Two trades to watch: EUR/USD, Gold

EUR/USD looks to central bank catalysts. Will the Fed boost Gold?


EURUSD looks to the Fed

EURUSD is steadying after settling 0.23% lower in the previous session. Weak Eurozone manufacturing PMI hit the euro. The data revealed that factory activity slowed to an 8-month low.

Today all eyes are on the Fed. The US central bank is expected to taper bond purchases. Investors will be more interested in what the Fed has to say over inflation and the timing of the next rate hike. Could this be a case of buy the rumor sell the fact?

Also watch for ECB Christine Lagarde who is due to speak. Continued defence of the bond buying programme could highlight central bank divergence.

Learn more about the Federal Reserve

Where next for EUR/USD?

EURUSD faced rejection at the 50 sma and descending trendline resistance at the end of last week. The pair tumbled to a low of 1.1535 and has been attempting to recover. However, the recovery has run into resistance at the 20 sma at 1.16.

Buyers will need to retake the 20 sma to open the door to 1.1665. A move above here could expose the 50 sma and allow for a fresh attempt on the descending trendline resistance.

On the downside, 1.1550 this week’s low could offer support ahead of last week’s low of 1.1535.

EURUSD chart

Will the Fed boost Gold?

Gold is heading lower for a second straight session ahead of the Fed’s announcement.

On Tuesday Gold fell as the US Dollar jumped and treasury yields jumped higher amid re-positioning as the FOMC got underway.

Today Gold is extending its decline as the US Dollar continues to rise. Whilst the tapering is pretty much a given comments over rate hike expectations are likely to be the biggest driver.

Should the Fed push back on market expectations of a mid 2022 rate hike, gold could rally.

Ahead of the Fed announcement there is also plenty of US data including ADP private payroll numbers and ISM non-manufacturing PMI. However, the data will play second fiddle to the Fed.

Where next for Gold prices?

Gold appears to be trading within a symmetrical triangle pattern. The price is trading towards the lower band of the pattern. It has broken below its 100 sma and is currently testing its 50 sma. The RSI is neutral.

A  break below the 50 sma at 1780 and the lower band of the symmetrical triangle at 1778 could prompt a deeper selloff toward the mid October low at 1760 and the October low of 1746. Beyond here the September low of 1724 comes into play.

On the flip side, should the triangle patten support hold, the price could rebound higher towards the 200 sma at 1791. A break above here could prompt a move towards 1800 round number and 1805 the upper band of the triangle.

Gold chart



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