Following a rather volatile start to the week, the US dollar traded flat on Tuesday. Economic data remains sparse. The US Richmond manufacturing index rose to 1 from -12 previously. This was slightly better than the forecasts.
However, the regional manufacturing index signals a larger slowdown in the sector. Meanwhile, the Conference Board’s consumer confidence report showed that the index fell slightly to 135.1 from 135.8 previously.
ECB VP Says Policy Not Market Dependent
ECB Vice President Guindos said on Tuesday that the monetary policy of the ECB will be focusing on the economy and not the markets. His comments come ahead of the September 12 ECB meeting. The central bank has all but signaled its intentions to relaunch its QE program including possible rate cuts as well. The euro was however muted to comments while maintaining a downside bias.
EURUSD Retests the Descending Wedge Breakout Level
The common currency quickly erased the gains made over the past few days. Price action is back, hovering near the descending wedge breakout level of 1.1098. If the EURUSD loses this handle, we expect to see further declines along the way. The next downside target is in the 1.1030 region.
Pound Maintains Bullish Bias
The British pound maintained the bullish bias on Tuesday. This comes amid EU President Jean-Claude Juncker’s comments. Juncker said that the no-deal Brexit scenario was entirely up to the UK. The negotiations on Brexit continue to remain in a deadline as the October 31st deadline looms closer.
GBPUSD Likely to Correct to Lower Support
Cable is likely to see some near-term correction. This comes as the support area of 1.2170 remains untested. For further upside gains, the GBPUSD needs to establish support to maintain the bullish bias. The 4-hour chart shows a bearish divergence forming, with the Stochastics forming a lower high, while there is a hidden bearish divergence on the daily chart time frame.
Gold Advances Gains Amid a Quiet Session
Gold prices rose sharply once again on the day on Tuesday. The gains come as China’s Premier said that he was not aware of any calls made to Trump. President Trump claimed that China wanted to get back to negotiating the trade deal. The confusion kept the market sentiment in check.
Is Gold on the Verge of Forming a Top?
The recent gains in the precious metal are showing signs of exhausting momentum. Gold prices have rebounded in the short term. But unless we see a strong breakout, it is unlikely that the precious metal will have further room to run. The Stochastics oscillator is currently signaling a possible easing of the momentum. The initial support at 1508 will be key to the downside.