Technical Tuesday

The EUR/JPY is our featured technical chart, for not only a technical breakdown is looking increasingly likely, but the macro back backdrop makes for a bearish fundamental backdrop. In short, the euro is undermined because of Europe’s persistent economic and political challenges, while a potential rate hike from the Bank of Japan magnifies the yen's appeal. Against this backdrop, our short-term EUR/JPY forecast is bearish.

Gold analysis: After the big sell-off on Monday, I will try to examine what this means for gold in terms of direction in the near-term outlook, purely from a technical point of view.

As well as disappointment regarding China’s stimulus, we haven’t seen any major escalations in the Middle East conflict, while the US dollar and bond yields also remain well supported. On top of this, technical indications suggest gold prices remain significantly overbought. All this means the scope for a decent downward move is there, if the bears dare try to step in against what has been one of the strongest bullish trends in gold and ahead of US presidential election.

EURUSD Forecast: In addition to the strength of the dollar between haven factors and moderated expectations of monetary easing, dovish expectations surrounding the ECB’s upcoming monetary policy decision are putting additional pressures on the Euro.

GBPUSD Forecast: The GBPUSD is currently hovering below the key 1.3430 resistance level, with Fed Chair Powell's recent speech introducing a hawkish tone to the rate cut expectations, reinforcing the strength of the DXY and limiting further weakness.

GBPUSD Outlook: GBPUSD is trading on bullish grounds ahead of the monetary policy decisions and outlooks of the Fed and Bank of England.

There is the potential for gold to move sharply in response to this week’s CPI inflation data from the US should we see a sharp deviation from expectations. We maintain a bullish gold forecast ahead of the CPI release.

Later in the week, we will have the release of global PMIs, US GDP and the Fed’s favourite inflation measure – core PCE price index – all of which having the potential to impact the short-term gold forecast.

Despite a stronger retail sales print, the tide may have turned on the US dollar following last week's recent data releases and raised expectations over the Fed cutting rates in September. Therefore, my GBP/USD forecast remains bullish, and I reckon the $1.30 handle could be taken out soon.

Stocks have not responded in the usual way of cheering on weaker-than-expected data. The questions, are we finally headed for a long overdue correction now? The S&P 500 outlook is not bearish yet from a technical viewpoint, but the potential is there for that to change in the coming days.

The AUD/USD forecast is turning somewhat positive, both from a macro perspective and technical viewpoint.