KVB Market Analysis | 24 Oct: EUR/USD Drops Ahead of PMI Data as ECB Cautions on Future Rate Cuts

Product: XAU/USD

Prediction: Increase

Fundamental Analysis:

Gold retreats from all-time high of $2,758 as US 10-year Treasury yields rise, reflecting fears of higher deficit spending under a potential Trump presidency. The US Dollar Index (DXY) hits a two-month high at 104.50, further weighing on Gold as risk appetite shifts toward safe-haven currencies. Traders now price in a 92% chance of a 25 bps Fed rate cut in November with another cut expected by year-end.

Technical Analysis:

Gold price retreats sharply, forming a Bullish Engulfing candle chart pattern or an “outside day.” If confirmed, the yellow metal could be headed for a pullback, following the 5.96% rally that started on October 10. From a momentum standpoint, sellers are gathering some pace. The Relative Strength Index (RSI) fell sharply from overbought conditions, opening the door for further downside. In the case of a daily close below $2,719, look for a retracement. The first support would be the 38% Fibonacci Retracement at $2,699, followed by the 50% and 61.8% Fib Retracements at $2,681 and $2,662, respectively. On the other hand, if XAU/USD clears todays high at $2,750 the next stop would be the all-time record high at $2,758, followed by $2,800.

Product: EUR/USD

Prediction: Decrease

Fundamental Analysis:

EUR/USD shed another fifth of a percent on Wednesday as the Fiber crumples ahead of Thursday‘s fresh round of Purchasing Managers Index (PMI) figures. ECB officials talked down economic concerns, reiterating the need for caution when weighing future rate cuts. FX markets promptly responded by pummeling the Euro further into the dirt, hitting a 16-week low. Global PMI figures are due for a rolling release on Thursday. Markets have high expectations for pan-EU PMI survey results, with median market forecasts calling for a slight uptick in October’s EU Services PMI to 51.6 from September‘s 51.4. On the US side, median market forecasts expect October’s US PMI figures to come in mixed, with the Manufacturing component expected to rise to 47.5 from 47.3, while the Services PMI component is expected to tick slightly lower to 55.0 from 55.2.

Technical Analysis:

EUR/USD continues to slide lower as the pair tests support near the 1.0780 level. The recent price action shows a significant breakdown below both the 50-day EMA, currently at 1.0975, and the 200-day EMA at 1.0908, signaling a shift in market sentiment to the downside. The sustained selling pressure has pushed the pair into a bearish phase, with sellers eyeing further downside towards the 1.0750 support zone. A break below this key psychological level could trigger a more aggressive selloff towards the 1.0700 handle.

Product: GBP/USD

Prediction: Decrease

Fundamental Analysis:

GBP/USD shed another half of a percent on Wednesday, tipping into a fresh ten-week low and grinding down toward the 1.2900 handle. Purchasing Managers Index (PMI) figures from both the UK and the US are due on a rolling schedule throughout Thursday, and investors will be keeping an eye out for a slew of central banker appearances from both the Bank of England (BoE) and the Federal Reserve (Fed). The Pound Sterling swooned on Wednesday, declining further as GBP markets buckle under the weight of a broad-market Greenback recovery and investors brace for an overall decline in UK PMI prints for October.

Technical Analysis:

GBP/USD has extended its bearish momentum, falling to the 1.2910 level, as downside pressure persists. The pair has recently broken below the 50-day EMA, which sits at 1.3079, indicating that the bears remain in control. The next key support level to watch is the 200-day EMA at 1.2847. A break below this level could signal further losses towards the 1.2800 psychological level. The recent price action shows a series of lower highs and lower lows, confirming the bearish trend that has been developing since the October highs.

The MACD is further confirming this bearish sentiment, with the MACD line crossing below the signal line and the histogram deepening in negative territory. This suggests that selling pressure could continue in the near term, with little sign of a bullish reversal. However, if the pair manages to hold the 200-day EMA, a bounce-back towards the 50-day EMA could offer short-term relief. Traders should remain cautious as the overall trend points to further downside risk unless key support levels hold.