Two trades to watch: EUR/USD, Gold

EUR/USD edges towards 1.550 with CPI data in focus

EUR/USD is edging higher on Wednesday, paring losses from the previous session.

Fed President of Cleveland Loretta Mester suggested that a 75 basis point rate hike was still possible for upcoming meetings, which lifted the USD.

Today it’s all about inflation. German CPI confirmed the preliminary reading of 7.4% YoY in April, rising from 7.3% in March.

This comes hot on the heels of Bundesbank President Joachim Nagel saying that he will push for a July rate hike.

Could momentum be building for a July rate hike? ECB’s Christine Lagarde is due to speak later, in addition to several other ECB officials.

US CPI data later will also be the driving force. Cooling CPI could lift the pair.

Learn more about inflation

Where next for EUR/USD?

EUR/USD has been consolidating since the end of April, capped on the lower band by 1.0470, the 2022 low, and on the upper band, by 1.0640, the May high.

The RSI suggests that there could be more downside to come while it remains out of oversold territory.

Sellers could look for a move below the round number 1.05 to test 1.0470. A break out below creates a lower low and brings 1.0360, the January 2017 low, into target.

A weak US CPI print could help the pair above 1.06 and over 1.0640 to recapture the 20 sma, which the price has broadly traded below since the end of February.

Gold look to US inflation data for its next move

Gold prices have been trending lower over the past three weeks, hitting a three-month low yesterday.

A surging USD and hawkish Fed bets have weighed on the precious metal. The USD has been the safe haven of choice amid the fallout from the Russian war and China’s strict zero-COVID policy.

All eyes are on US CPI data today, which is expected to show that consumer prices rose to 8.1% YoY, down from 8.5% in March. This would mark the first slowdown in US inflation since August 2021.

Core CPI is also expected to soften to 6%, down from 6.5% in March.

Cooling inflation is likely to temper hawkish Fed expectations, which could help gold bulls push the non-yielding precious metal higher.

Where next for Gold prices?

Having fallen below the rising trendline support dating back to the end of last year, Gold prices are currently finding support from the 200 sma. The RSI is supportive of further downside.

Sellers will be looking for a close below the key 200 sma at 1837 in order to extend the bearish trend towards 1820 February 10 low and 1800 round number.

If the 200 SMA holds, buyers will look for a move over 1850, last week’s low, ahead of 1865, this yesterday’s high ahead of 1900.