Week 48 data: Oil and Gold
By Antreas Themistokleous
14 November 2023
This weekly preview examines USOIL and XAUUSD, focusing on upcoming economic data. These figures will drive market trends for the near-term outlook. Here's the most significant economic data for this week:
Chinese Industrial Production data will come out at 02:00 AM GMT. October's figure is expected to fall to 4.3%, down from 4.5%. Confirmation of this prediction could lead to losses in production-related commodities like crude oil, silver, and copper.
The UK inflation rate will be updated at 07:00 AM GMT. It is anticipated to drop from 6.7% to 4.8% for October. Should this be the case, it would mark the lowest annual UK inflation rate. This could result in brief, minor losses for the pound, potentially influencing the Bank of England's upcoming decisions.
Oil prices dropped on Monday, influenced by concerns over decreasing demand from the United States and China. Additionally, unclear signals from the US Federal Reserve played a role. Weak economic indicators from China, such as a disappointing trade balance and negative inflation figures, contributed to the concerns. Diminished demand from Chinese refiners also weighed on the market. However, if Saudi Arabia and Russia persist with their voluntary supply cuts, it could prop up prices.
From a technical perspective, the price is hovering around the resistance area, which corresponds to the 61.8% level of the weekly Fibonacci retracement. Meanwhile, the Stochastic oscillator is edging towards a neutral zone but remains in a somewhat oversold territory.
This suggests a potential upward correction may be on the horizon. Supporting this correction hypothesis is the fact that the 50-day moving average is still above the slower 100-day moving average. Without a crossover below the slower moving average, the bullish momentum is not yet reversed. Hence, an upward correction in the short term appears highly likely.
Should this scenario unfold, the first potential resistance zone could be near the $80.50 (USD) mark. This level represents the 50% mark of the weekly Fibonacci retracement and aligns with a prior price reaction zone from early November.
Gold prices have stabilized near a three-week low amidst a robust dollar and anticipation of US inflation data, which investors believe will inform the Federal Reserve's interest rate decisions. Last week's fall in gold prices followed hawkish comments from Fed Chair Jerome Powell. The forthcoming US Consumer Prices Index (CPI) data is also expected to influence the Fed's next move.
The dollar's current strength has diminished gold's appeal to holders of other currencies. Nevertheless, the macroeconomic environment could support gold since the US monetary tightening cycle may be drawing to a close, and the dollar could be reaching its peak.
Technically, gold prices are testing a significant support level. This level is defined by the 38.2% mark of the daily Fibonacci retracement, the lower boundary of the Bollinger Bands, and proximity to where the 50-day and 100-day moving averages converge.
These technical factors make the $1,930 price level a robust support for gold, reinforced by the psychological impact of the round number. Moreover, the Stochastic oscillator indicates extreme oversold conditions, suggesting that most technical indicators are pointing towards a potential upward correction in the near term.
Should this analysis hold true, the first potential resistance area could be at the $1,960 level. This includes the psychological resistance of the round number and the 23.6% mark of the daily Fibonacci retracement level.
This is not investment advice. Past performance is not an indication of future results. Your capital is at risk, please trade responsibly.
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.
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