Equity markets posted strong gains on Friday and especially in the final few hours of trading. The gains came as the economic advisor to the White House, Lawrence Kudlow said that there was progress being made.
The comments come in a week where President Trump did not make any mention of the China trade deal. This led the markets to pull back. But on Friday, the Dow Jones rose to 28,004, while the S&P500 rose to 3120.
Euro Gains Despite Tepid Inflation
The euro managed to recover from the losses earlier in the week on Friday. The final inflation estimates for October showed that headline inflation for the eurozone grew 0.7% on the year.
Core inflation, which strips the volatile food and energy prices, was up 1.1%. Inflation continues to remain stubbornly off the ECB’s target rate of 2.0%.
Can the EURUSD Maintain the Upside Momentum?
The gains in the currency pair triggered a strong rebound off the support level of 1.1000 earlier this week. The momentum could see the EURUSD attempting to test the resistance area of 1.1062.
But watch the Stochastics, which is signaling a hidden bearish divergence. This could trigger a pullback to the current rally.
Sterling Maintains Gains Amid a Quiet Day
The pound sterling managed to maintain the bullish momentum. The gains came as a patch of economic data from the United States came out weaker than forecast.
Core retail sales rose just 0.2% on the month, while the headline number was up 0.3%, a slightly better result. But the import prices and industrial production both fell. Meanwhile, economic data from the UK was sparse.
GBPUSD to Settle Into the Range
Following the close above 1.2865 level, the GBPUSD is most likely looking to settle into a range. The sideways range within 1.2865 and 1.2960 will see the accumulation building up.
Unless there is a breakout from this level, price could remain flat. We expect the momentum to rise as we head closer to the December UK elections.
Gold Trades Mixed but Holds on to Gains
The precious metal held its gains despite a strong rally in the risk markets on Friday. The price action sees gold closing with some modest gains after the previous week’s declines. With the Fed signaling that it was done with rate cuts and some news on the trade talks, gold could be pressured in the near term.
XAUUSD to Target the Resistance
After the hidden bearish divergence, gold prices slipped back. But after retesting the support area at 1462, the precious metal is looking to push higher. We expect the gains to take XAUUSD toward the 1483 region. Forming resistance at this level will cap the gains any further. This will also put the focus back to 1462 and eventually to the 1440 level.