EUR/USD forms head and shoulders pattern ahead of ECB decision
European stocks bounced back even as worries of rising coronavirus cases remained. In the past few weeks, the number of cases in important economies like India and Brazil have led to a sharp decline in global stocks. In the UK, the FTSE 100 rose by 0.30% as IAG and Rolls-Royce led the rally. Energy stocks like BP and Royal Dutch Shell also rebounded. In Germany, the DAX index rose by 0.13% while in France, the CAC 40 rose by 0.30%. Hugo Boss shares jumped after media reports said that LVMH was considering a bid. Meanwhile, in the United States futures tied to the Dow Jones and Nasdaq 100 erased some of their earlier losses ahead of earnings from companies like Verizon, Anthem, and NextEra Energy.
The British pound retreated slightly as the market reacted to the latest UK inflation numbers. According to the Office of National Statistics (ONS), the headline consumer price index (CPI) rose from 0.1% in February to 0.3% in March. This pushed the annualised gain from 0.4% to 0.7%, lower than the expected 0.8%. In the same period, the core CPI rose from 0.9% to 1.4%, which is slightly below the BOE’s target of 2.0%. Further data revealed that the retail price index (RPI) increased from 1.4% to 1.5% while the PPI input and output rose by 1.3% and 1.9%, respectively.
The Canadian dollar wavered slightly after the latest Canadian inflation numbers. The data showed that the headline consumer inflation rose from 1.1% to in February to 2.3% in March. The core CPI, which excludes the volatile food and energy products, rose from 1.2% to 1.3%. These numbers show that the country’s economy is starting to gain momentum, in part because of higher oil prices and the stimulus in the United States. The numbers came a few hours before the Bank of Canada is set to publish the latest interest rate decision.
The XAU/USD pair has been in a strong upward trend lately. The pair rallied from 1,678 in March to 1,790 this week. On the four-hour chart, the price is slightly below this week’s high. It has also moved above the 25-day and 15-day moving averages and the important support at 1,758. It is also between the middle and upper lines of the Bollinger Bands. Therefore, the pair may keep rebounding as bulls attempt to move above the highest level this week.
The GBP/USD pair was in a tight range today after the UK inflation numbers. On the hourly chart, the price has formed a bearish flag pattern that is shown in pink. It has also moved slightly below the 25-day moving average. The Relative Strength Index (RSI) has moved close to the oversold level. It is also slightly above the important support at 1.3918. Therefore, the pair may soon breakout lower as bears target the 38.2% Fibonacci retracement level at 1.3880.
The EUR/USD pair declined to an intraday low of 1.2000, which is substantially below this week’s high of 1.2080. On the hourly chart, the price is between the ascending channel shown in pink. It has also formed a head and shoulders pattern, which is usually a bearish signal. Therefore, the pair may keep falling as bears target the lower side of the channel at 1.1983.