Will Euro rally lose steam? And will gold maintain its strength?

Will Euro rally lose steam? And will gold maintain its strength?

Will Euro rally lose steam?

From a technical viewpoint, the long-term path on the weekly chart is still bearish, while in the medium-term and short-term windows the euro has reached a very important resistance area near 1.1200 and entered the overbought borders. Such conditions indicates that there’s little scope for more gains, and suggest a possible return of downside pressure.

The fundamentals support this cloudy outlook. In addition to weakening growth, soft economic data and lack of inflationary pressures, there’s increasing risks that the Coronavirus outbreak sparks a recession in both France and Italy. All eyes will be on the ECB and BoE and any policy easing steps they take will further pressure the European common currency.

Will gold maintain its strength?

We noticed that despite the recent stock market rebound, gold maintained it’s strength holding near his 7-year high, and this strength is justified.

Several factors support the precious metal’s strength, the most important of which is the commitment of central banks around the world to adopt expansionary monetary policies with low interest rates. Dollar is struggling as treasury yields sank after the Fed aggressive rate-cut, and gold as usual benefited from the dollar’s weakness, and on another hand lower interest rates makes other safe havens such as bonds less attractive, thus raising the demand for gold.

I think that gold will be the best investment in the coming years, and if the stock markets continue their downward trajectory, gold will in contrast continue to shine, and if central banks are forced to make more rate cuts in attempt to soothe virus fears, gold will rise.