The US dollar index was seen posting solid gains on Wednesday. The recovery comes after the index was trading rather muted in the previous sessions. Economic data on the day saw the US producer prices index rising more than expected. Headline PPI rose 0.1% on the month while core PPI grew 0.3%.
Euro Retreats Ahead of ECB Meeting
The euro currency extended declines on Wednesday ahead of the ECB monetary policy meeting. The initial euphoria of a possible QE announcement faded as reflected in the bond markets. Yields on the German bonds rose after hitting record lows on Wednesday. The expectations are for the ECB to announce a cut to the key deposit rate but the size of the QE program remains questionable.
EURUSD Flirts Near Yearly Lows
The currency pair’s declines see a possible move back to the previous lows. The euro currency is trading close to September 3 lows of 1.0925. This comes following a hidden bearish divergence on the daily chart. Watch for a test of minor support at 1.0971. A breakdown below this level could see fresh lows coming off the common currency.
Boris Johnson’s Brexit Plans Hits Legal Hurdles
The Pound sterling was muted as Scottish court rules Parliament suspension unlawful. The UK Prime Minister’s decision to suspend the parliament was deemed unlawful by a Scottish court. The ruling sets the stage for a showdown between the UK government and the opposition. Lawmakers ruled that Boris Johnson’s decision to suspend the parliament was done in order to prevent them from debating Brexit.
GBPUSD Trades Flat for the Moment
The currency pair was seen closing with a doji pattern for two consecutive days. This comes following a bullish engulfing candlestick pattern formed earlier on Monday. The upside looks limited for the moment. Price will test the resistance area of 1.2406 ahead of a correction lower.
Gold Prices Hold Steady Ahead of ECB Meeting
The precious metal was recovering off the declines from earlier this week. This comes as investors await the ECB to unveil its monetary policy plans. The main topic will be the ECB’s QE plans and its size. For the moment, markets remain mixed on the size and the scope of the bond purchase program.
XAUUSD Finds Support. Can it Bounce Higher?
Gold has managed to established support at 1485 as expected. Price action will remain flat in the near term within the levels of 1485 and 1508. A breakout from this range will set the direction in the near term. To the upside, watch for a potential lower high forming. This will indicate a possible start to a steeper correction.