GBPUSD – 1,20 TEST LOOMS AFTER FAILURES BELOW 21-DMA
- GBP/USD capped by 21-DMA last two sessions
- 21-DMA is falling. Logically to put increasing pressure on GBP/USD
- Fed’s Powell key Friday but minutes yesterday favour USD bulls
- Rates are either coming down slower than expected by markets or not at all
- What’s certain is that rates in U.S. will remain far higher than major peers
- A liquid high yielding currency in a zero/negative rate world, will attract
- If GBP/USD breaks 1.2000 and 2017 low @ 1.1983. 2016 low 1.1491 next target
Powell Puts Rate Cut Up For Debate
At an event yesterday, Jerome Powell, the chair of the Federal Reserve, said that the magnitude of the projected rate cut at the upcoming Fed meeting was up for debate. He did, however, indicate that the Fed will definitely be cutting rates as early as July.
Meanwhile, the lack of progress in the US-China trade negotiations also hit the markets. Equities retreated while safe havens such as the yen and gold rose on the day.
Euro Posts Modest Gains on CPI
Inflation data for the eurozone showed that consumer prices edged higher. The headline inflation rate rose 1.3% on the year, beating estimates of a 1.2% increase.
The core inflation rate also nudged higher, rising 1.1%. Meanwhile, the European Parliament confirmed the appointment of Ursula Von der Leyen as the next Chairman of the European Commission, while Christine Lagarde was formally nominated as the next ECB Chairperson.
EURUSD Pares Losses, but Trades Flat
The currency pair recovered from the losses set earlier this week. However, price action continues to trade flat as the pair approaches the support/resistance level of 1.1250. With the new range formed between 1.1250 and 1.1188, we expect price to breakout from this range to establish further direction.
Crude Oil Falls on EIA Inventory Report
WTI Crude oil prices fell after the US. Energy Information Administration reported a higher than expected inventory. US crude oil stockpiles fell 3.12 million. This was more than the estimates of a 3.6 million decline in inventory. The data was shrugged aside as initial news reports indicated that Tehran was dropping its nuclear program, which was later denied.
WTI Breaks Below Key Support Level
The declines in oil prices continue for the third consecutive day. Price broke past the previously established support level near 57.50. While attempting to recover the losses, if resistance forms near this level, we expect oil prices to drop further. The next main support is at the 54.42 level.
Gold Rises to Fresh Six-Year High
The precious metal was once again seen rallying as price touched a new six-year high briefly at 1426 an ounce. The gains came following reports of a lack of progress on the trade talks between the US and China. The US economic data on housing was also disappointing leading to a modest risk-on sentiment.
XAUUSD Forms an Ascending Triangle
0Gold prices edged higher, once again testing the previously established resistance levels near 1423. In the process, price action has formed an ascending triangle pattern. A breakout above the resistance could indicate further gains in the near term. The minimum upside is seen near the 1445 level. To the downside, if the resistance fails, we expect gold to find support off the minor rising trend line.