Gold, Silver, and EUR/USD Technical Analysis Ahead of Key Inflation and ECB Data

The EUR/USD pair experienced a slight dip, marking its third consecutive day of losses and approaching the crucial 1.0500 level. This decline reflects market hesitancy as traders await Wednesday’s key US Consumer Price Index (CPI) inflation data. The report holds significant weight as one of the last data points before the Federal Reserve’s final policy decision for the year. Any indication that inflationary progress has stalled could shift sentiment, undermining expectations for further rate cuts. The market expects that the headline inflation may edge up to 2.7% year-over-year, with core inflation likely holding steady at 3.3%.

Gold (XAU) and silver (XAG) are bracing for potential volatility tied to the inflation report. If the CPI data exceeds expectations, the dollar could strengthen, exerting downward pressure on precious metals and EUR/USD. Conversely, a softer-than-expected inflation figure could weaken the dollar, boosting gold and silver. Gold and silver are forming bullish price action before releasing inflation data and breaking out of a consolidation phase.

The European Central Bank (ECB) is also set to announce its latest rate decision on Thursday, which could further influence market dynamics. A quarter-point rate cut would likely reduce the Main Refinancing Rate to 3.15%. This decision could weigh on the euro, increasing downward pressure on EUR/USD. A weaker euro often translates into a stronger dollar, which pushes gold and silver higher. However, if the ECB is surprised with a more cautious approach to rate cuts, it could strengthen the euro, indirectly supporting precious metals through dollar depreciation.

Gold (XAU) Technical Analysis

Gold Daily Chart – Bullish Momentum

The daily chart for gold shows strong price action after nine days of consolidation and continues to advance higher. The price has closed above the 50-day SMA, while the RSI has closed above the midline, indicating bullish price action. The strong rebound from the pivotal support at $2,550, marked by the red dotted trend line, indicates positive development. The immediate resistance lies at $2,720, followed by $2,790.

Gold 4-Hour Chart – Break from Range-Bound

The 4-hour chart for gold shows that the price has been consolidating within wide ranges after peaking at $2,790. However, the trend remains positive, and gold is eyeing $2,720. The RSI is nearing the overbought region as gold approaches $2,720. However, a break above $2,720 will open the door to the $2,790 region.

Silver (XAG) Technical Analysis

Silver Daily Chart – Ascending Channel

The daily chart for silver shows that the price is trading within an ascending channel pattern. Bullish price action has formed at the support region of this ascending channel at $29.60. The bullish development at $29.60, followed by a breakout above the key level of $31.50, indicates that silver is poised to move higher. Silver closed above the 50-day SMA on Tuesday, which opens the door for a potential move to $34.80.

Silver 4-hour Chart – Descending Broadening Wedge

The 4-hour chart for silver shows that it has reached the $32.20 to $32.50 resistance zone. The price consolidates around this resistance and shows bullish price action. A break above $32.50 will open the door to $34.80. The emergence of a descending broadening wedge indicates bullish potential, while the inverted head-and-shoulders pattern at the support of this wedge highlights the potential for an upward rally.

EUR/USD Technical Analysis

EUR/USD Daily Chart – Volatility

The daily chart for EUR/USD shows significant volatility around the long-term support at $1.047. The pair broke out of the ascending broadening wedge pattern following Trump’s victory and reached the target of $1.06. The strong volatility around $1.047 indicates weakness. A confirmed long-term break below this level would likely initiate a prolonged downward trend in EUR/USD. However, a break above $1.06 would maintain a neutral outlook for the pair.

EUR/USD 4-Hour Chart – Consolidation at Support

The 4-hour chart for EUR/USD shows a descending channel pattern formation. The pair is trading within this channel and exhibits bearish momentum. The price failure at $1.06 highlights weakness and continues the bearish trend. This is driven by the strong rebound in the US Dollar Index from the key support level of 105.60.