Markets were seen rallying modestly after days of uncertainty. The US dollar extended declines for a second consecutive day. The trade gap narrowed in July on the back of weakness in the manufacturing sector. The data underlined the slowing trend among investments in the US. Trade deficit in goods and services fell 2.7% on the month. Traders will be looking at today’s private payroll figures.
Euro Rises on the Back of a Weaker Dollar
The euro currency logged gains on Wednesday as the US dollar turned weaker. Economic data from the eurozone comprised of the retail sales report. Retail sales fell 0.6% on the month in August, matching estimates. Previous month’s data was revised higher to show a 1.2% increase. ECB chief in waiting, Christine Lagarde gave her speech where she pledged to review the ECB’s monetary policies.
EUR/USD Testing Resistance
The modest rally in the currency pair saw the euro testing the previously breached support level of 1.1030. It is possible for EUR/USD to consolidate sideways. But this is subject to the resistance level holding up. But for the moment, the declines look to be done. Unless the common currency extends losses below the previously established lows, we expect to see a sideways range.
UK Political Uncertainty Keeps Volatility Alive
Rapid developments from the UK on the political front saw the sterling logging gains. The British PM Boris Johnson was met with resistance as lawmakers scramble to block a no-deal Brexit. This is positive for the pound sterling traders as it lowers the odds of a hard Brexit. Lawmakers are also floating the idea of extending the Brexit deadline to January 31st. The news sent GBP to post gains for a second day after slipping to historic lows briefly on Tuesday.
GBP/USD at Risk of a Short-Term Correction
Price action in the currency pair currently shows a hidden bearish divergence. The Stochastics oscillator forms a higher high against a lower high in price. This could result in prices snapping back. GBP/USD can test the lower support at 1.2082 in the near term. If the declines stall at this support, there is scope for GBP/USD to maintain the upside bias.
Gold Turns Flat as Risk Sentiment Improves
The precious metal was trading flat near six-year highs on Wednesday. Improving investor sentiment saw the safe-haven staying muted. The positive reaction came amid receding tensions in Hong Kong. But the China and US trade narrative still remains in the background. However, the lack of new remarks or policies from either side gave room for investors to take on more risk.
XAUUSD Likely to Hold Out Near Current Highs
Price action in XAUUSD could remain in a holding pattern ahead of key economic releases today. The ADP private payrolls report is due and could be a precursor to Friday’s jobs report. The fact that gold prices are trading near 1544 level indicates that this could turn into resistance in the short term.
