Two trades to watch: GBP/USD, Gold

GBP/USD struggles despite CPI surprising to the upside. Gold pressurised by reflation trade.

Gold 2

GBP/USD struggles despite inflation surprising to the upside

Despite the upbeat CPI data GBP/USD struggles under US Dollar strength after US Treasury yields spiked.

Downside could be limited given the optimism surrounding the strong UK vaccine rollout and plans to lift covid restrictions.

Attention will now turn towards US retail sales and FOMC minutes for clues as to the next steps the Fed could take and whether the reflation trade has merit.

GBP/USD technical analysis

After hitting a fresh 34 month high at 1.3950 on Tuesday, GBP/USD eased lower on USD strength.

GBP/USD remains on the back foot, although has picked up off the lows in the early European session. 

On the 4 hour chart, GBPUSD trades in an ascending channel pattern dating back to early February. The price is currently testing the lower band of the channel at 1.3870 and the confluence of 20 sma. 

A break through support at this level could see 1.3850 tested ahead of the 50 sma at 1.3820. 

Given that the RSI is neutral a move beyond here appears unlikely for now.

Should the price fail to break through the lower band of the channel, resistance at 1.3950 ahead of the key 1.40 psychological level will be the targets for the bulls.

Learn more about trading forex.



Gold pressurized by reflation trade

Gold trades under pressure sub $1800, overwhelmed by the spike in treasury yields in the revival of the reflation trade.

With more US fiscal stimulus coming and optimism of a vaccine led economic recovery US treasury yields hit the highest level since February 2020.

Higher returns on US debt hits demand non-yielding gold

Attention will now turn to US Retail Sales and the minutes from the latest FOMC meeting for direction.

Gold technical analysis

After 5 straight days of declines, Gold struck $1786 overnight an almost two week low. At the time of writing it has just eased up slightly back over $1790, but the path of least resistance remains southwards

Gold trades comfortably below its 20 & 50 sma on the daily chart and below a descending trendline dating back to mid-August showing an established bearish trend.

The RSI is supportive of further downside given it is below 50 but still some way from 30 the oversold level.
Immediate resistance can be seen at $1785 the monthly low with further support seen at $1765 December’s low. A meaningful move beyond this level could see $1748 June 29th low.

A pullback could see Gold attempt to break above 20 sma at $1830. In a break above this level, bulls would be looking for validation from horizontal support at $1843 before testing $1853, the convergence of the 50 sma with the descending trend line.

Learn more about trading gold.



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