The US dollar index is building upon the strong patch of economic data. The index is currently seen extending gains for four consecutive sessions so far.
But the momentum could stall ahead of the FOMC meeting due later in the week. The uncertainty over the impact of the coronavirus is also keeping the USD slightly supported for now.
Euro Slips on Dollar Strength
The Euro is extending declines amid a strong economic report from the United States. The CB Consumer confidence report rose to 131.6 in January, beating estimates of a headline print of 128.2. The data for the previous month was revised higher to 128.2.
Elsewhere, the Richmond manufacturing index was also higher at 20, beating estimates of -3 and up from -5 previously.
EURUSD Likely to Bounce Off Support
The currency pair’s declines have pushed price action to the support area of the 1.1000 region. We expect prices to consolidate around this level in the near term. Following which, as long as there is no further declines, the EURUSD could be looking to correct in the near term.
The correction could be limited to 1.1051 or possibly back to the breached support level of 1.1072.
Sterling Continues to Remain Weak
The pound sterling remains biased to the downside as the bearish momentum is strong. Economic data from the UK remains sparse ahead of the BoE meeting later in the week.
The currency pair lost over 0.50% intraday basis. Following the January 31st deadline, the UK and the EU will enter an 11-month transition period to chalk out the finer details.
GBPUSD Could Retest the Support at 1.2960
The current bearish momentum in GBPUSD indicates that the currency pair could slip to the support area of 1.2960. If we see a rebound in prices, then the GBPUSD could likely be forming a head and shoulders pattern.
This could turn out to be quite bearish for the pound sterling. For now, the retracement off 1.2960 support will be important.
Gold Prices Retreat on Strong US Data
The precious metal was giving up the gains made earlier in the week. The declines were set off by economic data from the US which also saw a strong durable goods orders report. Headline durable goods orders rose 2.4% on the month despite a 0.1% decline on the core.
XAUUSD Declines Could be Limited in Scope
Despite the retracement in the XAUUSD, price action could be limited to the price level of 1562. If support can be formed here, we expect prices to rebound once again.
But a lot will depend if the XAUUSD will be able to progress higher. To the upside, the resistance level of 1594 remains in place.