KVB Market Analysis | 19 Nov: Geopolitical Tensions and Dollar Pullback Push Gold Prices Higher

Product: EUR/USD

Prediction: Increase

Fundamental Analysis:

EUR/USD reduced its losses on Monday, climbing nearly two-thirds of a percent as the market eases off the U.S. Dollar, allowing the Euro to recover some ground.

The economic calendar is relatively quiet until Friday, when Purchasing Managers Index (PMI) figures will be released globally. Aside from a midweek appearance by European Central Bank (ECB) President Christine Lagarde on Wednesday, which kicks off the ECB‘s Conference on Financial Stability and Macroprudential Policy, there isn’t much scheduled.

The ECB faces challenges as inflation remains stubbornly high, complicating the economic outlook. Traders will be cautious on Friday when S&P PMI forecasts are released, with European Manufacturing PMI expected to hold steady at 46.0, while Services PMI is predicted to rise to 51.8. In the U.S., Manufacturing PMI is expected to increase to 48.8, and Services PMI to 55.2.

Technical Analysis:

EUR/USD shifted to a bullish stance on Monday, aiming for the 1.0600 level after stabilizing near 1.0500 late last week. However, the pair remains firmly in bearish territory, trading well below the 200-day Exponential Moving Average at 1.0884.

The Euro has seen a slight rebound from its lowest prices in over a year, having fallen nearly 6.5% from the September highs just above 1.1200. With the pair significantly below its peaks, any further recovery is likely to face technical resistance between 1.0700 and 1.0800.

Product: XAU/USD

Prediction: Increase

Fundamental Analysis:

Gold prices are rising above $2,600 early Tuesday, supported by increasing geopolitical tensions between Russia and Ukraine and a pullback in the U.S. Dollar. After falling to a two-month low of $2,536, Gold rallied over 1.80% at the weeks start, with XAU/USD currently trading at $2,610.

Wall Street shows mixed sentiment, with two major U.S. indices gaining while others fluctuate. Reports indicate President Biden has authorized Ukraine to use long-range missiles against Russia, affecting the Dollar, which fell about 0.38% to 106.27. This weeks U.S. economic schedule includes housing data, Jobless Claims, and S&P Global Flash PMIs.

Technical Analysis:

Gold prices have resumed their upward trend since November 14, when a 'hammer' candle pattern signalled a potential rebound. After rising above the October 10 swing low of $2,603, buyers are now targeting the 50-day SMA at $2,653, with further resistance near $2,700. A breakout above this level could lead to the November 7 high of $2,710.

Conversely, if prices fall below the November 14 swing low of $2,536, traders will first encounter support at the 100-day SMA at $2,547. If both levels are breached, the next support would be at $2,500. The Relative Strength Index has moved away from neutral, indicating bearish momentum that could result in further declines for XAU/USD.

Product: GBP/USD

Prediction: Decrease

Fundamental Analysis:

GBP/USD rose by 0.5% on Monday, starting the new trading week with a bullish recovery that ended a six-day losing streak and pushed prices back toward the 1.2700 mark.

This rise in Cable bids is more due to a general easing of the U.S. Dollar's strength rather than any particular strength in the Pound Sterling. GBP traders are preparing for this weeks update on UK Consumer Price Index inflation figures.

The week began quietly with limited economic data. The Bank of England will influence Cable movement on Tuesday with its latest Monetary Policy Report Hearings, but traders are focused on Wednesdays CPI report, which is expected to show annual inflation rising to 2.2% from 1.7%.

While the U.S. data is lighter this week, Cable traders will also watch for Fridays UK Retail Sales update and S&P Purchasing Managers Index figures from both regions to close out the week.

Technical Analysis:

The Pound Sterling gained a modest 0.5% on Monday, but overall losses keep GBP/USD firmly in bearish territory, below the 200-day Exponential Moving Average around 1.2850.

Last Friday, GBP/USD reached multi-month lows near 1.2600, marking a significant drop from the multi-year highs of 1.3434 set in September. The pair has fallen 6.25% from that peak, and a short-term rebound may trigger more short positions to form between 1.2700 and 1.2800.