The US dollar recovered from Monday’s decline, but price action was largely confined to the previous session’s range. Reports that China was willing to buy US agricultural products sent equity markets briefly higher, reflecting the risk sentiment.
However, overall, USD remains rather muted ahead of the ECB meeting. Economic data also picks up with the producer prices and CPI reports coming up later in the week.
Euro Holds Firm as Markets Speculate Easing
The euro held steady on Tuesday. This comes as investors speculate whether the central bank will announce its QE program at the monetary policy meeting this Thursday. Speculation is rife that the central bank could seek more time before committing to a relaunch of QE.
EURUSD Forms a Minor Double Top
The EURUSD establishes resistance near 1.1059, forming a minor double top pattern on the four-hour time frame. A breakout above this level will see the euro rising to 1.1085 as the minimum target. Further gains could push the common currency closer to the main resistance area of 1.1140. To the downside, the support at 1.1016 will remain key. A close below this support could trigger further declines.
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Sterling Steady as Boris Affirms EU Pullout on October 31st
The pound held near recent highs, even as PM Boris Johnson once again reiterated his commitment to pull out of the EU on October 31st. This comes even as lawmakers passed a last-minute law preventing a no-deal Brexit. The UK parliament is suspended for four weeks with investors waiting for further developments on Brexit.
GBPUSD Likely to Consolidate Near Support
The currency pair retreated from recent highs on a modest pullback. However, price is yet to test the support level at 1.2320. As a result, the GBPUSD downside is limited. But a break down below this support could trigger a sharper correction in the GBPUSD currency pair. To the upside, the resistance area of 1.2533 – 1.2511 remains within reach.
Gold Extends to a 4-day Decline
The precious metal continued to fall, extending declines to four consecutive sessions. The precious metal is losing ground amid investor sentiment improving. Furthermore, the strong gains logged by gold previously are also due for a correction. A lack of key fundamentals over the past few days has kept price action subdued. However, with US economic data on tap later in the week as well as the ECB meeting, we expect to see some volatility in the precious metal.
XAUUSD consolidates near lower support
The precious metal is consolidating near the lower support area of 1485. Price action remains somewhat muted near this level. With gold breaking past the initial support at 1508, we expect the sideways range to continue into Thursday’s ECB announcement on monetary policy.