EURUSD: retracement to 1.1792 could be in the cards

The euro closed slightly higher on Tuesday, August 11. The EURUSD pair ticked up 0.02% to 1.1740. The single currency recovered to 1.1808 during the European session, up 84 points in four hours. Buyers attempted for two hours to draw out the rally, but were ultimately forced to capitulate as the markets came under pressure from a sharp decline across precious metals.

Market participants opted for profit-taking after a lengthy bull run that got under way on August 1, 2018 (+78%). For this reason, protective stops were triggered, thus heightening pressure on gold and precipitating the downward movement. Notably, the precious metal has climbed 43% since mid-March.

News from Russia about the registration of the world’s first Covid-19 vaccine may have urged investors to bail out of gold. The announcement was made by Russian President Vladimir Putin. A slowdown in the number of new cases of the virus stateside also prompted investors to take profits. Gold retreated 5.67% to $1,910/oz yesterday, and dropped as low as $1,862/oz in Wednesday morning trading before turning around and mustering a powerful recovery.

News that Russia has registered the first vaccine for the treatment of COVID-19 before the start and completion of phase-3 trials drew criticism from medical experts. They are outraged that the registration was approved before the completion of the third and final phase of clinical trials, whereas no official scientific data on the previous phases were made public. US authorities have openly questioned the efficacy of the Russian vaccine, nicknamed Sputnik-V.

Meanwhile, AstraZeneca PLC AZN and Moderna Inc. are currently conducting the final trials of their vaccines in line with research that is expected to produce results before long. Against the backdrop of a strengthening dollar, the euro slipped to 1.1728.

Today’s macro agenda (GMT+3)  

  • No major releases are scheduled for today.

Current outlook

Our upbeat expectations were wholly justified. After ascending to the 67th degree, the pair pulled back to 1.1711. Another low was tested due to the decline in gold prices. At the time of writing, EURUSD was trading at 1.1730. We think this is a good time for a retracement to 1.1775. Bar charts showed movement for August 3-5. Today we could see a rise to the 67th degree, broadly in line with yesterday's scenario. The rally might also run as high as 1.1800, but according to our forecast the gains will be capped at 1.1775.

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