David Morrison  |  22/10/2018 09:37
ECB Takes Centre Stage
 
The US dollar continues to be in demand as investors look for safe-havens amid the carnage in global equity markets. On Wednesday the S&P 500 closed 3% lower while the NASDAQ 100 fell close to 4.5% The greenback is also in favour given the positive interest rate differentials between the US and other developed-world currencies.
 
Meanwhile the euro is under pressure after the European Commission flatly rejected the Italian government’s budget proposals. The whole issue regarding Italy’s spending plans has helped to keep the spread of Italian to German 10-year government bonds above 300 basis points for the last week.
 
For the EURUSD, technically there’s some resistance around the 1.1470 to 1.1500 area will be a good selling opportunity while there’s some modest support around 1.1370 to 1.1400
 
But investors are wary of pushing the single currency too far in any direction ahead to today’s ECB meeting and Mario Draghi’s subsequent press conference.
 
At the same time US Durable Good Orders will be released and that will have impact on US treasury yields and Gold as well.
 
As for the British pound, Brexit headlines are driving price action as usual. The short-term trend for sterling dollar is negative especiallly now that support around 1.3000 has been broken.
 
There’s some mild support around 1.2890/1.2900 but if this breaks then a move back towards September lows around 1.2800 is high probability.
 
Gold bulls appear to be taking control now despite the failure to break the 1240 level on Tuesday. Gold is showing a negative correlation with the yield on the US 10 year Treasury note. Investors buy gold and US Treasuries (so yields fall) as safe havens in times of uncertainly. If gold can consolidate above 1220, then another assault on resistance at 1240 looks likely.

Have a great week!

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