Risk Appetite Remains High on Trade Deal and US Data

Equities continue to remain poised to the upside due to a number of factors.

The US-China trade deal brought a modest reaction. Investors expect that there is still a lot to do.

Economic data from the US saw retail sales beating estimates breathing life into the US dollar.

 

Euro Slips on Stronger US Retail Sales

The euro gave up the gains from earlier this week. Retail sales in the United States beat estimates, rising 0.7% on the core in December.

Headline retail sales were in line with estimates of a 0.3% increase on the month. The data pointed to a solid close for the year.

 

EUR/USD Gives Up Gains, but Momentum is Weak

The common currency continues to drift as prices retreat, giving up the gains from the previous session. The overall price action is suggesting to a potential bearish flag pattern on the daily chart. This means that a break down off the 1.1100 region could signal further declines on the horizon.

 

Sterling Rises as Weaker Inflation Lowers Odds of a Rate Cut

The pound sterling is trading stronger against the US dollar. This comes as investors are betting on a potential rate cut from the BoE as early as January. The interest rate decision will come ahead of flash PMIs. Earlier this week, inflation data saw a decline which eases pressure on the BoE in some way.

 

GBP/USD Maintains a Corrective Rally for Now

The currency pair rebounded off the support as noted previously. The current gains remain in place as GBPUSD remains on track to retest the 1.3100 level. If resistance is established, we expect prices to remain range-bound. But a lot will depend on the fundamentals, especially closer to the BoE meeting.

 

Gold Prices Remain Soft Amid Global Narratives

The precious metal is trading on the backfoot on Thursday. The declines came as gold gave a muted response to the China trade deal. The stronger USD managed to put some pressure on the precious metal. However, gold prices are staying resilient despite a broad build-up in risk appetite.

 

Will XAU/USD Decline Further?

Although the bias remains to the downside, XAUUSD is staying somewhat stronger. The hidden bearish divergence remains in play for the moment. But if prices continue to drift, we could expect the upside bias to build up. For the moment, the downside target remains at the support level of 1534.00. But a breakout above 1558 will, of course, change the view.