Fears of a recession were overdone last week as a sense of normalcy returned. Equity indices managed to post a modest recovery into Friday's close.
However, concerns continue to keep risk appetite in check. From the inverted yield curve to a slowdown in China and Germany, to the crisis in Argentina, investors had plenty of narratives running in the background.
Euro Slips to 2-Week Low
The common currency fell to a two-week low on Friday. The declines came amid a broader strength in the USD as well as the trade balance figures. The eurozone's trade surplus stood at 20.6 billion. This came as exports were down 4.7% while imports fell 4.1% during the period. The trade surplus of 20.6 billion was down from 22.6 billion in June 2019.
Will EURUSD Decline Further?
The currency pair's decline last week shows price trading just above the lower trend line. This could offer some dynamic support in the near term. However, price action remains weak and there is a possibility for the EURUSD to test the previous lows near 1.1030. The Stochastics oscillator remains in the oversold level, which signals a possible rebound in price in the near term.
Crude Oil Trades Mixed Amid Economic Uncertainty
WTI crude oil prices closed with modest gains on Friday. Price action in crude oil remains flat amid the economic outlook turning mixed. However, last week's retail sales report managed to quell fears of a recession. This partly led to gains in oil prices but the commodity failed to capitalize on it. The strength of the USD also dampened the upside bias in oil.
WTI Crude Oil to Maintain the Sideways Range
Oil prices are expected to maintain the sideways range. The resistance level is established at 57.50 while the support is found at 51.70. Amid this level, the minor support at 52.00 is seeing a bit of consolidation. Overall, oil prices need to break out from this range to establish some momentum and direction to the trend. Until then, we expect prices to remain flat.
Gold Pulls Back from Highs
The precious metal managed to log another week of gains. However, last week's volatility failed to push gold prices any higher. The precious metal is likely to remain in a wait-and- see mode heading into this week. Important events such as the FOMC meeting minutes, the ECB minutes and Jackson Hole symposium will be some of the catalysts for gold.
XAUUSD Could Turn Weaker if 1500 Support Fails
Price action in gold remains somewhat mixed with the support level near 1500 likely to be critical. Given that gold failed to post fresh highs, we anticipate a steeper correction if the 1500 psychological support gives way. This will pushed gold prices down to test the lows of 1485. To the upside, gold will need to post higher highs to confirm the upside bias.
This market forecast is for general information only. It is not an investment advice or a solution to buy or sell securities.
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