EUR/USD, Gold Forecast: Two trades to watch

EUR/USD edges higher ahead of ECB rate decision

EUR/USD is edging higher towards 1.1550 ahead of the ECB's interest rate decision at 12:15 GMT.

The ECB is widely expected to raise rates by 25 basis points to 2.25% as it continues to battle inflation. Eurozone inflation rose to 3.2% in May, while core inflation, which strips out food and energy prices, remained elevated at 2.5%. Both measures remain well above the ECB's 2% target.

Alongside the rate decision, the ECB will publish updated economic forecasts. Inflation projections for 2026 and 2027 are expected to be revised higher, reflecting the impact of elevated energy prices and ongoing uncertainty in the Middle East. Growth forecasts, meanwhile, could be lowered after recent PMI data pointed to a loss of momentum across the eurozone economy.

This leaves the ECB in a difficult position. Inflation remains too high, but the economy is showing signs of slowing, meaning policymakers have limited room for error.

Investors will also be listening closely to ECB President Christine Lagarde's press conference for clues about where rates could go next. Markets currently expect another rate hike in September before the ECB pauses. If Lagarde signals that inflation remains a concern and further tightening is possible, the euro could gain ground.

Meanwhile, the U.S. dollar has been relatively steady this week as traders weigh renewed tensions between the U.S. and Iran against mixed inflation signals from the United States.

While headline CPI rose to a three-year high of 4.2% in May, the underlying inflation picture was slightly more encouraging. Core CPI rose by 0.2% month-on-month, below the 0.3% expected, easing some concerns that inflation pressures are accelerating across the broader economy.

Attention now turns to U.S. producer price inflation later today. PPI is expected to rise 6.4% year-on-year from 6.0%. A stronger-than-expected reading could reinforce expectations that inflation pressures remain sticky and support the dollar by strengthening the case for higher interest rates for longer.

EUR/USD forecast – technical analysis

EUR/USD broke out of its symmetrical triangle pattern, breaking below the 200 SMA. Failure to take these dynamic resistance points reinforced the bearish bias, and the price fell to support at 1.15.

Sellers supported by the RSI below 50 will look to break below 1.15 to extend the bearish move to 1.1450 (the late March swing low) and to 1.1410 (the 2026 low).

Any recovery needs to rise above 1.16 resistance to bring 1.1680 into focus, the 50 and 200 SMA. Above here, buyers could gain traction towards 1.18, the May high.

             

Gold struggles to rebound as hawkish Fed expectations and Middle East tensions weigh

Gold is struggling to build on a modest rebound after falling to its lowest level since November last year earlier today, as investors weigh a softer core inflation reading against rising geopolitical and inflation risks.

The U.S. dollar is trading slightly lower after yesterday's CPI report showed some easing in underlying inflation pressures. Core CPI, which strips out food and energy prices, rose 0.2% in May, down from 0.4% in April and below the 0.3% forecast.

However, the broader inflation picture remains less encouraging. Headline CPI accelerated to a three-year high of 4.2%, driven largely by a sharp rise in energy prices.

With the Strait of Hormuz still effectively closed and the U.S. carrying out fresh strikes on Iranian targets, oil prices have rebounded from the two-month lows seen earlier this week. Higher energy prices risk keeping inflation elevated and could make it harder for the Federal Reserve to ease policy anytime soon.

As a result, markets continue to expect a hawkish Fed, with investors currently pricing around a 70% probability of a rate hike before the end of the year. Higher interest rates and rising Treasury yields tend to weigh on non-yielding assets such as gold while supporting the U.S. dollar.

Attention now turns to U.S. producer price inflation (PPI), which is expected to rise to 6.4% from 6.0%. A stronger-than-expected reading could reinforce concerns that inflation pressures remain persistent, pushing Treasury yields higher and supporting the dollar.

For gold, that would be a difficult backdrop. While geopolitical uncertainty may continue to generate some safe-haven demand, rising yields and expectations of tighter monetary policy suggest the path of least resistance remains to the downside.

 XAU/USD forecast - technical analysis

The breakdown of the symmetrical triangle pattern and the 200 SMA favors the gold bears. Although the RSI has fallen into oversold territory, downside pressure still dominates, hinting at some consolidation.

Sellers will look to break meaningfully below 4100, the 2026 low, opening the door to 3990, the November low, before attention turns towards 3,800, the round number

Should 4100 support hold, any recovery would first need to rise above the late March swing low and the 200 SMA at 4440. Above here, buyers could gain traction above 4500 and look towards the 50 SMA at 4,600.