Market Outlook: EUR/USD, Gold, and Oil Are Poised For Big Moves
The FOMC Is In Control Of The Market
While global events ranging from the trade war to the trade deal, economic data, geopolitics, and the coronavirus have markets on the move it is the FOMC that controls their longer-term direction. At least this week, that is. This week we’ll get a sneak peak into the mind of the committee via the minutes and that, along with some key data points, will have profound impact on the outlook for interest rates this year.
Right now, as I write this, the market has priced in at least one rate-cut by summer 2020 and the possibility of two, maybe three more by the end of the year. This is due in large part because of the coronavirus, an event whose economic impact is yet to be seen. The FOMC has said there will probably not be any cuts or hikes this year, Jerome Powell just said the other day before Congress that current policy was appropriate, so the market is smarter than the FOMC or really, really wrong.
The data this week, aside from the minutes, includes PPI, Housing Starts/Permits, the Philly Fed MBOS, and Leading Indicators; all crucial reads on the state of the U.S. economy. Strong data could easily sway the market and put renew the bid we’ve seen in the dollar over the last few weeks.
Euro Poised To Fall
The EUR/USD is poised to fall. This trade has not only the U.S. outlook to move it but also the EU’s. There is a lot of data from the EU this week to include business sentiment and PMI readings for the bloc. Most of the other data is country-specific with quite a bit from Germany. The price action suggests traders are banking on weaker than expected EU data and stronger U.S. data, a situation that will lead to continuation of the down-trend. At present, price action is consolidating at the new low. MACD momentum is consistent with consolidation and convergent with the low showing strength within the movement. Stochastic is oversold but this condition can persist for quite a while in a down trend. Support is near 1.0825, if price falls below there I would enter bearish positions, my target for next support is close to 1.0600.
Oil Prices Are Bottoming
Oil prices are bottoming after last week’s OPEC meeting. The cartel has agreed to extend production cuts into the summer and possibly deepen them in an attempt to shore up prices. The price action is now sitting at a bottom and forming a possible double-bottom because of it. The risk is the coronavirus and its impact on demand, so long as demand holds up prices should be able to at leas sustain this support level, near $50 dollars. The baseline for the Double Bottom is near $52.25, if price action can make a move above there and hold it we can expect to see upward drift over the next few weeks.
Gold, On The Verge Of Breaking Out
Gold is trending near a long-term multi-year high and may be on the verge of a break out. Resistance is near the $1,600 level where price action is forming a flat-topped triangle. The indicators are rolling into a bullish signal that, if accompanied by a price move, points to higher prices in the short to medium term. The risk is with the dollar. If the FOMC minutes and data support continued strength in the dollar this trade could bust. If price action doesn’t sustain a break or resistance confirms at $1,600 look for gold to move down to the $1,560, $1,520, and $1,480 levels.
