While economic data will provide the Dollar and the Pound with direction, COVID-19 and chatter on stimulus from Capitol Hill will remain key drivers.
At the time of writing, the Aussie Dollar was up by 0.01% to $0.7714, while the Kiwi Dollar was down by 0.06% to $0.7198.
The Japanese Yen was down by 0.02% to ¥103.77 against the U.S Dollar.
For the EUR
It’s a particularly quiet day ahead on the economic calendar. While it’s a busy week on the economic calendar, there are no material stats due out of the Eurozone to provide the EUR with direction.
The lack of stats will leave the EUR in the hands of COVID-19 news updates from the start of the week.
With the EU facing a marked shortfall in vaccine supplies, vaccination rates will likely remain on the low side.
A continued spike in new COVID-19 cases may force governments to enforce stricter restrictions to curb the spread of the virus. Any such moves would weigh further on the EUR.
At the time of writing, the EUR was up by 0.03% to $1.2143.
For the Pound
It’s a relatively busy day ahead on the economic calendar. December claimant count and November employment change and unemployment rate will be in focus.
With the UK reintroducing lockdown measures in late December, expect the claimant count to have the greatest impact.
Wage growth figures for November are also due out but would likely have a muted impact on the Pound.
Away from the economic calendar, COVID-19 infection and vaccination rates will also influence. A continued rise in vaccination rates and a fall in infection rates would be Pound positive.
Once concern will be the more infections and possibly more deadly strains and whether existing vaccines are effective.
At the time of writing, the Pound was up by 0.01% to $1.3676.
For the USD
It’s a relatively quiet day ahead on the economic calendar. January consumer sentiment figures are due out later today.
Expect Dollar sensitivity to the numbers. While stimulus hopes are positive, the continued rise in new COVID-19 cases and dire labor market conditions are negatives.
Vaccination rates have been on the rise over the last week. Coupled with a sizeable stimulus package, this should support a more optimistic outlook towards the economic recovery. Any negative updates from Capitol Hill would test market risk appetite.
GBP/USD settled below the support level at 1.3665.
British Pound Is Losing Ground Against U.S. Dollar
GBP/USD declined below the support level at 1.3665 and is moving towards the next support level at 1.3625 while the U.S. dollar is gaining ground against a broad basket of currencies.
GBP/USD is currently trying to get to the test of the nearest support level which is located at 1.3625. In case GBP/USD manages to settle below this level, it will move towards the next support level at 1.3575. No material levels were formed between 1.3575 and 1.3625 so this move may be fast.
A successful test of the support at 1.3575 will open the way to the test of the next support level at 1.3540. In case GBP/USD declines below this level, it will head towards the support at the 50 EMA at 1.3515.
On the upside, the previous support level at 1.3665 will likely serve as the first resistance level for GBP/USD. If GBP/USD settles above this level, it will head towards the next resistance at 1.3710. A successful test of the resistance at 1.3710 will open the way to the test of the next resistance which is located at the recent highs at 1.3745.
EUR/GBP flirts with the intraday high of 0.8885 during early Tuesday. In doing so, the pair battles 50-bar SMA on the four-hour (4H) chart amid receding bullish signals from the MACD.
However, sellers are less likely to enter unless witnessing a clear downside break of a descending trend line from January 06, at 0.8860 now, not to forget waiting for the UK’s latest employment data.
In a case where the quote successfully crosses the immediate 0.8885 hurdle, Friday top near 0.8920 and 100-bar SMA around 0.8945 will challenge the EUR/GBP buyers.
It should, however, be noted that the pair’s ability to cross 0.8945 enables it to revisit the early-month low near 0.8990 and the 0.9000 psychological magnet.
Alternatively, a downside break below 0.8860 will eye for the monthly low of 0.8830 and the 0.8800 round-figure during the further weakness.
Overall, EUR/GBP remains in a downtrend ahead of the key UK employment report
Gold (XAU/USD) has erased early gains and turns south on Tuesday, as the haven demand for the US dollar is back on the rise amid escalating American-Sino tensions. Strains between the world’s two biggest economies resurfaced over the South China Sea issue after a US carrier group entered the disputed waters last week.
Also, fading prospects of US President Biden’s $1.9 trillion stimulus plan likely to be passed by US Congress keep sentiment around gold undermined. Worsening risk-aversion ahead of the critical US Durable Good and Consumer Confidence data will keep any upside attempts in the metal elusive.
Gold Price Chart: Key resistances and supports
The Technical Confluences Indicator shows that gold has breached critical support at $1857, where the Fibonacci 38.2% one-month converged with the SMA50 one-hour.
The next relevant support awaits at $1851, the SMA10 one-day.
On a break below the latter, the price is likely to face a dense cluster of support levels around $1848, which is the intersection of the previous day low, SMA200 one-day and Fibonacci 38.2% one-week.
The bears could challenge the $1837 cushion, the pivot point one-day S2 if the selling pressure intensifies.
On the flip side, recapturing a powerful $1857 barrier is critical to extending the recovery towards $1863, the previous high four-hour.
Further north, the previous day high at $1867 could be back on the bulls’ radar.
The intersection of the previous week high and Fibonacci23.6% one-month around $1876 will be the level to beat for the XAU bears.
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