Two trades to watch: EUR/GBP, Gold

EUR/GBP rises ahead of eurozone inflation

EUR/GBP is heading higher ahead of eurozone inflation data; data which could provide more clues over what to expect from the December ECB meeting.

Inflation is forecast to ease to 10.4% YoY in November, down from 10.6% in October. Recent data from eurozone countries suggests that peak inflation may have passed. German inflation fell to 11.3% YoY and Spanish inflation fell to 6.6%.

Cooler inflation could offer support to ECB officials who are in favour of slowing the pace of interest rate hikes in December to 50 basis point. However, ECB President Lagarde warned that inflation could still move higher.

This week is a quiet week on the UK economic calendar. The pound is struggling for direction, leaving the euro in the driving seat.

Where next for EUR/GBP?

Having found support at 0.8580 EUR/GBP has pushed higher, recapturing the 100 sma and is testing the falling trendline resistance around 0.8650. The RSI is neutral, proving few clues.

Buyers will look for a rise over the multi-month rising trendline resistance to bring 0.87, the early November low and expose the 50 sma at 0.8725. Above here 0.8825 the November high comes into play.

Should the sellers successfully defend the rising trendline resistance, a break below the 100 sma at 0.8620 could see a test of 0.8580 the November low. A break below here creates a lower low, opening the door to 0.8515 the August 22 high.

Gold rises ahead of US data & Powell’s speech

Gold is rising, extending gains from the previous session as the USD moves lower and Jerome Powell’s speech moves into focus.

Gold has risen over 7% so far this month in its best monthly performance in two and a half years on optimism that the US central bank could start to slow the pace of rate hikes.

Will Federal Reserve Chair Jerome Powell build expectations of a dovish pivot? Or with inflation still 4 times the Fed’s target will he dampen those bets? Fed speakers this week have, to varying degrees sounded hawkish.

In addition to Jerome Powell, US Q3 GDP data and ADP private payroll figures are due ahead of Friday’s NFP.

Where next for Gold prices?

After strong gains at the start of the month Gold has been trading in a sideways pattern, capped on the upside by 1788 the monthly high and on the lower side by 1732, last week’s low. The RSI is over 50 so keeps buyers hopeful of further upside while it remains out of overbought territory.

Buyers will look for a rise over 1763 last week’s high to extend gains to 1788. A rise above here creates a higher high and open the door to 1808 the August high.

Sellers could look for a break below 1733 to bring 1700 round number into play and 1694the 50 sma.