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4 Global Market Updates- 5 September, 2022

In this article, we have covered the highlights of global market news about the GBP/USD, EUR/USD, XAU/USD and USD/CNH.

GBP/USD: Sellers will predominate until 1.1550 becomes support.

The GBP/USD exchange rate recovered a significant percentage of its daily losses after falling to its lowest point since March 2020. But below 1.1550, the negative tendency is still there, according to Eren Sengezer of FXStreet.

“The Conservative Party leadership contest is largely anticipated to be won by Liz Truss. Because players are waiting to see what the new PM will do to support families in the face of rising energy bills, market activity is expected to be subdued. Furthermore, Brexit is still an open question that will probably make it challenging for the pound to stage a significant recovery.

“In the event that cable makes a technical repair, temporary support at psychological level 1.1500 (static level) is formed before 1.1550.” (static level, the upper limit of the descending regression channel, 20-period SMA). Additional recovery progress approaching 1.1600 (static level, psychological level) might be seen if the latter develops into support.

“On the downside, the daily low of 1.1450 aligns as the next level of support before the psychological level, or lower limit of the declining channel, of 1.1400.”

EUR/USD seems to be on the cheap at sub-0.9900 levels at fresh cycle lows.

For the first time since December 2002, sellers have returned to the euro and have dragged the EUR/USD to new lows in the 0.9880/75 zone on Monday.

After initially falling to lows in the sub-0.9900 range at the start of the week, the EUR/USD is able to shake off the initial gloom and rise, always against the background of renewed purchasing activity in the dollar.

Indeed, as investors continued to react to the possibility of further rate rises by the Fed in the coming months, the US Dollar Index (DXY) climbed to more than 20-year highs north of the 110.00 barrier before the opening bell on the old continent on Monday.

Before the Fed’s announcement, the ECB will meet later this week, and expectations among investors still seem to favour a 75 basis point rate rise. This is despite the area continuing experiencing unabatedly rising inflation and the spectre of the oil crisis.

Gold Price Prediction: XAU/USD falls on stronger USD, Fed rate increase fears

The first day of the new week sees gold edging down as some of Friday’s significant gains are lost. Even though there hasn’t been any follow-through selling, the XAU/USD has managed to maintain above the $1,700 round-figure level during the early European session.

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On Monday, the US dollar reaches a fresh 20-year high and proves to be a significant driver pushing the price of gold priced in dollars down. The rising consensus that the Fed will stay to its aggressive policy tightening course continues to support the dollar in spite of the mixed US employment data issued on Friday. In fact, the likelihood of a supersized 75 bps rate hike at the upcoming FOMC meeting on September 20-21 is higher than what the markets are currently pricing in.

The recent hawkish comments of numerous Fed members, which suggested that interest rates are likely to keep increasing until inflation is much closer to the 2% objective, confirmed the bets. Furthermore, it is anticipated that interest rates will continue to rise at the Reserve Bank of Australia, the European Central Bank, and the Bank of England. This is thought to be another element that influences flows away from non-yielding gold.

USD/CNH: Potential upside reduced below 6.8700 – UOB

On a violation of the 6.8700 barrier, according to UOB Group FX Strategists Lee Sue Ann and Quek Ser Leang, the USD/CNH might lose some of its upward momentum.

24-hour view: “Last Friday, we anticipated that the USD would ‘trade sideways between 6.8900 and 6.9250. Although USD traded inside a smaller range than anticipated (6.9004–6.9209), our analysis was correct. The USD is anticipated to go upward for today as the underlying mood has strengthened. A breach of 6.9400, however, seems doubtful (there is another resistance at 6.9325). 6.9040 and 6.9120 provide support.

Within the next three weeks: “Our update from last Friday (02 September, spot at 6.9100) remains valid. As was said, even if the rising momentum has slowed a little, a breach of 6.8700 (a level that has been a “solid support” level since last Friday) would signal that the USD is not becoming any stronger. In the near future, resistance levels are located around 6.9400 and 6.9600.

Please click here for the Market News Updates from 3 September 2022.

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