Two trades to watch: EUR/GBP, Gold

Fiona Cincotta
By : ,  Market Analyst

  


 

EUR/GBP rises ahead of EZ retail sales & with trouble at Downing Street

EUR/GBP is falling extending losses from the previous session. The euro plunged on recession fears after weak PMI data and on threats of Russian gas supplies slowing.

Today stronger than expected German factory orders are failing to boost the euro. German factory orders rose 0.1% MoM in May after falling -2.7% in April.

Attention now turns to EZ retail sales which are expected to rebound 0.4% MoM in after falling  -1.3% in April.

The European Commission’s quarterly growth forecasts are expected to highlight the deteriorating picture in the region.

Meanwhile, the pound is watching developments in Downing Street as Boris Johnson’s government was thrown into chaos following the resignation of the health secretary and finance minister.

Where next for the EUR/GBP?

EURGBP broke below its multi-month rising trendline yesterday but managed to close above it. The long lower wick suggests that there was little acceptance at the lower price.

Today the price has once again fallen below the support, which combined with the bearish crossover on the MACD is keeping seller’s hopeful of further downside.

Sellers need to break below 0.8540 yesterday’s low to extend the bearish trend.

Buyers will look for a move over 0.8620 the weekly high to extend gains towards 0.8660.

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Gold looks to Fed minutes

Gold tumbled 2.5% yesterday to a 7-month low as the USD soared to a 20-year high on hawkish Fed bets. The late pull back on Wall Street and ease back in the USD failed to inspire gold bulls.

Today the precious metal is licking its wounds as investors look to the Fed minutes. The minutes could shed more light om the trajectory for near-term rate hikes.

According to the CME Fed Watch tool, the market is pricing in an 86.7% probability of a 75-basis point hike in July.

Hawkish minutes could raise the probability of a larger rate hike and drag non-yielding gold lower.

US ISM services PMI will also be in focus and is expected to ease slightly to 54.5 from 55.9.

Where next for Gold price?

Gold broke below its rising trendline support falling to a 7-month low of 1765. The death cross formation (the 50 sma crossing below the 200sma) and the bearish RSI keep sellers optimistic of further downside.

Support can be seen at 1754 the December low a breakthrough here opens the door to 1722 the September low.

Any meaningful recovery needs to retake resistance at 1790 the May low, opening the door to 1807 the June 15 low before exposing the 50 sma at 1840.

 

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