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Two Trades To Watch: EUR/GBP, Gold

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Technical analysis of Forex market

EUR/GBP falls as UK CPI keeps getting hotter

The pound is edging higher after data revealed that inflation surged higher in November.

UK CPI jumped to 5.1% in November, up from 4.2% in October and well ahead of the 4.7% forecast.

Inflation is well over the BoE’s 2% target. Usually sky high inflation and a strong labour market would guarantee a rake hike by the BoE. However, with Omicron clouding the outlook, the BoE could chose to wait until Feb to raise rates.

Both the BoE and the ECB are due to release their interest rate decisions tomorrow.

Where next for EUR/GBP?

EUR/GBP faced rejection at 0.8595 horizontal resistance, falling trendline resistance and rebounded lower, breaking below the 200 sma but finding support above the 50 sma.

The pair currently trades caught between the 200 sma and the 50sma. The RSI is neutral suggesting.

Buyers will be looking for a move over the 200 sma to restest critical support at 0.8595 for a third time.

Sellers will be looking for a move below the 50 sma at 0.8483, to open the door to 0.8446 and 0.8385 the yearly low.

Gold eyes the Fed

Gold is moving lower ahead of the Federal Reserve interest rate announcement later today.

The Fed is broadly expected to announce the speeding up of the pace at which it tapers bond purchases in an attempt bring surging inflation under control.

Despite uncertainties surrounding Omicron recent data has come in ahead of expectations. PPI is at a record high, CPI is at an almost 40 year high and the jobs market is improving.

The Fed kicked off its tapering programme in November at a pace of $15 billion per month. It wouldn’t be a surprise if the Fed upped this to £30 billion.

Where next for Gold prices?

Whilst Gold holds above a rising trendline support dating back to mid-August, more recently Gold has been in consolidation mode.

The upside has been capped by strong resistance around 1792 the confluence of the 50 & 100 sma and the weekly high. Beyond here 1800 round number and 1807 the late November high could offer some resistance.

The down side is capped by 1767 the December 3 low, which happens to be the rising trendline support. A break below this level and 1767 the December low could spark a move toward 1760 the November low and targeting 1720 the October low.