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Gold and Oil Struggle While USD Rallies on a Hawkish Fed

Mahmoud Alkudsi Mahmoud Alkudsi 01/09/2022
Gold and Oil Struggle While USD Rallies on a Hawkish Fed Gold and Oil Struggle While USD Rallies on a Hawkish Fed
Gold and Oil Struggle While USD Rallies on a Hawkish Fed Mahmoud Alkudsi
Released and Expected Data

The manufacturing PMI of the Eurozone (August) 49.6 has come in lower than expected of 49.7 and lower than the previous of 49.8 while, the same data in the UK of 47.3 has come in higher than expected 46 but lower than previous of 52.1 indicating that the manufacturing sector in the UK is now officially in contraction.
 
Investors expect the final data of the US manufacturing PMI (August) at 6:00 pm UAE time, and then Fed Bostic Speech at 11:30 pm.
 

Indices and Bonds Yield
 
The US equity futures have declined by nearly 1% and European indices by more than 1% on hawkish statements from central banks’ board members in the United States and Europe. All members agree on that the priority is to tame high inflation levels and push them back to the 2% target. It is worth mentioning that Fed member Mester said that she favoured hiking rates above 4% with no rate cut in 2023.
 
Markets await the US non-farm payroll data (August) tomorrow and any higher-than-expected data increases the odds of a 75 bp rate hike in the September meeting. Having said that, investors will get more clarity from the inflation report of August.
 
The US 10-year bond yields hit a two-month high at 3.21%, on the bond’s selloff and pricing a rate hike to the range of 3.75% - 4.00% by the end of 2022.
 

Major FX Currencies

The US dollar index has steadied thanks to the Fed members’ hawkish statements and the energy crises that if continued could lead the European economy to a severe recession.
Technically, the dollar index price rebounded from the high end of the current trading zone 109.42- 108.11 and may be on the way test of the low end. A daily close below the low end opens the door for a further decline towards 105.42, while a daily close above the high end of the zone could encourage traders to rally the price towards 110.09.
 
The EUR/USD returned to trade above the parity level on as the market believed that the European Central Bank could hike rates by 75 bp instead of 50 in the next week’s meeting. It should be noted major economies in the eurozone such as Germany and Italy could suffer from a severe recession should Russia suspends completely gas exports to Europe however, it is unlikely to see Russia cutting off gas supplies completely and for a long time as this step comes with a heavy cost on the Russian economy.
 
Technically, the EUR/USD currently moving in the 1.0413-1.0000 trading zone could be trading towards 1.0142 and 1.0280 respectively. That said, any daily close below the low end of the mentioned trading zone may embolden traders to press towards 0.9701.
 

Commodities
 
The Gold price closed in red yesterday for the fifth month in a row, and today slipped by 0.3% as markets prefer the USD on Gold as a hedge for inflation thanks to the tight Fed policy.
Technically, a daily close below 1705 opens the door for more price decline towards 1685 and then 1669. On the other hand, a daily close above 1705 signals a possible rally towards 1720.
 
Global oil prices fell by nearly 1% due to these factors:
  • A strong US dollar price
  • Increased fears of a lower demand caused by a global recession and the slowdown in China’s economic outlook
  • A higher supply should Iran revives its nuclear deal with the west
Technically, a daily close of WTI price below 87.13 could send the price towards 85.15 and 83.42 respectively. On the other hand, a daily close above 89.00 opens the door for the price to trade towards 93.57
 
EUR/JPY Daily Price Chart

On August 16, the EUR/JPY corrected higher and created a higher low at 134.94 and trading in a sideways move since then, now the price moves in the trading zone134.54 - 140.19. A daily close above the high end of the mentioned trading zone could send the price towards 134.63, while any failure in closing above the high end signals a possible retreat towards the low end of the mentioned trading zone.

 
 
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

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Meet our contributors
Carl Capolingua
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Carl Capolingua
Market Analyst, Melbourne

Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions. Specialising in Australian and US stock markets in particular, Carl uses a top-down approach to assess the global macro picture before using both technical and fundamental techniques to select stocks. He regularly appears as an expert commentator on a number of media outlets throughout the Asia-Pacific region.
 
 
 

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Lesego Mthombothi
Market Research Analyst, South Africa

Lesego Mthombothi is an experienced market research analyst and investment professional who proudly holds an honours degree in investment management and completed her CFA level 1.
 
 
 

Mahmoud Alkudsi
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Mahmoud Alkudsi
Chief Markets Analyst, MENA

Mahmoud is a market analyst, with over a decade of experience in financial markets. He follows main market movers and tracks their effect on the price chart. Mahmoud mixes technical and fundamental tools with a deeper focus on the technical side, and with his wide experience in providing educational and guidance materials to all levels of traders, he helps them in making informed trading decisions. Before joining ThinkMarkets, Mahmoud was head of market research departments in different reputed financial companies, where he provided market analysis for a variety of asset classes, including FX, equities, indices, and commodity futures. As an experienced market commentator, he was hosted by too many print and broadcast media, including not limited to Sky News Arabia, France 24, Alarabyia, Alsharq-Bloomberg, and CNBC Alarabyia to discuss key risk events their clear impact on the price action. Mahmoud holds a Master of Business Administration (MBA) from Cardiff Metropolitan University of Wales, UK, and speaks Arabic, English, and Spanish.

Shawn
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Shawn Lee
Market Analyst, Malaysia

Shawn Lee has over eight years of experience in the financial market as a market analyst. Shawn provides market key insights and trade ideas through the market and technical analysis. He also held trader roles and guided traders in maximising one’s trading success.

Carl Capolingua
Carl Capolingua
Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions.
Lesego
Lesego Mthombothi
Lesego Mthombothi is an experienced market research analyst and investment professional who proudly holds an honours degree in investment management and completed her CFA level 1.
Mahmoud Alkudsi
Mahmoud Alkudsi
Mahmoud is a market analyst with over a decade of experience in financial markets. Mahmoud mixes technical and fundamental tools with a deeper focus on the technical side, and has experience in providing guidance to all levels of traders.
Shawn
Shawn Lee
Shawn Lee has over eight years of experience in the financial market as a market analyst. Shawn provides market key insights and trade ideas through the market and technical analysis. He also held trader roles and guided traders in maximising one’s trading success.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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