Stocks, USD and T-bonds moved higher hand in hand yesterday in what seemed to be a flight to safety rally in these asset classes. EURUSD took a big hit moving the pair to levels last seen in 2002. Investors fear that Europe could be heading into a recession. GBPUSD nose-dived too. Dollar strength together with the news that two senior UK cabinet ministers resigned resulted in heavy selling of Cable. At the same time, USOIL and gold took significant hits as market participants believed there’d be a period of slower growth ahead globally and this would ease inflation expectations. 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
- EUR EU Economic Forecasts
- USD JOLTS Job Openings
- USD ISM Services PMI
- USD FOMC Meeting Minutes
- NZD RBNZ Statement of Intent
- USD Unemployment Claims
- CAD Ivey PMI
- USD FOMC Member Bullard Speaks
- EUR ECB President Lagarde Speaks
- CAD Employment Change
- CAD Unemployment Rate
- USD Average Hourly Earnings m/m
- USD Non-Farm Employment Change
- USD Unemployment Rate
For more information and details see the TIOmarkets economic calendar here.
Chief Market Analyst
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