.036.

Fed minutes and EU inflation data

The EUR/USD price tilted upwards after the FOMC published minutes of the past meeting. The minutes showed that some officials judged that it will be necessary to decelerate the pace of interest rate hikes in a bid to evaluate the impact of the past meetings.

Members were worried that the bank could be tightening at a substantially faster pace than is necessary. In that meeting, the committee decided to hike interest rates by 0.75% for the second straight month. It brought the total rate hikes this year to 225 basis points. The minus added:

“As the stance of monetary policy tightened further, it likely would become appropriate at some point to slow the pace of policy rate increases while assessing the effects of cumulative policy adjustments on economic activity and inflation.”

A lot has happened since the Fed met in July. Data by the Bureau of Labor Statistics (BLS) showed that the country’s unemployment rate dropped to 3.5%. Further, inflation moderated slightly in July as it dropped from 9.1% to 8.7%.

On Wednesday, data showed that retail sales did well in July. Headline sales rose at an annual pace of 10.1%. Additionally, big retailers like Walmart and Home Depot published results that were better than expected.

The next key catalyst for the EUR/USD price will be the latest European consumer inflation data. Based on the previous estimates, analysts believe that the headline consumer inflation rose to 8.9% while core inflation rose by 4%.

The pair will also react to the latest existing home sales numbers. Economists expect the data to show that sales dropped from 5.12 million to 4.89 million in July. Fed officials like Esther George and Neel Kashkari will also deliver speeches.

EUR/USD forecast

The four-hour chart shows that the EUR/USD price has been in a strong downward trend this week. It managed to move below last week’s high of 1.0366 to a low of 1.0123. The pair has dropped below the 25-day and 50-day moving averages and the ascending purple trendline. It is also between the 23.6% and 38.2% Fibonacci Retracement level. The pair will likely continue falling and retest the crucial parity level at 1.000.

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I think the only thing you can count on is seeing a lot of fake-outs in both directions.

• The AUD/USD currency pair has dropped rather heavily to kick off the week on Monday, slamming into the 0.70 level.
• This is an area that I will be watching very closely because it is a large, round, psychologically significant figure, and an area that I think a lot of people will be paying close attention to.
• We have seen a lot of support in that area in the past, right along with resistance.
• “Market memory” comes into play rather drastically in this general vicinity.

Risk Appetite May Cause Bullishness

The size of the candlestick is somewhat impressive, and therefore you need to take that into account. However, this is also a lot of noise underneath here so you also would have to assume that there will be people willing to get involved and try to pick up value in the Aussie if they are truly bullish on risk appetite. One of the main things that kicked this off during the Monday session was the fact that Chinese numbers came in rather lackluster. Retail sales missing by almost 3% does not bring in a lot of confidence when it comes to the Chinese economy. Remember, Australia is highly dependent on the Chinese economy, so if the Chinese economy does poorly, so will the Australian economy.

Underneath, we have the 50-day EMA, and that of course comes into the picture as well, as the market pays close attention to that quite often. The 0.6939 level is where it currently is, so breaking down below that will open up an attack on the 0.69 level, and then possibly breaking down below there to reach the lows again. I don’t know that it will happen easily, but it’s obvious that there is still plenty of volatility in the market, so you have to be very cautious on the whole.

If we were to break above the 200-day EMA, it opens up the possibility of a move above the 0.72 level, an area that has a certain amount of historical importance and of course psychology attached to it as well. Either way, I think the only thing you can count on is seeing a lot of fake-outs in both directions, and a lot of accounts destroyed in this pair as it has bucked the trend when it comes to how it behaves against the US dollar.

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The pair will likely continue pulling back as sellers target the key support at 1.0150. 

Bearish View

• Sell the EUR/USD pair and set a take-profit at 1.0175.
• Add a stop-loss at 1.0366.
• Timeline: 1-2 days.

Bullish View

• Set a buy-stop at 1.0300 and a take-profit at 1.0400.
• Add a stop-loss at 1.0250.

The EUR/USD price pulled back to a low of 1.0254, ahead of the upcoming economic numbers from the United States and Europe. The price is about 1% below the highest level this month. The price is at the lowest level since August 10th.

US Retail Sales and EU GDP Data

The EUR/USD price rose sharply last week after the US published significantly lower consumer and producer inflation data. According to the Bureau of Labor Statistics (BLS), the headline consumer inflation dropped from 9.1% in June to 8.7% in July. That decline was slightly lower than what most analysts were expecting.

On the following day, the BLS showed that the country’s producer price index (PPI) dropped for the first time since early in the pandemic. It eased to 9.8% in July as the price of gasoline declined. The pair then started dropping as Fed officials like Mary Daly, Charles Evans, and Neel Kashkari insisted that the bank will continue hiking rates.

The EUR/USD pair will react to several important economic data this week. On Tuesday, the US will publish the latest building permits and housing starts numbers. Economists expect the data to show that building permits dropped from 1.696 million and 1.540 million, respectively.

These numbers will be followed by the latest estimate of European GDP numbers. Economists expect the data to show that the economy expanded by 0.7% on a quarter-on-quarter basis and by 4.0% on a YoY basis. With the bloc facing significant energy challenges, there is a likelihood that it will sink to a recession this year.

The pair will next react to the latest US retail sales and Fed minutes that are scheduled for Wednesday. The minutes will provide more details about what the Fed officials deliberated. The EUR/USD pair will react to the latest EU inflation data and the US existing home sales data.

EUR/USD Forecast

The EUR/USD price rose to a high of 1.0366 last week. This was a notable level since it was the lowest level in May and June of this year. It has then pulled back slightly and moved slightly below the 25-day and 50-day moving averages. The current price is slightly above the ascending trendline shown in purple.

The pair will likely continue pulling back as sellers target the key support at 1.0150. More upside will only be confirmed if the pair moves above the resistance at 1.0366.

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The market is likely to be one in which you need to pay close attention to short-term moves, but still favor the downside overall as the US dollar is by far the strongest currency in the world.

• The GBP/USD currency pair initially tried to rally Monday but gave back the gains rather quickly.
• By doing so, it suggests that the market is going to test the 1.20 level underneath, which is a large, round, psychologically significant number that a lot of people will have to pay close attention to. It is also an area that has seen support previously, so if we were to break down through it, that could kick off even more selling pressure.

UK Recession Likely to Cause Noise

If we were to break down below the 1.20 level, the market is likely to go down to the 1.18 level. The 1.18 level has offered a significant amount of support, so breaking down below there opens up the bottom for the British pound. On the other hand, the market could turn around and try to take out the 1.22 handle. If it does, that would be a very bullish sign, perhaps opening up a move to the 1.23 level. All things being equal, this is a market that I think is going to continue to be noisy, due to the fact that the Bank of England has just stated that the United Kingdom is almost certainly going to head into recession. That is not good obviously, and ironically, so is the United States.

That being said, the market is likely to continue to see a lot of demand for US dollars, especially if they start to jump into the bond market in order to protect trade accounts in what is a very rough economic situation. Ultimately, I think that rallies will continue to be sold into, so it’s difficult to get bullish anytime soon. In fact, it’s not until we break above the 1.26 level that I would think we could get beyond in order to change the trend. If we were to change the trend, then the market could go all the way to the 1.30 level.

The only thing that I think you can count on here is going to be a lot of volatility, but that’s nothing new. With that being said, the market is likely to be one in which you need to pay close attention to short-term moves, but still favor the downside overall as the US dollar is by far the strongest currency in the world.

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You should have plenty of time to accumulate if you are a longer-term investor.

Ethereum rallied just a bit Monday to show signs of life. Breaking above the $1100 level is positive, but one has to wonder whether or not any institutional money was involved, as the Americans were celebrating Independence Day. Because of this, Tuesday may tell the real story, so pay close attention to how the daily candlestick closes.

If we were to break above the $1250 level, that would be very bullish and more likely take this market much higher. In that scenario, I would anticipate an attempt to get back to the $1600 level, perhaps even the $1750 level after that. Anything above there would be a huge bonus, but I just don’t see that happening anytime soon. In fact, I think that once we reach the $1750 level, there would be plenty of people willing to jump out of the market in order to either break even or come close to it.

On a breakdown from here, I would be paying close attention to the $1000 level, and perhaps even more importantly the $900 level. $900 was the recent low, and breaking down below that would more likely than not send even more sellers into the market. In that scenario, the market almost certainly will go down to the $500 level, maybe even $400. It is worth noting that $400 being tested would make a “complete round-trip” of the rally that we have just seen. That is not uncommon for crypto markets, and in the environment we find ourselves in, I do not think there are a lot of people out there willing to throw a ton of money into this market.

That being said, if we get close to the $400 level I will start “stacking”, because the next run higher in crypto should produce even higher highs. In fact, I am actually hoping for this to happen so that I can pick up Ethereum “on the cheap.” In the meantime, short-term rallies are probably thought of as selling opportunities at the first sign of exhaustion, which we should see shortly after a surge higher. As long as the Federal Reserve remains tight with its monetary policy, there’s no real argument for this market going higher over the longer term. You should have plenty of time to accumulate if you are a longer-term investor.

We should continue to see plenty of resistance.

The Parisian CAC Index had a relatively strong session on Friday, engulfing the Thursday candlestick with an impressive move. That being said, the market is more or less in a consolidation area, and I think that’s probably how you have to look at the CAC currently. The size of the candlestick is relatively large considering what we have seen as of late, and I still believe that the €6200 level above is going to continue to cause problems. It is not until we break up up there that I think the French index can really start to take off.

If we do break above the €6200 level, I then suspect that the index will target €6500, where we had fallen from to begin with. This is an area that has been major resistance more than once, and we’ve formed a “M pattern” previously. Breaking through that would obviously change the entire outlook of the market, but right now it seems to be a bit of a tall order.

While the ECB is talking about a couple of token interest rate hikes, the reality is that the central bank will probably have to change their attitude relatively soon. If and when they do, that might be a clue that you need for the CAC to finally take off. Keep in mind that the French index is heavily tied to luxury goods, which in a global recessionary environment is not a good look. Because of this, I do believe that Paris will underperform some of the other indices on the continent such as Frankfurt, Amsterdam, and possibly even the Swiss.

I would anticipate more choppy behavior than anything else, and I think that much like other indices around the world, we just find this market in a little bit of an oversold condition. This is a short-term situation that will eventually either work off the froth by going sideways, or break down rather significantly. We could get a little bit of relief, but see that as a way to reload the short position that you may have at the moment. Keep in mind that a lot of traders are underwater at the moment, and will be looking to get out of the market as soon as they can get close to breakeven. Because of this, we should continue to see plenty of resistance.

The financial markets are a bit of a mess these days, and gold will reflect that right along with everything else.

Gold markets initially tried to rally on Monday but gave back gains to show signs of weakness yet again. Ultimately, the market is likely to continue to see a lot of volatility and negativity. The gold markets giving up gains near the $1840 level suggests that we could go to the bottom of the overall consolidation area, which is at the $1800 level.

The 200-day EMA is sitting just above the $1850 level and going sideways. That suggests that the market is currently looking for some type of bottom, and the $1800 level could be a huge area. The $1800 level is not only a large, round, psychologically important number, but it is also an area that has seen action in the past, so I do think that it is crucial. If we were to break down below the $1800 level, it’s likely that we go down to the $1750 level rather quickly.

If we were to break above the $1850 level, it’s likely that we could go to the $1880 level. The $1880 level is an area that has been resistant more than once, so I do think that it is probably going to be crucial if we do break above there and will more likely than not send the market much higher. At that point, the market is likely to see an attempt to get back to the $2000 level, which obviously would attract a lot of attention, which could bring in more money.

The interest rates in the United States will continue to have a major influence on where the gold market will go next. Ultimately, I think the only thing you can count on here is a lot of volatility, and that being said, the market is going to see swings in both directions, so you need to be very cautious with your position size, and perhaps focus on short-term charts more than anything else. After all, the financial markets are a bit of a mess these days, and gold will reflect that right along with everything else. The US dollar has a negative influence on the gold markets as well, so pay attention to the US Dollar Index. The candlestick for the day suggests more weakness than strength, so you should probably keep that in mind.

The hopes of euro investors quickly evaporated in the recent hawkish statements from European Central Bank officials headed by Lagarde about the approaching date for raising the ECB interest rate 11 years ago. The EUR/USD currency pair tumbled from the resistance level 1.0773 to the support level 1.0506 and is stabilizing around the level 1.0515 at the beginning of this important week’s trading. We indicated when the euro’s recent gains will not last long because the US Federal Reserve will be the fastest and strongest in raising interest rates than the European Central.

Currently, traders are seeking the European Central Bank’s support to smash bonds with the approach of price hikes. Markets are not convinced that the European Central Bank can raise interest rates and maintain bond yields for the most indebted eurozone members at the same time. Italy, one of the countries most exposed to rising borrowing costs, saw its 10-year debt drop after the biggest drop since the pandemic, as European Central Bank President Christine Lagarde outlined plans last Thursday to raise interest rates for the first time in more than a decade.

Meanwhile, the spread on German bonds approached towards levels that recently prompted the European Central Bank to start buying sovereign debt in an effort to stabilize the currency bloc as Covid-19 swept the continent in March 2020.

Investors are concerned about the lack of a credible plan to tackle so-called fragmentation – unjustified jumps in borrowing costs for weaker eurozone countries compared to stronger economies. Some say that only the new instrument, separate from previous bond-buying programs, can contain the spreads. Commenting on this, Nicholas Forrest, head of global fixed income at Candriam, a $180 billion asset manager, said: “This is an ‘whatever it takes’ moment for Lagarde. He was referring to a speech by former European Central Bank President Mario Draghi, who pledged to ensure the safety of the eurozone at all costs as the sovereign debt crisis erupted in 2012.

Meanwhile, Forrest is particularly cautious about Italian and Spanish debt given the volatility and potential for increased bond issuance from those countries. “The European Central Bank will need to avoid policy mistakes,” he said.

Global central banks face an unstable equilibrium process as they seek to combat rising prices without disrupting business activity. The situation in the eurozone is unique, with 19 disparate economies whose fiscal policies are not aligned. The fear is that without a plan, excessive widening of spreads could divert the ECB from its mission to combat inflation, forcing it to halt or even begin to reverse the rate-raising cycle.

What has so far been earmarked for retail processing – reinvestment from maturing debt accrued under the European Central Bank’s pandemic asset purchase program – is widely seen as insufficient. Programs like the outright cash transactions, which Draghi created during the last crisis, still exist, but are seen as too inflexible to be appropriate now.

A new machine is in the works as Bloomberg reported in April. Details are still scarce. Some analysts believe that spreads of around 250 basis points could prompt the European Central Bank to intervene, even if only by disclosing the instrument. We are not at those levels yet. The German-Italian bond spread is at 225bp – far from the 500bp gap seen in the worst days of Europe’s sovereign debt crisis.

But the uncertainty weakened the euro, erasing gains after Lagarde offered only vague reassurance that “if needed in the future we can design, we can deploy the right tool”.

According to the technical analysis of the pair: On the daily chart, the price of the euro currency pair against the dollar EUR/USD is moving towards the support level 1.0500. This which will support the bears’ control of the trend and prepare to move towards the stronger support levels that are closest to it. This is according to the performance over the time period 1.0460 and 1.03800, respectively, as the last level is support for the move of technical indicators towards oversold levels, from which a resumption of buying can be considered.

It must be considered that this week’s events are important and affect the forex market in general, and the US Central Bank’s announcement on Wednesday is the most influential, and the movement may remain in narrow ranges until this date. On the upside, the bulls should return to the vicinity of the 1.0795 and 1.1000 resistance levels, otherwise the general trend will remain bearish.