Markets stay muted to Fed minutes
Markets saw little activity after the release of the Fed’s meeting minutes yesterday. The central bank, in its minutes, revealed that the rate cut in July was a mid-cycle adjustment. The Fed minutes put the Fed in a position of not being aggressive in cutting interest rates. The Fed Chair Jerome Powell is due to speak on Friday as the two-day Jackson Hole symposium gets underway.
Euro Remains Subdued Amid a Strong USD
The euro currency was relatively weak for the most part on Wednesday. This came largely due to the stronger greenback. Lack of economic data saw investors focusing on the bond markets. After the Italian political crisis, the focus was on the German 30-year bond yields which turned negative. Investors anticipate the ECB to announce its stimulus program in September.
EURUSD Could Extend Declines Below 1.1065
The currency pair has been consolidating near the resistance level of 1.1100. This comes as the Stochastics oscillator is forming a hidden bearish divergence. The declines could be extending to the support area at 1.1065. A breakdown below this level will potentially accelerate the downside. The next lower support in EURUSD is at 1.1008.
Oil Prices Trade Flat on Inventory Report
WTI Crude Oil prices were trading flat on Wednesday. The US Energy Information Administration (EIA) report showed that the crude oil inventory fell by 2.7 million barrels for the week ending August 16. This was the first decline in inventory in the past three weeks. The build-up comes following two-weeks of back-to-back increases in the inventory report.
WTI Crude Oil to Remain Range-Bound
Oil prices have settled into a sideways range of 57.50 and 54.42 region. Price action has been trading within this level since last week. A breakout from this range is required in order for the momentum to build up. It is likely that the breach of support at 54.42 will see oil prices falling back to lows of 51.70 where another support level exists that was previously tested.
Gold Remains Perched Near the Highs
The precious metal was trading near the highs, but price action is rather subdued. This reflects the general perception among investors who remain cautious. Meanwhile, equity markets have been steadily rising. This reflects that confidence among investors is slowly returning.
XAUUSD Consolidates into a Bullish Pennant Pattern
The precious metal is consolidating into a bullish pennant pattern. This pattern is evident, as seen on the 4-hour chart time frame. The pattern potentially raises the upside bias in gold. However, gold prices will need to clear the 1531.63 highs that are in place. The bullish pennant will be validated only after a breakout above this level. In the meantime, to the downside, the support at 1485.71 could hold the declines.