Weekly Outlook: Gold, Euro, GBP, JPY trends to watch

October 13, 2024 (MLN): Following the release of better-than-expected consumer data last week, the market's expectations for the Fed's aggressive rate cutting strategy have lowered. 

I don't think the Federal Reserve will take a chance to undo all of its tireless efforts to reduce inflation by a significant interest rate decrease.

A 25 basis point cut is reasonable given the ongoing US economic slowdown, which includes job losses following an unexpected spike in initial jobless claims to 258k, the worst level since the second quarter of 2023. 

The ECB's policy announcement on Thursday of next week will be another major event. The decision makers have made it clear that further actions would rely on the data. 

The ECB minutes have made clear that it will take a thoughtful and planned approach. But I believe 25bp cut is already priced in by the market.

Although there was no major negative news for the US economy last week, the US Dollar rose. This explains why the 10-year bond was comfortably above 4%, as USD index rose and US bond was sold.

Even yet, this week's US economic schedule is light. However, the market can also be driven by a wide range of other geopolitical issues. 

Gold dropped to test the intended goal last week. 

Like past week, I have noticed similar behaviour from gold this week as well. 

Initially I am expecting gold to rise at first before dropping and is expected to move up again before Friday's closure of market. 

Over the past two weeks, I believe that the fear of an Israeli attack on Iranian assets has caused gold to recover over the weekend. 

Because of this, traders and investors prefer to close their positions on weekends due to the risk involved. 

In my opinion, gold will find selling opportunities to retest and break last week's lows if geopolitical conditions stay calm. 

Gold is expected to decline and the USD will rise. A move towards $ 2700 and beyond and oil beyond $ 85-90 will only be feasible if there is more chaos throughout the world. 

However, when the yellow metal falls, investors will still want to purchase gold. As investors' favourite strategy will continue to be to buy on dips.

#GOLD @ $ 2657- Gold is projected to ease unless it breaks $2670-75 levels. But initially, I am looking for a dip following a modest increase.  A break of $ 2632-35 will encourage for a test of $ 2601 or $ 2592. Or else upside risk is for $ 2688 and beyond.

#EURO @ 1.0936- Euro is probably going to continue to face resistance and should hold below 1.1020 before falling. A break of 1.0870 is necessary for the test of 1.0780-00 levels. Or else 1.1110.

#GBP @ 1.3058- Pound Sterling is well supported between 1.2950-70. The critical level that needs to hold on the downside is 1.2910. It is anticipated to rise and is projected to move ahead. But only break of 1.3150 will make it possible for a test of 1.3210 zones. 

#JPY @ 149.08- If USD weakens, keep a close watch on 148.05. It needs to hold. 

On the upside, USD will have to overcome the 150.40–50 barrier in order to reach 151.20-40 levels. Or else monitor 147.50 on the downside.

The writer is the former Country Treasurer of Chase Manhattan Bank

Disclaimer: The views and analysis in this article are the opinions of the author and are for informational purposes only. It is not intended to be financial or investment advice and should not be the basis for making financial decisions.