Two trades to watch: EUR/USD, Gold

EUR/USD trades below 1.18 with ECB's Lagarde & US data in focus. Gold looks to US retail sales for direction.

Charts (4)

EUR/USD trades below 1.18, Lagarde & US data in focus

The EUR/USD is edging lower paring mild gains from the previous session. 

The Euro has failed to meaningfully capitalize on weaker than forecast US CPI data earlier in the week. Instead concerns over the rising energy prices in Europe and the German elections ae weighing on the Euro. 

The Fed taper question remains. Retail sales will be in focus. Expectations are that rising prices and weaker consumer confidence could mean another monthly decline in sales of -0.8%.  

Meanwhile jobless claims are expected to tick up slightly to 328k, from 310k. 

The Euro benefited from a more hawkish stance from several policy makers on Wednesday. Investors will look to a speech by ECB President Christine Lagarde to see if a similarly hawkish tone is replicated. 

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Where next for EUR/USD? 

The EUR/USD chart is offering a mixed picture. It trades in a triangle pattern on the four-hour chart. However, the direction of any potential breakout remains unclear. The RSI is broadly neutral and the pair trades below the 50 sma but above the 200sma. 

Sellers could be looking for a breakout below 1.18 the rising trendline of the triangle ad 1.1790 the 200 sma to spark a deeper selloff towards 1.1770 the September low and 1.1740 the low August 27. 

Meanwhile buyers could look for a move over 1.1825 the falling resistance trendline of the triangle to 1.1850 September 14 high and 1.1885 September 7 high. 


Gold looks to retail sales 

Whilst Gold rebounded following the softer CPI report the spike higher was short lived. The softer than expected CPI report supports the view that inflation could be transitory. However, inflation hasn’t weakened sufficiently to fundamentally change the Fed’s position. 

Tapering of bond purchases is still on the cards. The question is when not if. Today’s retail sales data and jobless claims numbers will be watched closely as investors eye macro data for fresh impetus.  

Retail sales are expected to decline -0.8%. A loss in momentum in the economic recovery could push back expectations of the Fed tapering sooner rather than later which could boost gold prices. 

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Where next for Gold prices? 

Rejection at the 200-day moving average has sent gold lower heading towards the lower band of the holding pattern, a pattern which it has been trading in over the past week. The said rejection combined with a slight point lower of the RSI suggests that a break to the downside could be more likely. 

Sellers could be looking for a break below 1780 which could spark a deeper selloff towards 1750.  

Gold chart

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