Gold faces downside pressure near term – BAML

FXStreet (Edinburgh) – According to analysts at BAML, the precious metal could be poised for further pullbacks in the near term.

Key Quotes

“Given the macroeconomic backdrop and acknowledging the persistent headwinds to gold prices of late, we are reducing average 2015 forecasts by 6.8% to $ 1,122/oz; gold should fall below $ 1,000/oz in 2016”.

“Continued hawkish comments from the Fed against falling inflation are our most notable concern. In fact, the combination of higher nominal opportunity costs and lack of inflation has hardly ever been bullish in the past 40 years”.

“Having said that, we believe that gold should stabilise when inflation picks up, which is one reason that we maintain an average forecast of $ 1,250/oz in 4Q16, when US CPI is set to expand by 2.1% YoY”.

Gold prices are largely influenced by four macroeconomic indicators, with USD and real interest rates statistically the most significant drivers”.

“While tighter US monetary policy is bearish for gold near term, against the backdrop of subdued inflationary pressure, we believe a hawkish Fed exacerbates headwinds to the precious metals also through exchange rates”.
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EUR/USD finds support at 1.1220 and trims losses

FXStreet (Córdoba) – EUR/USD found support at the 1.1220 zone and even managed to recover some ground over the last hours against a backdrop of uncertainty and erratic moves as investors focus turns to ECB meeting on Thursday and the nonfarm payrolls report on Friday.

EUR/USD dropped nearly a full cent throughout the day despite the latest series of US data came in on the soft side, and touched a low of 1.1221 before bouncing slightly. At time of writing, the pair is trading at 1.1242, recording a 0.64% loss on the day.

The Fed’s Beige Book will be published at 18:00 GMT and even though usually it has low market impact, investors will likely be interested on the bank’s assessment of the economy to see if a September liftoff is still possible.

EUR/USD levels to watch

In terms of technical levels, EUR/USD could find immediate supports at 1.1222 (Sep 2 low), 1.1200 (psychological level) and 1.1178 (21-day SMA). On the other hand, resistances are seen at 1.1292 (200-day SMA), 1.1318 (Sep 2 high) and 1.1331 (Sep 1 high).
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Risk-sentiment seeps back in Asia, UK construction PMI – Next in focus

FXStreet (Mumbai) – The USD bulls jumped back into the bids after steep losses witnessed during the first two trading sessions this week as appetite for risk seems to return in the markets. The risk currencies such as AUD, NZD and the newly crowned USD are the major beneficiaries amid risk-on moods while oil and most Asian stocks also flipped to gains.

Key headlines in Asia

Australia’s Q2 GDP misses expectations

SHCOMP drags Asia lower, Nikkei bucks the trend

Dominating themes in Asia – centered on JPY, AUD, NZD

A calmer Asian session, dominated by re-emergence of risk-on environment on rebounding Asian equities as well commodity prices, which helps to lift the overall market sentiment.

The US dollar enjoyed heavy gains as the buck staged a solid comeback against its major rivals as traders preferred to hold the US currency ahead of the key US employment report due to be reported today and on Friday. USD/JPY was the biggest gainer amongst the majors, up 0.70% to trade at 120.17, while the EUR/USD pair loses -0.31% and trades around 1.1280 levels.

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