KVB Market Analysis | 29 Oct: Gold Prices Hold Steady Amid Geopolitical Tensions and Dollar Strength

Product: EUR/USD

Prediction: Decrease

Fundamental Analysis:

The EUR/USD pair is stable around 1.0810 as the U.S. Dollar consolidates ahead of Germanys GfK Consumer Confidence data. After recovering from lows near 1.0760 last week, the Dollar Index has retreated to about 104.30, showing signs of fatigue following recent highs.

U.S. yields, driven by strong economic data and cautious Fed commentary, support the Dollar. Speculation continues regarding a potential 25-basis-point rate cut by the Fed next month.

In Europe, the ECB recently cut rates to 3.25%, with Eurozone inflation falling to 1.7%, suggesting further easing may be possible. The direction of EUR/USD will likely hinge on broader economic trends, with the U.S. economy currently outperforming the eurozone. Recent CFTC data also indicates net short positions on the Euro for the first time since April.

Technical Analysis:

Further losses could drive EUR/USD to its October low of 1.0760, potentially leading to a test of the round number 1.0700 before approaching the June low of 1.0666.

On the upside, the first resistance is at the 200-day SMA of 1.0869, followed by the 100-day and 55-day SMAs at 1.0933 and 1.1027, respectively. The 2024 high of 1.1214comes next, ahead of the 2023 peak of 1.1275.

If the pair stays below the 200-day SMA, the outlook remains negative. The four-hour chart shows some consolidation, with initial support at 1.0760 and 1.0666 below. Resistance is at 1.0839, then 1.0954 and 1.0996. The relative strength index remains stable below 50.

Product: XAU/USD

Prediction: Increase

Fundamental Analysis:

Gold prices remain within a familiar range over the past week, influenced by various factors. Geopolitical risks and U.S. political uncertainty continue to provide support for the safe-haven asset, with spot gold trading around $2,740, slightly higher for the day. Although gold gapped lower at the start of the week due to renewed demand for the U.S. Dollar, it changed direction as market sentiment improved, limiting gold's upside in the American session.

During Asian trading, attention was on Japan after a snap election led to disappointing results for the Liberal Democratic Party. Prime Minister Shigeru Ishiba vowed to stay in office despite losing support due to a political scandal, which caused the Japanese Yen to drop and supported the Dollar.

Falling oil prices also bolstered the Greenback, as Iran stated that recent attacks did not impact its oil industry. Stock markets are trading positively, albeit modestly, ahead of key economic data due this week. The U.S. will release the flash estimate of Q3 GDP and employment figures before Fridays Nonfarm Payrolls report. Additionally, inflation data will be published by the U.S., Australia, Germany, and the Eurozone, while the Bank of Japan will announce its monetary policy decision.

Technical Analysis:

Gold is holding onto modest intraday gains but remains below Friday's close and within familiar levels. The XAU/USD daily chart shows moving averages trending upwards well below the current price, with the 20 Simple Moving Average rising, indicating buyer strength. However, technical indicators suggest a neutral-to-bearish outlook while remaining in positive territory.

XAU/USD found intraday support just above $2,721.20, the 23.6% Fibonacci retracement of the $2,601.87 to $2,756.36 rally. More significant support lies at $2,698.66, the 38.2% retracement.

The near-term technical outlook is neutral. The 4-hour chart shows the pair barely above a mildly bearish 20 SMA. The 100 and 200 SMAs are rising below the current price, but technical indicators have slightly declined, hovering above their midlines. A break above the intraday high near $2,745.90 could lead to a retest of the record high and the $2,800 mark.

Product: GBP/USD

Prediction: Decrease

Fundamental Analysis:

The GBP/USD pair faces slight losses around 1.2970 in the early Asian session as the U.S. Dollar Index remains steady near 104.30 after reaching a three-month high. Traders await key U.S. economic data this week, including Q3 GDP and October Nonfarm Payrolls, which could influence potential Fed rate cuts, currently projected with a 96.8% probability in November.

U.S. election uncertainties and Middle East tensions are supporting the Dollar's safe-haven appeal. While the Bank of England may cut rates later this year, hawkish remarks from BoE‘s Catherine Mann suggest caution, potentially limiting the Pound’s decline.

Technical Analysis:

The Relative Strength Index on the 4-hour chart is rising toward 50, indicating a loss of bearish momentum. The 100-day Simple Moving Average at 1.2970 acts as immediate resistance. If the pair closes above this level, it may attract technical buyers. In that case, the next resistance levels could be 1.3010 and 1.3060.

On the downside, initial support is expected at 1.2900-1.2890 and then at 1.2800.