Two trades to watch: GBP/USD, Gold
Fiona Cincotta June 16, 2021 7:59 AM
USD/USD retakes 1.41 after stronger than forecast CPI data. All eyes now to the Fed. Gold attempts to rise after 3 straight days of decline,but next directional move depends on Jerome Powell & Co.
GBP/USD retakes 1.41 after strong CPI data
UK CPI jumped 0.6% MoM in May, ahead of the 0.3% forecast and 0.3% in April. Annually CPI rose to 2.1%, up from 1.5% and ahead of the 1.8% forecast.
Inflation is now above the BoE’s 2% target, raising the chances of the central bank reining in monetary policy by dialing back bond purchases.
The data comes following upbeat labour market data in the previous session, which failed to boost the Pound.
Brexit jitters and the delay of lifting final lockdown restrictions undermined demand
Attention now turns to the Fed’s monetary policy announcement. A less dovish Fed and the introduction of taper talk could boost the US Dollar and drag on the pair.
Where next for GBP/USD?
GBP/USD hit a two month low of 1.4033 in the previous session, but managed to pick up into the close, settling at 1.4088. This is the first time that the pair settled below 1.41 since mid-May.
The pair trades below its descending trendline dating back to early June. It trades below its 50 EMA but has retaken its 200 EMA.
The MACD appears to be forming a bullish crossover keeping the buyers hopeful.
GBP/USD has jumped higher post CPI. It has retaken its 200 EMA and is heading towards its 50 EMA at 1.4120 a move above here could bring the pair to test the descending trendline resistance at 1.4160.
Failure to retake the 50 EMA could see the the pair retest 1.4080 the 200 EMA and horizontal support before targeting 1.4030.
Gold looks to Powell for direction
Gold is attempting to climb higher after 3 straight days of declines which saw it test $1850.
Gold came under pressure amid a stronger US Dollar on expectations that the Fed could start introducing a gradual move towards tightening monetary policy.
Heading towards the Fed announcement the US Dollar has stalled and gold is clawing higher.
Golds next move depends on the Fed’s outlook on the economy and where policy goes from here.
Any taper talk from the Fed could send the US Dollar higher and weigh on gold.
Where next for Gold?
Gold fell through its ascending trendline at the start of the week. It found support yesterday around 1850, horizontal support and the 50 EMA.
The RSI is supportive of further downside, with risks remaining to the downside.
Beyond the 1850 level, appears support at 1830 from the descending trendline from August last year and then at 1812 the 200 EMA and horizontal support.
All in all these levels create an area of strong support. If these levels breached and the area of support broken, this would mark a considerable shift in the technical outlook for Gold.
On the upside, any recovery would need to retake horizontal resistance at 1775 ahead of the ascending trendline resistance at 1890.
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.