Two trades to watch: EUR/USD, Gold

EUR/USD is supported by the prospect of ECB tapering possibly as soon as September. Gold looks to US CPI data for further clues.

Charts (3)

EUR/USD retakes 1.1850 on ECB tapering bets  

The EUR/USD is attempting to pick up after a slightly softer start to the week.  

ECB President Christine Lagarde announced that the ECB will make a change to guidance in the July 22 meeting – a meeting that was previously expected to be uneventful. 

The ECB is expected to start tapering its asset purchases from September and stop buying in March next year. 

German inflation came in line with forecasts +0.4% MoM and +2.3% YoY.

The US Dollar is edging lower but hovers around a 3 week high, with US CPI inflation due later today. Expectations are for CPI to rise 0.5% MoM in June, down from 0.6% in May. Annually, inflation is expected to rise 4.9%, down from 5%. 


Where next for EUR/USD? 

The pair rebounded from a 4 month low of 1.1790 last week, pushing back above its multiweek descending trendline, its 50 sma, however the 100 sma still limits gains. As such the pair is trading in a holding pattern between the 50 and 100 sma on the 4 hour chat. 

The RSI is relatively neutral. 

Buyers will look for a break above the 100 sma and horizontal resistance at 1.1880 in order to look towards 1.1900 and 1.1975 horizontal support. 

Sellers could look for a move below the 50 sma and horizontal support at 1.1840 in order to head towards 1.1780 and 1.1755. 

 

Gold looks to US CPI 

Gold traded flat on Monday, struggling to extend last week’s gains, after it was boosted by falling yields. 

Whilst a mildly optimistic tone in equity markers hits safe haven demand and the US Dollar trading at 13 week highs undermines gold. The rise in covid cases underpins the precious metal. 

US CPI inflation data is in focus. Core CPI could push past last months 3.8% reading with 4%. A higher print could prompt concerns of a sooner move by the Fed and drag on Gold. 

That said, Fed Williams said that the US economy has not achieved the substantial further progress for the Fed to start reducing asset purchases. Boosting hope of extended easing. 


Where next for Gold prices? 

Gold has been trending higher after hitting 1751 2 weeks ago. Gold trades above its 2-week ascending trendline and its 50 & 100 sma. The 50 crossed above the 100 sma in a bullish signal. The RSI is neutral.  

The bulls will be looking for a break above 1815 last week’s high and 1518 the July high to head towards 1825 the June 17 high. 

Meanwhile a break below 1804 trendline support could open the door to 1794 the 50 sma. It would take a move below 1790 for the bears to gain traction towards 1760 June 18 low and 1750 the June low. 

 

How to trade with FOREX.com

Follow these easy steps to start trading with FOREX.com today:

  1. Open a Forex.com account, or log-in if you’re already a customer.
  2. Search for the market you want to trade in our award-winning platform.
  3. Choose your position and size, and your stop and limit levels.
  4. Place the trade.


More from Trade Ideas

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.