The dollar rallied even though the 10-year yield came down yesterday. This pushed the EURUSD below the triangle formation I talked about yesterday and helped the pair to move significantly lower. The dollar rally was probably a flight to safety move as the US stock market dived significantly lower. The dollar strength seen yesterday weighed on gold which as failed to create a sustained rally for several days in a row. USOIL is trending higher even though there’s been a slowdown after the price hit my target range. By reading further, you agree with our disclaimer at the end of this report and acknowledge that we do not provide investment advice.
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XAUUSD – When gold started to move higher on May 17th I noted that the rally would be likely to be short-lived, and indeed it was. Now the market is trading lower than in May. After a massive daily move lower yesterday the market is getting closer to a key support level (weekly low at 1753). The nearest significant resistance level is at 1786.64. The market is extended to the downside which means that the immediate downside could be getting limited but the 1786 region could provide us with a shorting opportunity with a target at or close to 1753. Should the bulls be able to push the price above 1786.64, look for a move to 1805 – 1814.
NZDCHF tries to reverse the recent downtrend. After a breakout from a bearish channel, the pair tested the channel high successfully but has since then run into some trouble around the 0.5977 level. It now seems likely to move lower intraday today. If the market attracts buyers again above the 0.5906 low we have a technically bullish case in NZDCHF and could see it moving to 0.6110 (T1). If there’s a decisive break above the 0.6000 level then we might see the pair trading to 0.6046 (T2). Alternative scenario: The market breaks below the 0.5906 low and moves to 0.5807.
CADCHF has been creating a bottoming formation for over two weeks now. The balance of power started to shift from the bears to the bulls after the market hit a highly significant weekly support level at 0.7360. This means the market could provide us with long trade opportunities. We need to see a decisive break above the 0.7487 resistance level in order to see a sustained rally. This could take the market all the way up to 0.7626. Let’s keep an eye on this market.
Macro Drivers for the USD
As the most followed, invested and traded markets for risky assets are priced in the USD it is helpful to understand what macroeconomic factors impact the other side of the equation, the USD. Whether we are trading EURUSD, XAUUSD or US equity CFDs the factors impacting the dollar, the nominator in the equation, have a significant role in the formation of all medium to long-term price action. The following table summarises the most important fundamentals.
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The Next Main Risk Events
- USD – FOMC Member Mester Speaks
- USD – Final GDP q/q
- EUR – ECB President Lagarde Speaks
- GBP – BOE Gov Bailey Speaks
- USD – Fed Chair Powell Speaks
For more information and details see the TIOmarkets economic calendar here.
Chief Market Analyst
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