Two trades to watch: GBP/USD, Gold

USD/USD retakes 1.41 after stronger than forecast CPI data. All eyes now to the Fed. Gold attempts to rise after 3 straight days of decline,but next directional move depends on Jerome Powell & Co.

FED 6

GBP/USD retakes 1.41 after strong CPI data 

UK CPI jumped 0.6% MoM in May, ahead of the 0.3% forecast and 0.3% in April. Annually CPI rose to 2.1%, up from 1.5% and ahead of the 1.8% forecast.  

Inflation is now above the BoE’s 2% target, raising the chances of the central bank reining in monetary policy by dialing back bond purchases. 

The data comes following upbeat labour market data in the previous session, which failed to boost the Pound. 

Brexit jitters and the delay of lifting final lockdown restrictions undermined demand 

Attention now turns to the Fed’s monetary policy announcement. A less dovish Fed and the introduction of taper talk could boost the US Dollar and drag on the pair. 

Learn more about the Fed

Where next for GBP/USD? 

GBP/USD hit a two month low of 1.4033 in the previous session, but managed to pick up into the close, settling at 1.4088. This is the first time that the pair settled below 1.41 since mid-May. 

The pair trades below its descending trendline dating back to early June. It trades below its 50 EMA but has retaken its 200 EMA. 

The MACD appears to be forming a bullish crossover keeping the buyers hopeful. 

GBP/USD has jumped higher post CPI. It has retaken its 200 EMA and is heading towards its 50 EMA at 1.4120 a move above here could bring the pair to test the descending trendline resistance at 1.4160.   

Failure to retake the 50 EMA could see the the pair retest 1.4080 the 200 EMA and horizontal support before targeting 1.4030. 

Learn more about MACD

 

Gold looks to Powell for direction 

Gold is attempting to climb higher after 3 straight days of declines which saw it test $1850. 

Gold came under pressure amid a stronger US Dollar on expectations that the Fed could start introducing a gradual move towards tightening monetary policy. 

Heading towards the Fed announcement the US Dollar has stalled and gold is clawing higher. 

Golds next move depends on the Fed’s outlook on the economy and where policy goes from here. 

Any taper talk from the Fed could send the US Dollar higher and weigh on gold.

Learn more about trading Gold 

Where next for Gold? 

Gold fell through its ascending trendline at the start of the week. It found support yesterday around 1850, horizontal support and the 50 EMA. 

The RSI is supportive of further downside, with risks remaining to the downside. 

Beyond the 1850 level, appears support at 1830 from the descending trendline from August last year and then at 1812 the 200 EMA and horizontal support. 

All in all these levels create an area of strong support. If these levels breached and the area of support broken, this would mark a considerable shift in the technical outlook for Gold. 

On the upside, any recovery would need to retake horizontal resistance at 1775 ahead of the ascending trendline resistance at 1890. 

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