Two trades to watch: EUR/USD, Gold

EUR/USD picks up from 2.5 month low. Attention shifts to ECB's Lagarde amid quiet calendar. Gold attempts a rebound as US treasury yields slip under 1.40%. Fed Williams to speak

Charts (5)

EUR/USD looks to ECB President Lagarde 

EUR/USD is picking up after hitting a 2.5 month low on Friday following the Fed’s hawkish surprise at the FOMC and following Fed Bullard’s suggestion that rates may need to rise in 2022 and advised that taper talk had started. 

The pair is heading back towards 1.19 as US treasury yields weaken on Monday. 

Looking ahead the economic calendar is quiet. All eyes will be on ECB President Christine Lagarde who is due to speak before the European Parliament Economic and Monetary Affairs Committee. Any comments regarding future monetary policy stance will be listened for. 

Where next for EUR/USD? 

Last week the pair broke below 1.20 – the 200 sma on the daily chart and the key psychological level in a bearish move. The RSI moved into oversold territory limiting further losses, caution should be taken before placing further bearish bets. Sellers could look for a move below 1.1830 low 23rd March before placing further bearish bets, potentially opening the door to 1.18 round number and 1.1760. 

Any meaningful recovery would look to retake 1.19 round number before targeting 1.1925 high April 27. It would take a move above the 200 sma and round number at 1.20 for the buyers to gain momentum. 

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Gold in focus as treasury yields drop 

Gold prices tanked over 6% last week in its worst week in over a year. The Fed’s hawkish surprise caught the market off guard, boosting the treasury yields and the US Dollar; a move which dragged on non-yielding US Dollar denominated Gold. 

At the start of the week yields on the 10 year treasury have dropped heavily below 1.40%  and the US Dollar is easing off its two month high. 

Inflation and the Fed’s next move is likely to remain a key theme this week with Jerome Powell testifying before Congress and PCE data on Friday. 

US bond auctions and a speech by Fed Williams are under the spotlight in a quiet economic calendar. 

Where next for Gold? 

After six consecutive days of declines, Gold is attempting a move higher.  

Gold fell below its ascending trendline last week, it also broke below its 50 and 200 sma and moved back below the descending trendline dating back to August. 

The RSI is is oversold territory supporting a move higher before. 

Any recovery will need to retake 1800 the psychological number & resistance April 26, May 5. This could open the door to 1830 the confluence of the 50 sma and the descending trendline. The key 200 sma sits marginally higher at 1835. The zone could prove a tough nut to crack. 

Support is seen at 1660 the overnight low, ahead of 1745 and 1720. 

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