USD Maintains Modest Gains
The US dollar held onto gains as the index struggles to break out from the current highs near 97.50.
Economic data from the United States saw inflation data disappointing.
Headline inflation rose 0.2%, while core inflation rose just 0.1%. Still, the data was well within the estimates.
Euro Continues to Trade Subdued
A lack of any economic data from the eurozone saw the euro trading to the USD flows. The common currency continues to trade soft, as it has done for the past few days.
The consolidation is likely to continue ahead of next week’s ECB monetary policy meeting.
EURUSD Consolidating into a Bearish Flag
Price action in the common currency is consolidating into a bearish flag pattern. This indicates a downside risk. The support area of 1.1100 remains in place for now. But if the bearish pattern is validated, we expect the declines to push through to 1.1072 level eventually.
To the upside, the EURUSD will need to break out convincingly above the 1.1150 resistance level.
Sterling Pares Losses but Downside Risks Remain
The British pound is rebounding following the sell-off from Monday. The declines were set off by dovish remarks from BoE Governor Carney. Although the currency pair is paring losses from Monday, the downside risks remain. EU negotiator Barnier contradicted claims from PM Johnson about the border checks. This remains one of the key points of conflict in the Brexit talks.
GBPUSD Could Rise to Fill the Gap
Price action in the currency pair is somewhat consistent with the bullish divergence on the 4-hour chart time frame. This indicates a minimum upside correction to 1.3068.
Considering that price left an unfilled gap from earlier this week, we expect the gains to be modest in nature. Price action is likely to remain within the 1.3100 and 1.2960 levels in the near term.
Gold Continues to Drift Lower
The precious metal is gradually retracing the gains made from the previous weeks. A lack of economic data and the impending trade deal signing remain one of the biggest cues for the gold prices at the moment.
President Trump is expected to sign the phase one deal sometime after today.
XAUUSD to Hold Near the Support
The precious metal initially bounced off the support level at 1534. Price action could retrace higher, but for the moment, further gains are unlikely.
The support level is likely to hold in the near term. In the event of a breakdown below this level, gold prices could accelerate the decline down to the 1513 region.