KVB Market Analysis | 30 September: Gold Retreats from Peak as Dollar Gains, Fed Easing Hopes Stay

Product: EUR/USD

Prediction: Increase

Fundamental Analysis:

EUR/USD began the week with a slight rise, trading around 1.1170 during the Asian session on Monday, supported by a weaker U.S. Dollar amid expectations for continued Federal Reserve policy easing in November.

The pair struggled to break the 1.1200 level and faced selling pressure on Friday, reversing some gains. Although the USD ticked higher as traders repositioned ahead of the U.S. Personal Consumption Expenditure Price Index release, this uptick faded due to expectations of aggressive Fed easing.

The CME Group's FedWatch Tool indicates over a 50% chance of a 50-basis-point cut at the November meeting. Meanwhile, softer CPI data from France and Spain weakened the euro, reinforcing bets on a 25-basis-point ECB cut in October. Caution is advised ahead of key U.S. inflation data.

Technical Analysis:

From a technical standpoint, the recent repeated failures to maintain momentum above the 1.1200 level suggest a bearish double-top pattern. However, positive indicators on the daily chart mean its wise to wait for further selling below the immediate support at 1.1125-1.1120 before expecting larger losses. If EUR/USD drops below 1.1100, it may test the weekly low around 1.1085-1.1080, potentially falling to the 50-day Simple Moving Average near 1.1020. A decisive break below 1.1000 would indicate a top and lead to more significant declines.

Conversely, the 1.1200 level remains a strong barrier, with 1.1215 as the next target. Continued buying could push EUR/USD toward the July 2023 high of around 1.1275, possibly extending past 1.1300 toward 1.1335 and 1.1400.

Product: XAU/USD

Prediction: Increase

Fundamental Analysis:

Gold prices rose to nearly $2,665 during the early Asian session on Monday, supported by geopolitical risks and expectations of another significant interest rate cut by the Federal Reserve in November.

However, on the last day of the week, gold faced selling pressure and retreated from the all-time high of around $2,685-2,686 reached on Thursday. This decline was driven by increased U.S. Dollar buying, which reduced demand for gold. Additionally, improved market sentiment from Chinas new stimulus measures shifted flows away from this safe-haven asset.

Despite this, expectations for aggressive Fed easing keep the USD within a familiar range, close to last weeks year-to-date low. The ongoing geopolitical tensions in the Middle East may also help limit gold's losses. Traders are likely awaiting the U.S. Personal Consumption Expenditure Price Index release.

Technical Analysis:

From a technical standpoint, the Relative Strength Index on the daily chart indicates overbought conditions, making bulls hesitant to place new bets on XAU/USD. However, the recent breakout from a short-term ascending trend channel suggests that gold prices are likely to rise. Bulls should wait for some consolidation or a small pullback before extending the recent uptrend.

Any significant dip could present a buying opportunity near the channel resistance around $2,625, which should help limit declines near the $2,600 mark. If this level is decisively broken, it may lead to more significant losses in the near term.

Product: GBP/USD

Prediction: Increase

Fundamental Analysis:

The GBP/USD pair is trading positively near 1.3385 during the early Asian session on Monday. Expectations for further interest rate cuts by the Federal Reserve, combined with a less dovish outlook from the Bank of England, support the pair.

The CME Group's FedWatch Tool shows a 75% chance of a 50-basis-point Fed rate cut in November. Weaker U.S. data and a risk-on market support GBP/USD, but with the Relative Strength Index above 70, a pullback or consolidation may occur before further gains.

No major UK economic releases are expected Wednesday, but BoE MPC Member Megan Greene's speech could impact GBP. U.S. New Home Sales data may present short-term opportunities, with traders likely to hold off on bets ahead of key speeches by Fed Chair Powell on Thursday and the U.S. PCE Price Index on Friday.

Technical Analysis:

The GBP/USD pair has continued to rise, reaching its highest level since March 2022, around 1.3430 during the Asian session on Wednesday. The current market conditions suggest that prices are likely to move higher, although slightly overbought levels on the daily chart urge caution for bullish traders.

The British Pound benefits from expectations that the Bank of England's rate cuts will be slower compared to those in the United States. BoE Governor Andrew Bailey noted that while interest rates will decrease, this process will be gradual and not return to very low levels without significant shocks. Meanwhile, the market anticipates more aggressive easing from the Federal Reserve, keeping the U.S. Dollar near its year-to-date low and supporting the GBP/USD pair.