Week 43 data: Oil and Gold

This preview of weekly data examines USOIL and XAUUSD, also focusing on the economic data set to be released later this week as the primary market drivers influencing the short-term outlook.

The key economic data for this week includes:

Tuesday:

British unemployment data for August is scheduled to be released at 06:00 AM GMT, with expectations of a steady rate of 4.3%. Meanwhile, claimant counts for September are anticipated to rise to 2,300, up from the previous figure of 900.

The German Flash Manufacturing PMI for October is projected to rise by 0.4 points, reaching the 40 mark. Although this may appear to be a slight improvement, it remains below the 50 level, indicating that the manufacturing sector in Europe’s largest economy is not experiencing substantial growth.

Wednesday:

The Australian inflation rate is broadly expected to decrease, hitting 5.3% as opposed to the previous 6%. If accurate, this could result in minor losses for the Aussie dollar against its pairs, as it may prompt a dovish stance from the RBA in their next meeting on November 7.

The Bank of Canada's interest rate decision is due at 14:00 GMT, with predictions of a steady rate at 5%. A surprise rate hike would likely bolster the loonie in the short term, whereas an unexpected rate cut could generate some unrest for the currency.

Thursday:

The ECB interest rate decision is slated for 12:15 PM GMT. Market consensus suggests that the central bank of Europe will maintain a rate of 4.5% in their meeting on the 26th. A surprise rate hike could provide support for the Euro against other major currencies, while a rate cut could lead to short-term losses. Investors and traders are keenly awaiting the subsequent press conference, seeking insights into future monetary policy steps.

US GDP growth for the third quarter is expected to double, reaching 4.2%. Should these optimistic projections be met, it could uplift the Dollar, adversely affecting many of its paired instruments.

Friday:

The US core PCE price index for September is anticipated to rise to 0.3%, compared to the previous 0.1%. If these figures hold, it may provide some support for the Dollar; conversely, a softer PCE reading might weaken the Dollar.

USOIL, daily

Oil prices have remained steady amid discussions regarding hostage releases, which might potentially delay Israel's ground invasion of Gaza. Israel has also issued warnings about Iran-backed Hezbollah possibly pulling neighboring Lebanon into the conflict. The looming threat of a broader regional skirmish could significantly elevate oil prices. 

Aid convoys have begun arriving in Gaza from Egypt, alleviating some tension in the oil market as Israel postpones a ground incursion, allowing diplomatic efforts to take place. Concurrently, fears of a diminished oil supply due to the conflict might have been assuaged by the US decision to suspend sanctions on Venezuela.

On the technical front, there was a minor rally in oil prices aiming to retest the $90 mark, but it lost momentum slightly below this level, primarily due to the internal resistance level of $89.50, where the price had reacted in late September. Currently, the price of 'black gold' is hovering just above the support area marked by the 38.2% level of the weekly Fibonacci retracement and the 50-day moving average.

The Stochastic oscillator is nearing the extreme overbought level, which may hint that a short-term continuation to the downside could be the prevailing scenario. If this turns out to be accurate, then the zone between $85-$86 might emerge as a robust technical support area, encompassing the 38.2% level of the weekly Fibonacci retracement and the psychological support provided by the round number.

Gold-dollar, daily

Gold prices remained stable on Monday following a climb to a five-month peak in the prior session, with the US dollar and Treasury yields firming up in anticipation of crucial economic data due this week.

Investors are keeping a keen eye on the rising turmoil in the Middle East and are awaiting significant US economic indicators such as GDP growth and PCE readings. Although the ascent in US Treasury yields has diminished the allure of non-yielding gold, a return of ETF investors to the market could bolster gold prices. COMEX gold speculators transitioned to a net long position, mirroring investor sentiment towards bullion.

From a technical standpoint, gold prices encountered notable resistance on the upper Bollinger bands, just shy of the $2000 level, and have since adjusted downward. At present, the price is precisely at the 38.2% level of the weekly Fibonacci retracement, testing the strength of its support.

The 50-day moving average continues to trade below the 100-day moving average, affirming the ongoing bearish momentum in the market for the time being. The Stochastic oscillator's extreme overbought reading also corroborates the bearish narrative. Should this scenario persist, we might witness significant support around the $1,940 area, which encompasses the 50% level of the weekly Fibonacci retracement as well as the psychological support of the round number.

This is not investment advice. Past performance is not an indication of future results. Your capital is at risk, please trade responsibly.

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Author:

Antreas Themistokleous

Antreas Themistokleous is a trading specialist in Exness. He is a Certified Financial Technician since 2018. As a member of the Society of Technical Analysts, Antreas is implementing advanced use of indicators and patterns to conclude in an action plan for different trading strategies.