US GDP came in higher than expected (2.9% vs. 2.6%). Even though the consumer spending component could have been stronger investors piled into stocks once again. Both DJ and Nasdaq rallied. Gold bids were soft yesterday as yields moved higher. The major dollar pairs had a relatively narrow range day signalling that the markets are waiting for today’s PCE (Fed’s favourite inflation gauge) release to better guestimate how the Fed is likely to finetune the downshifting process. The PCE release is due at 1:30 pm GMT. At 3 pm GMT we’ll have the revised UoM consumer sentiment.
DJ broke above a key resistance area
DJ – trends higher in the 8h chart. The trend remains in force above 33490. Below the level, the market probably trades down to 33 260 or so. Based on the weekly chart and the higher daily swing low that was put in place last week it seems that DJ is trying to push higher. Today’s PCE release and the following market reactions should tell us more about investor sentiment. The next major resistance is a daily swing high at 34 373.
NAS is bullish above 11 547
NAS remains in an uptrend above 11 547. Below the level, the market would break out of the bull channel and probably moves to 11 400 or so. The market penetrated 11 900 (as expected) which makes the former resistance level a potential support. The next major resistance level is at 12 200.
DAX trades sideways
DAX has lost momentum and is trading sideways right below the 2022 market top. The green team has defended levels above 14 900 but haven’t been able to make sizeable progress. If 14 900 breaks the market could retrace to 14 550 or so. The 15 271 is the next major hurdle for the bulls.
Gold bids softened as bonds sold off
Gold drifted down to the 1919 support as the T-bond market sold off yesterday. This lifted yields and dampened the gold bulls’ mood a bit. If 1919 breaks the market could trade down to 1896. Keep an eye on the markets (the bond market & yields and gold) react to the PCE number today.
A lower than expected number should firm the bids in gold but if that doesn’t happen then the mood in the gold bugs’ camp is sour and the risk of market retracing deeper increases. A higher than expected inflation number should be bearish for gold. So, this is the theory but as always, the only interpretation that counts is the one the market makes. Therefore, follow the price action after the release to get further clues on what gold traders think.
The Next Main Risk Events
- USD Core PCE Price Index
- USD Pending Home Sales
- USD Revised UoM Consumer Sentiment
For more information and details see the TIOmarkets economic calendar.
Trade Safe!
Janne Muta
Chief Market Analyst
TIOmarkets.com
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