Two Trades To Watch: EUR/GBP, Gold - Tuesday, June 14

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EUR/GBP digests UK jobs data & looks to German ZEW economic sentiment numbers

EUR/GBP rose for a third straight session yesterday after data showed that the UK economy unexpectedly shrank for a second consecutive month.

Today the pair is holding steady after UK jobs data showed that the unemployment level unexpectedly ticked high to 3.8%, up from 3.7%.

The claimant count fell by -19.7k less than expected the -42.5k expected. Meanwhile, wages rose 6.8%, down slightly from the 7% in March, but remain elevated, highlighting the challenge that the BoE faces when it meets on Thursday.

Meanwhile, German CPI was upwardly revised to 0.9% MoM, up from 0.8%. The ECB has signaled that it will hike interest rates in the July meeting.

Looking ahead, German ZEW economic sentiment data is expected to show an improvement to -27.5, up from 34.3. If realized this will mark the third straight month of improving economic morale.
 

Where next for the EUR/GBP?

EURGBP has made several attempts to break above 0.86. The pair continues to trade above its 20& 50 sma, the RSI also supports further upside. However, buyers need to break above 0.86 to extend the bullish trend toward the 0.8620 2022 high.

On the downside, support can be seen at 0.8530 at yesterday’s low and 0.8525 at the 20 sma. It would take a move below 0.8490 to create a lower low.

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Gold steadies after a steep selloff

Gold lost over 3% yesterday on fears of a more hawkish Federal Reserve. After Friday’s unexpected ruse in US inflation, the market started to price in a 75 basis point rate hike in June, which sent US stocks into a bear market, the USD surged higher on safe-haven flows, pulling gold prices lower.

According to the CME Fed watch tool, a 75 basis points rate hike has been fully priced in for the June meeting, up from 4% just a week earlier.

Today, Gold is edging higher as Treasury yields retreat and attention is on US PPI data which is expected to show a slight tick lower to 10.9% YoY, down from 11%. Hotter than expected inflation could pull gold lower.
 

Where next for Gold prices?

Gold prices failed at the rising trend line resistance and the 50 sma and fell lower, breaking below the 20 sma before finding support at 1810. The RSI remains below 50 supporting further downside.

Any recovery will first look to attack resistance at 1830 ahead of the 20 sma at 1848 and the rising trendline resistance at 1880.

(Click on image to enlarge)