GBP/USD struggles despite CPI surprising to the upside. Gold pressurised by reflation trade.
Despite the upbeat CPI data GBP/USD struggles under US Dollar strength after US Treasury yields spiked.
Downside might be limited given the optimism surrounding the strong UK vaccine rollout and plans to lift covid restrictions.
Attention will now turn towards US retail sales and FOMC minutes for clues on subsequent steps the Fed could take and whether the reflation trade has merit.
After hitting a fresh 34 month high at 1.3950 on Tuesday, GBP/USD eased lower on USD strength.
GBP/USD remains on the rear foot, although has picked up off the lows within the early European session.
On the 4 hour chart, GBPUSD trades in an ascending channel pattern dating back to early February. the worth is currently testing the lower band of the channel at 1.3870 and therefore the confluence of 20 sma.
A break through support at this level could see 1.3850 tested before the 50 sma at 1.3820.
Given that the RSI is neutral a move beyond here appears unlikely for now.
Should the worth fail to interrupt through the lower band of the channel, resistance at 1.3950 before the key 1.40 psychological level are going to be the targets for the bulls.
Gold trades struggling sub $1800, overwhelmed by the spike in treasury yields within the revival of the reflation trade.
With more US fiscal stimulus coming and optimism of a vaccine led economic recovery US treasury yields hit the very best level since February 2020.
Higher returns on US debt hits demand non-yielding gold
Attention will now address US Retail Sales and therefore the minutes from the newest FOMC meeting for direction.After 5 straight days of declines, Gold struck $1786 overnight an almost two week low. At the time of writing it’s just eased up slightly back over $1790, but the trail of least effort remains southwards
Gold trades comfortably below its 20 & 50 sma on the daily chart and below a descending trendline dating back to mid-August showing a longtime bearish trend.
The RSI is supportive of further downside given it’s below 50 but still how from 30 the oversold level.
Immediate resistance are often seen at $1785 the monthly low with further support seen at $1765 December’s low. A meaningful move beyond this level could see $1748 June 29th low.
A pullback could see Gold plan to break above 20 sma at $1830. during a break above this level, bulls would be trying to find validation from horizontal support at $1843 before testing $1853, the convergence of the 50 sma with the descending line .