Gold gains while traders wait for next shoe to drop

Market Insights

Asia Pacific markets provided a strong start to the week with a catch up rally. The Hang Seng rose 0.9% while the Nikkei gained 0.4%. Initial enthusiasm has faded as the day has progressed. European markets are mixed with the FTSE up 0.2% and the Dax down 0.4% while US index futures are flat.

As is normal after nonfarm payrolls, US news flow goes quiet for a few days. ‎There are still some earnings reports of interest. Toymaker Hasbro has posted stellar earnings this morning and a 10%+ dividend increase.

There are a number of things simmering away in the background that could move the markets but it’s hard to say how much or when at this point. For example, Sterling is steady sitting on $1.2500 as three days of debate on the Brexit bill gets underway in the UK House of Commons. In Europe, Germany is blaming the ECB for the low Euro following verbal barbs from President Trump last week with ECB President Draghi speaking today. Polls in France and Germany showing opposition parties gaining ground and an IMF report on Greece’s debt may also attract some attention.

Tensions between the US and Iran remain elevated following Iran’s recent missile test. WTI crude is up 0.2% while gold is up 0.5%.

So there’s potential for action, but it’s not clear where the main focus may fall. There are also a number of round number tests to keep an eye on including 20,000 for the Dow, $1.3000 for USDCAD, par for USDCHF, $1.2500 for GBPUSD and others.

Chart Signals

Chart Signals: Gold and Yen rally; stocks keep topping; EUR rolls over

Gold and JPY are breaking out today, indicating that capital continues to flow back into defensive havens over rising political risks. Meanwhile, indices continue to roll over, particularly the Germany 30. The relationship between GBP and EUR also appears to be shifting with the single currency showing signs of peaking and turning downward against both USD and GBP.

North American and European Indices

US 30 is still above 20,000 for now but showing signs of exhaustion again with the index peaking at a lower high near 20,090 and falling back toward 20,060. Next support on a breakdown possible near 19,970 then 19,850. RSI sending mixed signals falling toward 50 but not breaking it.

US SPX 500 is struggling with 2,300 resistance and appears to be forming a double top to go along with the head and shoulders top in its RSI indicator, both signs indicating the recent uptrend appears to have peaked and a retreat possible. Recently trading near 2,292, next potential support appears possible near 2,282 then 2,252,

US NDAQ 100 is still bouncing around between 5,100 and 5,170 trying to decide whether it’s topping or if this is a consolidation phase within an ongoing uptrend. Next potential resistance near a measured 5,240 with next support possible near the 5,000 round number.

UK 100 tried to retake 7,200 but has failed on its initial attempt peeking up toward 7,210 before sliding back toward 7,185. RSI bouncing around 50 indicates a sideways trend emerging. Initial support tests near 7,165 then 7,125.

Germany 30 increasingly looks like it’s breaking down. The index has dropped from 11,660 toward 11,560 while RSI has broken down below 50 to confirm a downturn in momentum. Next potential support near 11,500 then 11,445.

Commodities

Gold continues its uptrend, rallying up off of $1,220 toward $1,227 with next potential resistance near $1,229 a Fibonacci level then $1,235 and $1.250 on trend. RSI above 60 and rising indicates upward momentum accelerating.  

Crude Oil WTI continues to form an ascending triangle of higher lows below $54.20. The price trending higher above its 50-day average and RSI holding above 50 also confirm underlying accumulation. Next potential resistance near $55.00 with support near $53.35.

FX

US Dollar Index is testing the 100.00 round number again with resistance falling toward 100.10 from 100.30 but support rising toward 99.65 from 99.50 and 99.15.

USDJPY is breaking down today, falling from a lower high near 112.60 through 112.35 a Fibonacci level and on toward 112.20 with next potential support near 111.25 then 110.00. RSI remaining below 50 and turning down again confirms distribution trend.

EURUSD is starting to break down. After confirming $1.0800 resistance, the pair has dropped down below $1.0720 a Fibonacci level with a rollover in the RSI confirming the recent uptrend has peaked and a downturn underway. Next potential support near $1.0640 then $1.0600 and the 50-day average. 

EURGBP failed to break through 0.8660 and has started to turn downward again, slumping back toward 0.8600 with next potential support at the 50-day average near 0.85430 then 0.8500 and 0.8460 a Fibonacci test.

GBPUSD is still in a downdraft trading below $1.2500 but downward momentum appears to be slowing with the RSI holding 50 and the pair holding above its 50-day average near $1.2410. So far this appears to be a pause within an emerging uptrend.

USDCAD has picked up from near $1.3010 toward $1.3050 but remains in a downtrend below $1.3100 resistance and its 200-day average near $1.3130. RSI under 50 confirms downward momentum. Next support in place between the $1.3000 round number and $1.2975 a Fibonacci level. 

CADUSD is forming a symmetrical consolidation triangle between $0.7600 and $0.7725 currently above its 200-day average and below a Fibonacci cluster. RSI holding 50 indicates underlying upward momentum intact through this pause. 

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