EUR/GBP consolidates in familiar range ahead of ECB rate announcement. Gold looks to US CPI for clues over the Fed's next move.

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EUR/GBP consolidates ahead of ECB rate decision

The ECB is expected to keep rates unchanged at 0.0% and the PEPP bond purchase program unchanged at €1.85 trillion. 

COVID cases are falling and economies re-opening. But data has been mixed. PMIs were upbeat but retail sales and German ZEW sentiment missed the mark. 

The ECB upped the pace at which it purchased bond in March. The central bank could ease the purchase pace back to pre-March levels. Quarterly projections will be in focus. 

Meanwhile, GBP is digesting rising tensions between UK & EU over the Northern Ireland protocol. Rising COVID cases could also mean that the final stage of re-opening in delayed. 

Where next for EUR/GBP? 

After falling steeply across the first three months of the year, EUR/GBP is in a period of consolidation awaiting fresh direction. 

The current range is capped on the upside by 0.8640 and the lower band by 0.8560.  The RSI is sitting around 50 in a neutral bias. The pair trades below the 100 sma keeping the sellers hopeful. 

Any move higher would need to retake 0-.8640 the 50 sma and the horizontal resistance to open the door to 0.8675 and high May 25 and then 0.8720. 

Sellers will be looking for a move below 0.8560 for a deeper selloff towards 0.8470 (FXE, FXB). 

Gold looks to CPI for clues over the Fed's next move

Gold is heading mildly lower for a third straight day ahead of the all important ECB meeting and US CPI data.  

US CPI is expected to rise to 4.7% in May, up from the shock 4.2% in April and the fastest rise in inflation since 1993. 

US CPI could provide further clues as to the Fed’s monetary policy path amid expectations of tapering and therefore provide clues as to where gold goes from here. 

CPI rising well above expectations could give the Fed more reason to tighten policy earlier which could lift yields and the USD and drag on the precious metal. 

Where next for Gold prices? 

Gold has formed a series of lower highs since the start of the month. It trades below its descending trend line from that date. The 20 sma also crossed below the 50 sma in a bearish signal last week. 

The RSI is supportive of further downside whilst it remains out of overbought territory. 

However, ascending trendline dating back March, keeping the longer term uptrend in place. 

A break below this week’s low at 1880 could see the ascending trend line support tested at 1775. A break below this level could spark a deeper selloff. 

Any recovery would need break through 1896 the 50 sma and 1900 round number and the descending line in order to target 1915 the June 1 high (GLD).