European Open: EUR/USD eyes break of 1.06, potential bull flag on gold

The dollar is on track to break a 6-week winning streak, and the euro and gold may present a couple of opportunities around that theme.

Gold 4

Asian Indices:

  • Australia's ASX 200 index rose by 73.9 points (1.05%) and currently trades at 7,138.40
  • Japan's Nikkei 225 index has risen by 318.1 points (1.2%) and currently trades at 26,720.94
  • Hong Kong's Hang Seng index has risen by 368.95 points (1.83%) and currently trades at 20,489.63
  • China's A50 Index has risen by 237.18 points (1.8%) and currently trades at 13,439.25

UK and Europe:

  • UK's FTSE 100 futures are currently up 95.5 points (1.31%), the cash market is currently estimated to open at 7,398.24
  • Euro STOXX 50 futures are currently up 41 points (1.13%), the cash market is currently estimated to open at 3,681.55
  • Germany's DAX futures are currently up 157 points (1.13%), the cash market is currently estimated to open at 14,039.30

US Futures:

  • DJI futures are currently up 211 points (0.68%)
  • S&P 500 futures are currently up 135.75 points (1.14%)
  • Nasdaq 100 futures are currently up 33 points (0.85%)


Asian market in the green thanks to PBOC lending rate cut

China cut their 5-year mortgage reference rate for the second time this year, and by mech more than expected, to support the housing sector. The 5-year loan prime rate (LPR) was cut by -15 bps from 4.6% to 4.45%. Earlier this week Chinese Premier Li called for policy adjustments and Xi Jinping’s top economic advisor publicly supported helping the tech sector. Major benchmarks across Asia were all in the green, led by China.


EUR/USD pulls back into support overnight


The US dollar retraced against some of yesterday’s losses overnight, which pushed the Australian dollar down to 70c (a key level to monitor this session) and EUR/USD down to a key zone of support. But it likely won’t be enough to help the US dollar escape breaking a 6-week running streak by the close of today.

We can see on the hourly chart that a strong bullish trend is forming on EUR/USD. Yesterday’s rally petered out around 1.0600 before pulling back to the 38.2% Fibonacci retracement and weekly R2 pivot. The market is now trying to form a base and we suspect it can rally from current levels and have another crack at 1.0600. A break or hourly close beneath 1.0550 invalidates the near-term bullish bias and suggests a deeper correction is underway.


Potential bull flag on gold


I noted yesterday how yields were looking toppy, which itself was based on an observation that the 10-year bond had rallied form a key support level and bears had closed out gross longs. This proved to be beneficial for gold yesterday which closed at a 10-day high. For the rally to advance today, we’d like to see the US dollar and yields continue to weaken.

As for gold, a bullish trend has developed on the hourly chart and probed trend resistance. A potential bull flag is forming above the weekly pivot point and 100-hour eMA, and the pattern projects a target around 1875. Although 1858 and 1865 make likely interim targets.


How to start gold trading


FTSE: Market Internals


FTSE 350: 4070.24 (-1.82%) 19 May 2022

  • 57 (16.29%) stocks advanced and 287 (82.00%) declined
  • 3 stocks rose to a new 52-week high, 39 fell to new lows
  • 23.14% of stocks closed above their 200-day average
  • 98.29% of stocks closed above their 50-day average
  • 10.86% of stocks closed above their 20-day average


  • + 10.16% - HomeServe PLC (HSV.L)
  • + 5.20% - Darktrace PLC (DARK.L)
  • + 4.50% - Ferrexpo PLC (FXPO.L)


  • -12.38% - Royal Mail PLC (RMG.L)
  • -11.03% - 3i Group PLC (III.L)
  • -7.81% - Pagegroup PLC (PAGE.L)


Up Next (Times in BST)

  • BOE’s Chief economist speaks at 08:30.
  • ECB member Lane speaks at 11:00.




How to trade with

Follow these easy steps to start trading with today:

  1. Open a account, or log in if you’re already a customer.
  2. Search for the pair 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. 

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 or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account