Market Analysis

The euro is gaining ground

FOREX

The euro is gaining ground against the US dollar during early Friday trading, following a sharp decline in Treasury yields. Despite the impressive US economic data that showed both retail sales and unemployment figures exceeding expectations, the greenback remained subdued, with the markets giving a clear sign that they are taking the Fed’s word at face value. The Fed has been hammering-out a dovish message that for a while wasn’t taken seriously by many investors, who believed that inflationary pressures would force the central bank to anticipate the tapering of its current accommodative policies. However, that is no longer the case, as illustrated by the recent closing out of large short positions on Treasuries. This scenario is weighing down on the dollar, while also providing support to the euro due to the narrowing of the yield differential between the two currencies and the positive growth outlook for the global economy that is also positive for the single currency.

Ricardo Evangelista – Senior Analyst, ActivTrades

Source: ActivTrader

 

GOLD
US Treasury yields are going down, pulling down the dollar. In this scenario, it’s little surprise that gold has managed to break up the resistance at $1,750, a move that confirms the improving market sentiment towards gold. From a technical point of view, the climb above $1,750 represents a positive signal, as bullion continues to recover momentum, confirming the clear inverse relationship with US Dollar and Treasury yields. There could be space for further recoveries, with a first target the resistance zone at $1,815, while in the medium-term gold could rise to $1,865-$1,870, if the trend continues.

Carlo Alberto De Casa – Chief analyst, ActivTrades