EUR/USD Price Analysis: A deeper pullback could see 0.9859 retested

EUR/USD clocks new cycle lows in the sub-0.9900 zone.

Further losses could test the December 2002 low near 0.9860.

EUR/USD accelerates the daily losses and briefly breaks below the 0.9900 level, or new cycle lows.

Further weakness remains in the pipeline for the time being. Against that, the breakdown of the 2022 low at 0.9899 (August 23) should leave the door open to a probable deeper retracement to the December 2002 low at 0.9859.

In the longer run, the pair’s bearish view is expected to prevail as long as it trades below the 200-day SMA at 1.0845.

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US: Chicago Fed National Activity Index improves to 0.27 in July from -0.25

Chicago Fed National Activity Index moved into positive territory in July.

US Dollar Index clings to daily gains above 108.00 after the data.

The Federal Reserve Bank of Chicago's National Activity Index (CFNAI) improved to 0.27 in July from -0.25 (revised from -0.19) in June.

"The CFNAI Diffusion Index, which is also a three-month moving average, edged up to –0.05 in July from –0.08 in June," the publication further read. "Fifty-five of the 85 individual indicators made positive contributions to the CFNAI in July, while 30 made negative contributions. Fifty-five indicators improved from June to July, while 30 indicators deteriorated. Of the indicators that improved, 17 made negative contributions."

Market reaction

This report failed to trigger a noticeable market reaction and the US Dollar Index was last seen rising 0.26% on a daily basis at 108.40.

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Gold Price Forecast: XAU/USD struggles near one-week low amid sustained USD buying

Gold witnesses selling for the second straight day on Tuesday amid modest USD strength.

Hawkish Fed expectations and elevated US bond yields continue to underpin the greenback.

Recession fears could limit losses for the safe-haven XAU/USD ahead of the FOMC minutes.

Gold attracts fresh selling near the $1,783 region on Tuesday and turns lower for the second successive day. The XAU/USD drops back closer to a one-week low touched the previous day, around the $1,774 area during the first half of the European session and now seems vulnerable to a further slide.

Following a brief consolidation through the early part of trading on Tuesday, the US dollar gains some positive traction for the third straight day and exerts some pressure on the dollar-denominated gold. Despite last week's softer US CPI report, Fed officials stressed that it is too soon to declare a victory on inflation and have maintained a hawkish tone. This, in turn, suggests that the Fed would stick to its policy tightening path and continues to underpin the greenback.

In fact, the markets are currently pricing in a greater chance of at least a 50 bps rate hike at the next FOMC policy meeting in September. This remains supportive of elevated US Treasury bond yields, which turns out to be another factor driving flows away from the non-yielding yellow metal. The downside, however, seems cushioned, at least for the time being, as investors might now prefer to move on the sidelines ahead of the FOMC meeting minutes, scheduled for release on Wednesday.

Investors would look for clues about the possibility of a larger 75 bps rate hike move in September. This could play a key role in influencing the near-term USD price dynamics and help determine the next leg of a directional move for gold. In the meantime, growing worries about a global economic downturn could lend some support to the safe-haven precious metal. Traders now look forward to the housing market data and Industrial Production figures from the US for some impetus on Tuesday.

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Brent Oil to trade at only $90 by year-end – Commerzbank

Following last week’s massive setback, the latest recovery of oil prices is likely to falter. In the view of strategists at Commerzbank, oil prices should continue to decline until the end of the year.

Market will be amply supplied in the coming months

“The oil market should be more than amply supplied for the time being.”

“We now envisage a Brent price of only $90 by year-end.”

“The EU oil embargo that will come into force at the end of the year will probably prevent any further price slide.”

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GBP/USD surges past 1.2200 mark amid softer US inflation data-inspired USD slump

GBP/USD adds to its intraday gains and rallies to a one-and-half-week high amid a brutal USD selloff.

A weaker US CPI report pushed back expectations for a larger Fed rate hike and weighed on the USD.

A strong rally in the US equity futures exerts additional downward pressure on the safe-haven buck.

The GBP/USD pair catches aggressive bids and surges past the 1.2200 mark, hitting a one-and-half-week high during the early North American session.

The intraday US dollar selling picks up pace following the release of weaker US consumer inflation figures, which, in turn, provides a goodish lift to the GBP/USD pair. The Bureau of Labour Statistics reported that the headline US CPI remained flat in July against the 0.2% rise anticipated. Adding to this, the yearly rate decelerated to 8.5% during the reported month, again missing estimates pointing to a fall to 8.7% from the 9.1% in June.

Furthermore, core inflation, which excludes food and energy prices, came in at 0.3% MoM and held steady at a 5.9% YoY rate vs 0.5% and 6.1% anticipated, respectively. The softer data now seems to have pushed back market expectations for a larger Fed rate hike move at the September policy meeting and prompts aggressive selling around the USD. Apart from this, a strong rally in the US equity markets exerts additional pressure on the safe-haven buck.

The strong intraday move up allowed the GBP/USD pair to break through the 1.2130-1.2140 resistance zone, triggering an aggressive short-covering move. Hence, it remains to be seen if the momentum is backed by genuine buying or turns out to be a stop run amid the Bank of England's gloomy economic outlook.

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Silver Price Analysis: XAG/USD seems poised to appreciate further and aim to reclaim $21.00

Silver oscillates in a narrow band and consolidates its recent gains to a multi-week high.

The overnight breakout through the 50-DMA/50$ Fibo. confluence favours bullish traders.

Any meaningful dips could now be seen as a buying opportunity and remain short-lived.

Silver consolidates the previous day's strong gains to a six-week high and remains confined in a range above mid-$20.00s heading into the North American session.

The overnight breakout through the $20.30-$20.35 confluence - comprising the 50-day SMA and the 50% Fibonacci retracement level of the $22.52-$18.15 downfall - favours bullish traders. Positive technical indicators on the daily chart add credence to the constructive set-up and support prospects for a further near-term appreciating move.

Hence, a subsequent move up towards the 61.8% Fibo. level, around the $20.85 area, now looks like a distinct possibility. Some follow-through buying beyond the $21.00 mark would be seen as a fresh trigger for bulls and lift the XAG/USD towards the $21.40-$21.50 intermediate resistance en-route the $22.00 round-figure mark.

The latter coincides with the 100-day SMA and should keep a lid on any further gains for the XAG/USD, at least for the time being. That said, a convincing break above should pave the way for an extension of the recent recovery move from a two-year low, around the $18.15 region touched on July 14.

On the flip side, the $20.35-$20.30 confluence resistance breakpoint now seems to protect the immediate downside ahead of the $20.00 psychological mark. This is closely followed by the $19.80-$19.75 region (38.2% Fibo. level), Friday's swing low around the $19.55 area, and the 23.6% Fibo. level support, around the $19.20 zone.

Failure to defend the aforementioned support levels would negate any near-term positive bias and shift the bias back in favour of bearisha traders. The XAG/USD would then turn vulnerable to weaken further below the $19.00 mark, towards the next relevant support near the $18.40 area en route to the YTD low, around the $18.15 region.

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GBP/USD on track to break below the July 29 low near 1.2065 – BBH

GBP/USD has stabilized after its post-BoE sell-off but remains heavy. With no obvious safety net in sight, economists at BBH expect the pair to drop under the July 29 low at around 1.2065.

BoE is set to continue tightening

“A move above 1.21 earlier today failed to trigger any follow-through buying. We believe GBP/USD is still on track to break below the July 29 low near 1.2065.”

“Despite the gloomy outlook, the Bank of England is set to continue tightening as inflation spirals ever higher.”

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