Gold Rallies and Oil Tests a Multi-Month Low

 Released and Expected Data

The Japanese GDP (Q2) released today of 3.5% has come in higher than the expected of 2.9% while the Swiss unemployment data of August has come in line with expectations at 2.0%.
 
Markets expect the ECB interest rate decision today at 4:30 PM UAE time. The central bank could hike rates by 75 bp taking current levels from 0.5% to 1.25%. Investors will listen also to the ECB press conference of President Christine Lagarde at 6:15 PM and to the Fed chair’s speech at 5:10 PM.
 
Indices and Bonds Yield
 
The European and the US equity futures have stabilized awaiting the ECB and Fed head’s speeches today. Currently, these banks are trying to keep inflation levels in check without causing much damage to their economies and a further decline in oil prices will ease pressures on these banks.
 
The US 10-year bond yields rallied yesterday to a near three-month high nonetheless, the price retreated today as investors slowed down the bond’s selloff. The 10YY – 2YY spread remained around 20pb, indicating that the market believed that the Fed may continue hiking rates this year and cut them in the next year to save the US economy from a severe recession.
 
Major FX Currencies
 
The US dollar index rallied to a near 20-year high yesterday after Fed vice president Mrs Brainard vowed to hike rates to restrictive levels and maintain this policy for a while. It’s noteworthy that a high US Dollar price increases borrowing and importing costs in other economies and consequently feeding high inflation levels.
 
As for the Euro, investors await the ECB rates decision with inflation and growth forecasts for 2022 and 2023. The euro price would depend mainly on the ECB monetary policy and the European energy crisis. Tomorrow, the EU officials will meet in Brussels to address the energy shortage after Russia cut off gas supplies completely and indefinitely to Europe. The EU Commission will propose a price cap on Russian gas alongside the already imposed price cap on Russian oil.
 
Technically, the EUR/USD moves between 1.0000- 0.9700 trading zone and could be on the way to testing the lower end of the mentioned trading zone. On the other hand, in a daily close above the high end of the zone could send the price towards 1.0146 and 1.0334, respectively.
 
Commodities
 
The Gold price recovered this week some of last week's losses and steadied above the $1700/oz threshold. Given the inverse correlation of the gold price with the US dollar, it is unlikely to see any bullish move for gold at least until seeing the US inflation print of August next week.
 
Today, global oil prices tested a near eight-month low on increasing fears of a decline in demand from China, due to recent lockdowns to contain the spread of the Coronavirus.  The Brent crude price broke below $90pb despite the OPEC+ announcement of cutting crude output by 100K barrels from October. Today, markets wait for the US oil inventories at 7:00 pm UAE time.
Technically, a daily close of WTI below 80.00 could send the price 77.15 and 75.00 respectively, while its any close above 83.50 may encourage traders to rally the price towards 85.15 and 87.13 respectively.
 
Gold Daily Price Chart

Chart Source ThinkTrader
 
On August 25 the gold price corrected lower as created a lower high in 1765 and since then the precious metal started a downtrend momentum creating a lower high with a lower low. Currently, the price moves in the trading zone 1765-1685 hence a daily close below the low end of the zone could send the price towards 1629 however, the support levels at 1661 and 1645 should be monitored.
 
On the other hand, a daily close above 1720 could encourage traders to push towards 1765 however the resistance level at 1747 should be kept in focus.