EUR/USD suffers from EU political uncertainty
(Arnaud Masset, market analyst)
The US dollar continued to retrace gains on Friday as investor confidence in the strength of the US economy continues to dwindle. This week’s FOMC minutes suggest that the Fed is in no hurry to lift borrowing rates, while on the political front, investors are becoming increasingly impatient to know the details of Donald Trump’s fiscal boost. After testing the 1.05 support level, EUR/USD bounced back to 1.06 on Friday. The currency pair is still trading below its 50dma, suggesting that the momentum remains on the downside. However, a break of that key resistance would open the road toward the next one standing at around 1.0750-1.08.
The upside is however quite limited in EUR/USD due to the highly uncertain political environment stemming from the ongoing French presidential elections. This environment has further capped euro gains against the greenback despite an improving economic outlook in the European Union. Against this backdrop, the risk remains on the downside in EUR/USD.
Gold is showing strong demand
(Yann Quelenn, market analyst)
Things are certainly looking up for the precious metal, which has hit its highest level since November 11th. The bullish pressures on gold are further bolstered by this week’s Fed minutes. We have maintained a dovish stance on the US economy for the past two years and believe that there is further room still for disappointment on the monetary policy front. In our view, the Fed will not raise rates more than once this year and in this regard we believe that financial markets have overestimated the number of rate hikes. The demand for gold is therefore unlikely to stop.
All eyes will soon be on Trump’s upcoming talk in front of congress. So far, no defined plan to increase jobs has been revealed but even IF there is a plan there is nothing that will magically transform the economic situation overnight. This is why we maintain our bullish view on gold. Technically speaking, the road is now wide-open towards $1300 an ounce.