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EUR/USD & GBP/USD Prices May Fall as Upward Momentum Loses Steam

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Miguel A. Rodriguez
Miguel A. Rodriguez
05 November 2022
Stock markets edged lower on political disagreements, and all eyes are on Europe today. Here are the key levels to consider on EUR/USD, GBP/USD, and main commodities markets.

The ECB Day & EU Summit    

Markets expect the ECB on Thursday to unveil growth and inflation forecasts for the coming years and to deliver more monetary stimulus to support the Eurozone economy. The central bank left the door open for all possibilities such as increasing the pandemic Emergency Purchase Program (PEPP), to increase its open-ended quantitative easing program, to extend the Targeted Longer-Term Referencing Operations (TELTROs), or even to cut current interest rates.

Investors will keep an eye on the EU summit starting on Thursday to end the deadlock over the coronavirus aid package caused by Poland and Hungary’s veto.

More Talks   

US stock markets retreated on Thursday from its highest level as the US legislators could not agree on all points of the US Treasury Secretary's proposal of $916 billion COVID-19 aid. Therefore, there will be more bipartisan talks to agree on issues like the business liability shield suggested by Republicans and the aid to state and local governments demanded by the Democrats.  

On the other hand, the UK PM‘s visit to Brussels ended with pointing out “Large Gaps” that separate both sides. Nonetheless, they agreed on the need for more talks and gave themselves until Sunday to make or break. Major issues remain on fisheries, business competition, and deal compliance.

 

  Stock Market

Change %

S&P 500

-0.8%

Dow Jones

-0.3%

NASDQ

-2.2%

Japan 225

+0.4%

DAX 30

+0.3%

FTSE 100

+0.1%

CAC 40

-0.3%

 

Table source: Capex Webtrader

EUR/USD and Main FX Markets 

The EUR/USD rebounded on Wednesday around the high end of the current trading zone 1.1909 – 1.2148 after multiple failures to climb to a higher trading zone. The Relative Strength Index (RSI) abandoned overbought territory highlighting a weaker bullish momentum. Therefore, the price could be on the way for a test of the low end of the current trading zone at 1.1909. 

The GBP/USD closed on Wednesday with a Doji pattern indicating the market indecision. The price moves in the current trading zone 1.3185 – 1.3460. The (RSI) on the daily chart fell from 57 to 53 signaling that bulls were losing momentum.  Thus, a daily close below the low end of the zone could send the pair even lower towards 1.2916 (September 2016 low). 

Gold and Oil 

The oil price was supported by rolling out the Coronavirus vaccine in the UK and the possible start of the vaccine campaign in the US as the FDA may approve Pfizer’s vaccine on Thursday.

Technically, we notice on the daily chart of the Brent Crude the price/RSI negative divergence as the former created a high with a higher high while the latter created a high with a lower high indicating a possible reversal of the current upward momentum. Therefore, a daily close below the low end of the current trading zone at 46.53 may send the price towards the weekly support level at $43.30 (June 20 high).

The RSI on the Gold daily price fell below 50 reflecting a possible start of bearish momentum. The precious metal price failed to test the 50-day moving average and retreated to a lower trading zone of $1,786- $1,861 eyeing a test of the low end of it.

Looking Ahead

Eyes will be on the ECB rate decision due at 1:45 PM (GMT time), the ECB president Lagarde’s press conference at 2:30, the US inflation rates numbers of November at 2:30, and the Bank of Canada member Beaudry’s speech at 07:30 PM.

Sources: Bloomberg, Reuters, BBC.

This information/research prepared by Miguel A. Rodriguez does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views and consequently any person acting on it does so entirely at their own risk.The research provided does not constitute the views of KW Investments Ltd nor is it an invitation to invest with KW Investments Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.The research analyst in not employed by KW Investments Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation, or particular financial needs before making a commitment to invest. The laws of the Republic of Seychelles shall govern any claim relating to or arising from the contents of the information/ research provided. 

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Miguel A. Rodriguez
Miguel A. Rodriguez
Financial Writer

Miguel worked for major financial institutions such as Banco Santander, and Banco Central-Hispano. He is a published author of currency trading books.