EURUSD, Gold Analysis: PMIs, Geopolitics, and Key Levels

Key Events

• Russia-Ukraine War: Escalation or potential resolution?
• Middle East Ceasefire Talks: Positive developments emerge
• Can the dollar hold or break firmly above 107?
• Volatility risks flagged for FX markets tomorrow with Flash PMIs across EU, UK, and US

Russia/Ukraine and Middle East Developments

Between President Biden and upcoming president Donald Trump, a green light was given to Ukraine for war escalation against Russia, opening the door for intense combat since the beginning of the war. However, a ceasefire deal led by Trump could be on the horizon.

In the Middle East, US envoy Hochstein’s meeting with the Lebanese Prime Minister revealed encouraging feedback, raising hopes for a near-term ceasefire. As markets navigate between escalation risks and the potential for peace, gold's safe-haven appeal remains strong, supporting its long-term uptrend unless a decisive peace resolution materializes, or the dollar resumes its bullish breakout.

PMI Results: Catalysts for Volatility

Flash Manufacturing and Services PMIs, due tomorrow across the eurozone, UK, and US, are expected to drive volatility in the EURUSD and dollar. The EURUSD is balancing between a potential bullish reversal above 1.06 or a correction towards 1.03 and 1.01 if the dollar surges beyond 107.

Technical Analysis: Quantifying Uncertainties

EURUSD Analysis: Weekly Time Frame – Log Scale

Source: Tradingview

While the EURUSD chart exhibits bearish signals targeting parity with the dollar, the pair is rebounding from the mid-zone of a duplicated channel, coinciding with an oversold RSI condition seen during October 2023 and September 2022 lows. Holding above 1.05 as the DXY hesitates at 107, EURUSD could be forming a flag pattern.

Scenarios

Bullish Scenario: Holding firm above 1.05 while DXY stays below 107 could support EURUSD to 107, 1.0780, and 1.0950 resistance levels.

Bearish Scenario: A decisive break below 1.0480 could extend losses to 1.0380, 1.02, and 1.0170.

Gold Analysis: Weekly Time Frame – Log Scale

Source: Tradingview

Gold rebounded from the 2536 support, mirroring silver’s reversal from its one-year uptrend boundary, aided by the halt in the dollar rally and renewed safe-haven demand amid geopolitical tensions.

Scenarios

Bullish: Resistance levels are at 2660, 2706, and 2760, aligning with gold’s uptrend since October 2023. A break above 2760 could target 2800 and, potentially, 3050.

Bearish: A close below 2536 could push gold to 2480 before confirming a deeper move toward 2300.

--- Written by Razan Hilal, CMT on X: @Rh_waves