Trump-Powell Meeting Keeps Investors Guessing
President Trump’s meeting with Fed Chair Jerome Powell and Treasury Secretary, Steven Mnuchin saw a cautious response from investors.
Trump tweeted that he met with Powell and Mnuchin to discuss monetary policy, trade, and the US dollar. This led to a modest risk-off sentiment in the market. It comes as Trump has been overly critical of Powell’s policies.
ECB Members Express Confidence in Monetary Policy
Amid a lack of any major economic reports, investors turned to the speeches by ECB Members. Chief Economist, Philippe Lane said on Monday that the central bank did not reach the limits of its monetary policy. He said that the central bank had other tools if necessary.
Meanwhile, Vasle, the central bank head of Slovenia said that the ECB’s stimulus was working, noting that growth stabilized in the region.
EURUSD Could Retreat Off the Resistance Level
The euro gained on the back of positive remarks mentioned above and a weaker greenback. Price action is testing the resistance area of 1.1075 and 1.1062.
But, the hidden bearish divergence on the 4-hour chart indicates a pullback. The EURUSD could retreat modestly but declines are limited above the 1.1000 level of support for now.
Brexit Optimism Pushes Sterling to a 6-Month High
The British pound rose to a 6-month high on optimism that the UK will leave the EU with a Brexit deal in hand. This comes as PM Johnson urged fellow party members to back the Brexit deal ahead of the elections.
With the odds in favor of Johnson’s Conservative party winning the re-election bid, it also raises hopes for an orderly departure from the EU. According to the new deadline, the UK is set to leave the EU on the 31st of January 2020.
Can GBPUSD Break Past the Resistance?
The currency pair’s gains have pushed it higher to test the resistance level of 1.2967. This marks the upper end of the corridor between 1.2967 and 1.2865.
A breakout above this level is required to confirm further upside. Alternatively, if the GBPUSD retraces the gains, then watch for a potential right shoulder to form in the evolving inverse head and shoulders patterns at the current levels.
Risk-Off Sentiment Buoys Gold
The markets were trading in a somewhat risk-off sentiment mode on Monday. The US dollar was weaker while safe-havens yen and gold rose. This comes amid a lack of any major economic data or news headlines from the US-China trade talks.
The meeting with Trump and Powell and Mnuchin was seen as the primary reason behind the cautious market sentiment.
XAUUSD Likely to Rebound Higher
The precious metal initially fell to the support area of 1462 before reversing losses. The current momentum could see price testing the 1483 level where resistance could form. A retest of this level will cap the gains while keeping the downside bias open. However, if XAUUSD breaks past the 1483 level, then we expect to see further gains coming along.