Gold, EUR/USD, US Dollar Technical Analysis After Strong US Retail Sales

The European Central Bank’s (ECB) dovish stance has exerted downward pressure on the EUR/USD pair. The ECB reduced the deposit facility rate by 25 basis points to 3.25%. Market participants see this as a clear sign of the Eurozone’s economic slowdown. Inflation appears to be easing as HICP falls to 1.7% in September. These developments suggest a limited upside for the euro in the near term.

Moreover, a resilient US economy supports the US Dollar Index (DXY). The reduction of expectations for aggressive rate cuts by the Federal Reserve further supports the US dollar. Additionally, speculation surrounding Donald Trump’s potential return to the presidency drives dollar strength. Trump’s economic policies are expected to include tax cuts, higher tariffs, and looser financial conditions that favor the US economy.

These market uncertainties maintain the upward trajectory for the US dollar and downward pressure on the euro. The US dollar has further increased after the release of US retail sales data. US Retail Sales rose 0.4% MoM in September from 0.1% in August. This was above expectations of 0.3%. Overall, the combination of strong economic data and reduced rate cut expectations propel the US dollar higher. This reinforces the dominance of the US dollar over the euro.

On the other hand, gold (XAU) has surged to a new record high above $2,690. While the US retail sales data release caused a temporary pullback, the overall price action shows emerging bullish momentum. Notably, gold is rising with the US dollar due to the ongoing geopolitical conflict in the Middle East, which has boosted safe-haven demand. As uncertainty persists and global economic conditions evolve, gold prices will likely continue rising.

Gold (XAU) Technical Analysis

Gold Daily Chart – Breakout from Descending Broadening Wedge

The gold market has broken out of the descending broadening wedge pattern on the daily chart. The price maintains bullish momentum within the ascending broadening wedge pattern, with a target range of $2800-$3000.

Gold 4-Hour Chart – Price Target of $2,745

On the 4-hour chart, the price is breaking above the midline of the ascending channel. This price strength indicates the short-term target of $2,745, measured from the ascending channel resistance line. The RSI approaches the overbought region. Therefore, prices might consolidate before the next rally.

EUR/USD Technical Analysis

EUR/USD Daily Chart – Ascending Broadening Wedge Pattern

The price is trading within an ascending broadening wedge pattern on the daily chart. The formation of a double top and the breakout below $1.10 has reinforced the bearish momentum within this wedge. However, the price is now approaching a strong support area. This support is measured from the support line of the ascending broadening wedge at $1.0790. The RSI shows oversold market conditions. Therefore, EUR/USD may find solid support at these levels, potentially initiating a rebound.

EUR/USD 4-Hour Chart – Bearish Pressure

Bearish pressure on EUR/USD is also observed on the 4-hour chart. However, the 4-hour chart shows strong support within the $1.0780 to $1.0790 region. A price rebound from these levels is likely and could ease the recent bearish pressure. However, a break below $1.0780 will add further downside potential to the pair.

US Dollar (DXY) Technical Analysis

US Dollar Daily Chart – Key Resistance

The US Dollar has reached a strong resistance area on the daily chart at 103.90, defined by the 200 SMA and a red trendline. The RSI is in the highly overbought zone, suggesting a possible pause in the bullish run. However, a break above $103.90 could trigger another significant rally in the US Dollar. Ongoing economic and geopolitical uncertainties may continue to boost safe-haven demand.

US Dollar 4-Hour Chart – Bearish Divergence

The 4-hour chart shows that the price has hit a strong resistance area. However, there are still no clear signs of a top formation, and the price remains strong. The RSI shows bearish divergence, which may trigger a short-term correction in the US Dollar Index. A break below 102.70 could lead to a short-term correction. However, a break above 103.90 will likely trigger another strong rally in the US Dollar.