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It was like the good old times yesterday as gold rallied while stocks were under selling pressure. The negative correlation that we were used to has been missing lately. Now markets were shedding tech stocks and putting money in the yellow metal. Technology stocks were butchered while the shares of more traditional businesses such as Disney (DIS), Caterpillar (CAT) and Dow Chemicals (DOW) enjoyed nice gains. By reading further you agree with our disclaimer at the bottom of this page and acknowledge that we do not provide investment advice.

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The DJIA (0.09%) rallied strongly yesterday after trading down to the 31222 support level but Nasdaq 100 kept on falling and closed the day with a loss of 2.63%. Apple (-2.98%) and Tesla (-8.55%) shares dragged the technology sector down while 1533 stocks advanced and 2502 stocks declined (unchanged 79). This means that 60% of Nasdaq stocks lost ground in yesterday’s trading. At the same time, only 13 out of the 30 DJIA stocks declined which explains the strength of the index. DIS (4.42%), CAT (3.88%), DOW (3.46%), AXP (3.22%) and CVX (2.70%) were leading the DJIA rally. S&P 500 rallied from the 20-period SMA.

The publication of the German IFO business climate survey supported the EURUSD yesterday. Our view was that the technicals were favourable for the pair but the positive IFO surprise (92.4 vs. 90.5) gave an extra boost to the pair. Gold rallied strongly yesterday and moved to our resistance zone at 1810 – 1821. More on gold below. New Zealand retail sales were confirmed well below expectations (-2.7% vs. -0.5%) but NZDUSD has reacted quite modestly to the downside as is now trading about 15 pips lower than at the time of the release.

Today’s highlight is the speech from Fed Chair Powell as he gives his semiannual Monetary Policy Report before the Senate Banking Committee (via satellite). More central banker talk is due from the BOC Governor Macklem. The number of people claiming unemployment-related benefits during the month of January dropped by 20K while analysts had pegged the number to increase by 13.8K. For details on macroeconomic releases see our economic calendar.

We said on Friday that it looks like gold traders are willing to defend the 1764 support level and suggested that the move above 1777 would show the bulls are committed to this market. This is what happened and the price of gold rallied to our resistance zone at 1810 – 1821. Today’s high print was put in at 1815.96 after which there has been some loss of momentum. A break below 1806 would indicate the red team taking charge and possibly driving the price lower towards the channel low.

Even though the retail sales numbers from New Zealand were a substantial disappointment the NZDUSD reacted only slightly lower. Perhaps traders are focusing on the 0.7315 support level and are waiting for the Fed Chair Powell to shed light on what the Fed’s future policies will be. NZDUSD broke out of a bullish triangle on Friday after a lengthy consolidation. This indicates strength and suggests that should there be a retracement to the  0.7247 support traders are likely to defend the level. The rising trendline support is currently at 0.7175 and coincides with the 50-day SMA. A failure to honour either of these support levels would indicate a move to the 0.7000 – 0.7050 region would be likely.

USDJPY has retraced all the way down to the 61.8% Fibonacci level and the 20-day SMA. The pair has bounced higher from the proximity of the bullish channel low. Powell’s speech has the potential to move this market quite a bit which needs to be taken into account when considering trades in USDJPY. The weekly technical picture looks less favourable than the daily (rejection from 50-week SMA) which could mean that potential rallies get faded near the recent highs. The key support and resistance levels are 104.40, 104.85 and 106.22. Open a VIP Black account with us. There are no per trade execution or monthly fees on our VIP Black accounts.

Recent macroeconomic data releases

  • UK Retail Sales -8.2%, -3.0% expected
  • French Services PMI 43.6, 47.0 expected
  • French Flash Manufacturing PMI 55.0, 51.7 expected
  • German Flash Manufacturing PMI 60.6, 56.6 expected
  • German Flash Services PMI 45.9, 46.5 expected
  • EU Flash Manufacturing PMI 54.6 expected
  • EU Flash Services PMI 57.7, 45.9 expected
  • UK Flash Services PMI 44.7, 42.1 expected
  • UK Flash Manufacturing PMI 54.9, 53.1 expected
  • Canadian Core Retail Sales -4.1%, -2.4% expected
  • Canadian Retail Sales -3.4%, -2.5% expected
  • US Manufacturing PMI 58.5, 58.4 expected
  • German ifo Business Climate 92.4, 90.5 expected
  • New Zealand Retail Sales -2.7%, -0.5% expected

Important macroeconomic data releases today

  • UK Claimant Count Change -20.0K, 13.8K expected
  • Fed Chair Powell Testifies
  • US CB Consumer Confidence 90.2 expected
  • BOC Gov Macklem Speaks

You may access the times and dates in the economic calendar here.

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Trade Safe!

Janne Muta
Chief Market Analyst
TIOmarkets.com

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