EUR/USD shrugs off dismal German confidence data, FOMC eyed

EUR/USD holds steady with little follow through from yesterday’s bounce as traders look past grim German data and ahead to the US FOMC rate decision and US durable goods data due later today (FXE, UUP).

The pair shrugged off GFK data that revealed that German consumer confidence is expected to plummet in February -15.9 vs -7.5 in January, significantly lower than the -7.9 forecast.

As for the FOMC no change to policy is expected, so the language will be closely analysed. A dovish tone amid high covid cases and weak economic data could drag on the USD. 

Conversely any hint of gradually reversing stimulus could boost demand for the US Dollar and exert pressure of EUR/USD.

EUR/USD technical analysis

EUR/USD has broken out of its descending channel pattern after bouncing off 1.2050 the yearly low. However, the rebound appears to have lost momentum around 1.2160. The picture looks neutral EUR/USD trading range bound. 

EUR/USD bulls will be looking for a meaningful move over 1.22 to place more aggressive bets. Clearance here could open the door to 1.2220 before 1.2275. Further momentum could lift the pair to 1.23.

On the flip side, 1.21 the weekly low offers support ahead of the yearly low at 1.2050 and the psychological level of 1.20.

Gold looks to the Fed for direction

Gold (GLD) is edging lower in early trade on Wednesday, extending losses from the previous session.

Uncertainty over Joe Biden’s $1.9 trillion covid stimulus plan dragged on the market mood, boosting the safe haven US Dollar which pulled on demand for gold. 

Upbeat US consumer confidence data along with upgraded IMF global growth forecasts and encouraging vaccine news further added to the bearish picture for the precious metal.

However, the bulls remain hopeful that the huge stimulus package will still get pushed through after Senate majority leader Chuck Schumer said that the Democrats will still move forward on the package with or without Republican support.

Caution keeps investors on the sidelines ahead of the Fed meeting as investors await more clues on the timing of potential tapering. 

Gold technical analysis

The daily chart paints a bearish picture as gold trades below a descending trendline dating back to early August and below its 50 & 100 sma. The 50 sma also crossed below the 100 sma in a bearish signal and the RSI is below 50 supportive of further losses.

To the downside immediate support is seen at $1838 low 22nd January, prior to $1800round number and January low prior to $1763 November low.

An attempted recovery could see the 50 sma tested at $1856 prior to a move towards $1880 the confluence of 100 sma and the descending trend line before $1900 round number.