KVB Market Analysis | 21 Nov: Gold Gains on Safe-Haven Demand Amid Geopolitical Tensions

Product: EUR/USD

Prediction: Increase

Fundamental Analysis:

During midweek, EUR/USD bulls struggled, losing nearly half a percent and keeping prices just above the 1.0500 mark.

Thursday is quiet for both the Euro and the Dollar, with traders waiting for Fridays Purchasing Managers Index data.

On Friday, European Central Bank President Christine Lagarde will speak at the European Banking Conference in Frankfurt. She is expected to discuss EU monetary policy and its impact on the banking sector, with traders eager for hints about potential rate cuts.

The European HCOB PMI results will be released while Lagarde speaks, with expectations of stable business activity at a Composite PMI of 50.0. The key data this week will be the S&P PMI, with slight increases predicted for both Manufacturing and Services PMIs.

Technical Analysis:

EUR/USD is stuck near its lowest levels in over a year, having hit a 54-week low last Wednesday. A brief attempt at recovery quickly faded, with buyers unable to push past the 1.0600 mark.

The Euro has dropped about 6% from its September highs above 1.1200, and its technical outlook has shifted dramatically. EUR/USD remains below the 50-day Exponential Moving Average, which is trending downward and likely to move below 1.0800 soon.

Product: XAU/USD

Prediction: Increase

Fundamental Analysis:

Gold prices have risen for the third consecutive day, gaining over 3.40% this week as investors seek safe-haven assets despite a strong US Dollar. Buyers are now targeting the $2,700 level.

Gold had previously fallen to a two-month low of $2,536 as investors took profits following Donald Trump's election victory. Concerns that his policies could drive inflation higher led to a spike in US Treasury yields and strengthened the Dollar.

The ongoing Russia-Ukraine conflict has also pushed gold prices up. Recently, President Putin authorized nuclear weapon use in response to Western actions, while the US has supported Ukraine.

On the economic front, the US Dollar Index rose 0.51% to 106.69. Fed officials have not clarified the outcome of the upcoming December policy meeting, with traders reducing expectations for a rate cut. This weeks US economic releases will include Initial Jobless Claims, S&P Global Flash PMIs, and the final Consumer Sentiment reading from the University of Michigan for November.

Technical Analysis:

Gold prices have a positive outlook, but buyers need to overcome important resistance levels first. If XAU/USD breaks above the 50-day Simple Moving Average at $2,658, it could stabilize around $2,700. A move past this level may lead to the November 7 high of $2,710 and the key psychological level of $2,750.

On the other hand, if gold falls below $2,600, sellers could take control, targeting the 100-day SMA at $2,550. Further declines could see prices drop to the November 14 low of $2,536, and potentially to $2,500. The Relative Strength Index is currently bearish but nearing neutral, suggesting that buyers are gaining short-term momentum.

Product: GBP/USD

Prediction: Increase

Fundamental Analysis:

GBP/USD had a tough day on Wednesday, hovering around the 1.2700 level before facing downward pressure and closing 0.2% lower.

Despite UK Consumer Price Index inflation figures coming in above expectations, the Pound struggled as the Bank of England appears unlikely to cut rates again in 2024 due to persistent inflation.

UK CPI inflation rose to 2.3% year-over-year, exceeding the forecast of 2.2% and up from 1.7% previously. Core CPI also increased to 3.3%, higher than the expected 3.1%.

With little economic data on Thursday, traders are waiting for Friday's Purchasing Managers Index reports from both the UK and the US, which are anticipated to remain stable.

Technical Analysis:

GBP/USD struggled to maintain a bullish recovery this week after a brief bounce from 27-month lows around 1.2600. Initially, it seemed ready to start a recovery, with technical indicators suggesting a support level was forming. However, buying interest has weakened, and prices have faced resistance near the 1.2700 level, preventing further upward movement. As a result, the potential for a sustained recovery is fading, leaving the pair in a challenging position. Traders will be watching closely to see if it can break through this resistance or if it will retreat further.