Brenda Kelly, Head Analyst at London Capital Group, shares the outlook for Gold, EUR/USD, FTSE 100 and the key risks in the week ahead for financial markets.
Gold – Might see a short-squeeze
The bearishness in Gold is a bit overcoming, according to Kelly, and she further believes that a short squeeze might be in the offing. Technicals suggest that there is a bullish hammer on the daily charts and $1200/ounce might be on the cards for the precious metal if it sees a monthly close above $1089, but this largely depends on the FOMC.
Hedge funds remain short on the yellow metal. Market speculation is high for a $1000 and below target for Gold, but flatting momentum indicates we might see a bounce ahead. Kelly adopts asell on rallies approach for Gold prices.
Bullish on EUR/USD
More upside potential might be seen ahead in EUR/USD. Volatility is going to be two-sided before the FOMC. The markets remain too hawkish on the FOMC and any disappointment might see the cross pushing above 1.10 resistance for a move towards 1.12.
Why is the euro going up?
The key reason for the euro’s climb remains the fundamental scenario in the eurozone. Today’s German IFO and money supply data remain positive for the eurozone economy and subsequently the inflation expectations which are guiding the single currency higher.
FTSE 100 – Lower lows expected, 6350 might be on the cards
Kelly says that there is a lot to commend a lower low in the footsie .BoE rate hike plan, Gold and Commodity prices remain key risks for the index. Kelly further explains that the bearish tilt for the FTSE 100 is much higher than expecting a bullish move, and a break below 6450 will open 6350.
Key risks for the week ahead:
UK GDP is set to improve, but the yearly figure might disappoint market. GBP/USD might make a move lower towards its 200DMA on a soft number.
FOMC Meeting: key for USD strength and Commodity FX
BoE might beat Fed in the rate-normalization race.
Both Bank of England and the Fed remain in the race to begin race normalization. Kelly believes that UK remains in a much better position to hike rates than the Fed, and by August we might see a 6-3 split in votes in the BoE MPC.
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