Two transactions to watch: EUR / USD, gold
EURUSD turns to Fed
EURUSD stabilizes after falling 0.23% in the previous session. The weak euro zone manufacturing PMI has hit the euro. Data revealed that plant activity slowed to an 8-month low.
Today, all eyes are on the Fed. The US central bank is expected to reduce its bond purchases. Investors will be more interested in what the Fed has to say about inflation and the timing of the next rate hike. Could this be a case of buying the rumor selling the fact?
Also watch the ECB Christine Lagarde who is due to speak. Continued defense of the bond buying program could highlight central bank divergence.
Where next for EUR / USD?
EURUSD was rejected at the 50 sma and downtrend line resistance at the end of last week. The pair fell to a low of 1.1535 and tried to rally. However, the rally encountered resistance to sma 20 at 1.16.
Buyers will need to resume on 20 sma to open the door at 1.1665. A move above here could expose the 50 sma and allow another attempt on the resistance of the descending trendline.
On the downside, the week’s low at 1.1550 may offer support ahead of last week’s low at 1.1535.
Will the Fed Boost Gold?
Gold is down for a second straight session ahead of the Fed’s announcement.
Gold fell on Tuesday as the US dollar surged and Treasury yields surged higher as part of a repositioning as the FOMC began.
Today, gold is expanding its decline as the US dollar continues to rise. While the decline is pretty much a given, comments on rate hike expectations are likely to be the main driver.
If the Fed pushes back market expectations for a rate hike in mid-2022, gold could recover.
Before the Fed’s announcement, there is also a lot of US data, including the ADP private payroll figures and the ISM non-manufacturing PMI. However, data will play the second fiddle to the Fed.
What next for gold prices?
Gold appears to be trading in a symmetrical triangle pattern. The price is trading towards the lower band of the model. It has fallen below its 100 sma and is currently testing its 50 sma. The RSI is neutral.
A break below the sma 50 at 1780 and the lower band of the symmetrical triangle at 1778 could cause a larger drop to the mid-October low of 1760 and the October low of 1746. Beyond , the low of September of 1724 comes into play.
On the other hand, if the triangle’s support holds, the price could rebound higher towards the sma 200 to 1791. A breakout above here could prompt a move towards the round number 1800 and 1805 the upper band of the triangle. .