Friday, 6 October 2017

Gold remains under pressure

Posted by Valentine at 12:55 Labels:

On Thursday, the first half of the trading day, gold traded with a slight gain, as the price of yellow metal rose to $1279, but failed to hold on the reached highs, above the level of 1275. The reason for such a sharp change in sentiment and a move to decline was stronger than expected US macroeconomic indicators, which in turn contributed to the strengthening of the US dollar, after several days of consolidation. On the other hand, the «hawkish» rhetoric of FOMC members Williams and Harker, who are in favor of another rate hike this year, and three in 2018, provided support for the US currency. As a result of this two factors, the bears seized the initiative and pushed the market downward to strong support in 1267.26 where they ended the day session.

There is a strong black candle after two bullish candles on the daily chart, and it is a kind of intensifying bearish tendency, which fully reflects the mood of market participants in favor of the US dollar, and the positive perception of the US equity market, amid of the promised tax reform for business.

Today, on Friday, gold is testing for breakdown support 1267.26 and there is a high probability that this level will be broken. This will happen only if today's statistics on the US labor market proves to be positive for the dollar. After the breakdown of the current support level of 1267.26, the market will go to 1264, 1260, 1251.50, 1250 and, possibly, to 1244.

If US dollar falls under the pressure of sale-off, we should expect gold to rise to levels of 1279, 1283, 1288, 1290.50 and, possibly, to 1295-1296 dollars per ounce.

Trade recommendations - wait for Non-Farm data and look into shorts

Eur/Usd - support zone 1.1666-1.17 is last stronghold of euro bulls

Yesterday, the major FX pair Eur/Usd fell under strong pressure in the second half of trading session and ended Thursday's trading with significant losses. It all started with the speech of the ECB chief economist Peter Praet, who urged his colleagues not only to follow, but to "closely follow" the high rate of the single European currency. Players unambiguously understood the signal, and verbal intervention did its job. If the European currency proved to be resistant to the risks of the political crisis in Spain, the pair could not show immunity to the words of the European financial officer.

Further, based on the minutes of the September meeting of the ECB, it became clear that officials discussed various options for the future of the asset-buying program, while, importantly, they expressed general concern about the strengthening of the euro.

Market participants expect that the European Central Bank will cut QE by a third, the volume will be 40 billion euros a month, and the quantitative easing program will be extended for a period from 6 to 9 months. Since different variants of QE were discussed and, at the same time, worries were expressed about the expensive euro, of course, the single currency came under pressure.

Another negative factor for the euro was the strong US data. Positive reports on the trade balance and initial jobless claims provided the dollar with a good support. The hawkish comments of Open Market Committee Williams and Harker, who consider another rate hike this year appropriate, only increased the pressure on the pair.

Increase in US volume of industrial orders more than expected, and the last, on this day, the tough performance of Ister George finally nailed the euro / dollar to support 1.1700, from which the pair again managed to rebound a little and completed trading on October 5 near 1.1710.

Probably a negative impact on the euro was made by the Spanish Constitutional Court's ban on holding a meeting of the Catalan Parliament on October 9, at which independence may be announced. More information will appear on the weekend, closer to Monday, but for now in the focus of market is the data on the US labor market.

Let me remind you that according to the consensus forecast, the growth of Nonfarm Payrolls in September amounted to 90 thousand new jobs. It is interesting that ADP data came out quite positive and exceeded forecasts. Probably, after the last hurricanes, the labor market in the US is being restored, and today's official data on Payrolls will finally clear up the situation.

If the indicator is comparable with expectations, and even better than the forecast of 90 thousand, the US dollar will get a good support and continue its strengthening in relation to all major competitors.

In this scenario, the Eur / Usd currency pair risks falling and breaking through a very important support level of 1.1662. This is the last stronghold of euro bulls, and if it falls, the pair is to move much lower.

Trading recommendations - accurate shorts when broken through 1.1660-1.17

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