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. 


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