FTSE 100, gold on track for weekly drop as GBP/USD’s advance resumes

Macro Update

Asian equities head for their strongest week in two months: Regional stocks advanced on Friday, with MSCI's Asia-Pacific index excluding Japan on track for a 2.6% weekly gain as softer US inflation data reduced expectations of a Federal Reserve rate hike next month.

Wall Street closes at fresh records: The S&P 500 gained 0.65% and the Nasdaq rose 0.81% on Thursday as unchanged July producer prices reinforced expectations of a Fed rate hold, while strong AI infrastructure earnings continued to support technology stocks.

Oil prices stabilise below $90: Brent crude edged up to $90 a barrel and was on course for a weekly gain of around 4% after Washington threatened an indefinite naval blockade of Iran, although weaker demand forecasts from OPEC and the IEA limited further gains.

Yen remains close to potential intervention levels: The Japanese currency traded around ¥159.25 per dollar, approaching the ¥160 threshold that markets view as a possible trigger for renewed action from Tokyo, while investors increasingly expect the Bank of Japan to raise rates next month to stem the yen's decline.

Topix targets a record close: Japan's broader equity index rose 0.69% to 4,204.99 and the Nikkei 225 gained 0.85%, supported by the previous day's Wall Street rally that lifted both the S&P 500 and Nasdaq to new record highs.

Gold retreats from a two-month peak: Spot gold fell 0.6% to $4,330 an ounce and was heading for a possible weekly decline as investors took profits, with markets now pricing only a 33% probability of a September Fed rate hike, down from 55% a week ago.

FTSE 100 retraces lower

The FTSE 100 continues to slowly descend from its late July 10,990 record high and is on track for its fifth straight day of falling prices and a negative weekly performance. The April and July highs at 10,745-to-10,697 may act as support, though.

Minor resistance may be spotted around the 5 August 10,837 low, ahead of the 10,960 7 August high and the all-time high at 10,990.

Short-term outlook: bearish while below the 7 August high at 10,960

Medium-term outlook: bullish while above the 24 July low at 10,578

FTSE 100 daily candlestick chart

GBP/USD advance resumes

The recent appreciation in the pound sterling versus the greenback seems to be resuming, having earlier this week run out of steam at $1.3546, marginally below its $1.3558 mid-July high. If these two resistance levels were to be overcome, the mid-April high at $1.3599 would likely be targeted ahead of the May peak at $1.3658.

Immediate minor support sits at Thursday's $1.3475 low and below it at the mid-June $1.3461 high. Further potential support may be found between the 3-to-7 August lows and the 200-day simple moving average (SMA) at $1.34.34-to-$1.3413.

Short-term outlook: bullish while above $1.3434

Medium-term outlook: neutral with a bullish undertone while trading within its $1.3140-to-$1.3658 March-to-August boundaries

GBP/USD daily candlestick chart

Gold advance thwarted by downtrend line

Spot gold's sharp August rally has run out of steam along the January-to-August downtrend line at $4,449.83 per troy ounce and looks to be short-term under pressure with the late December low at $4,274.03 possibly being revisited. Further down potential support may be found around the early July high at $4,202.71 and at the 22 July $4,166.13 high.

A rise above this week's $4,449.83 high would push the 200-day simple moving average (SMA) at $4,503.01 to the fore.

Short-term outlook: bearish while below the $4,449.83 high, a rise above which would turn the forecast bullish again though

Medium-term outlook: bullish while above the 30 June low at $3,942.10

Gold daily candlestick chart