TIOmarkets traders shorting gold yesterday had a very successful day! Gold sold off heavily after the weakness we identified in yesterday’s report invited more gold bears to hit the bids. We said yesterday that gold was losing momentum below a key resistance level after rallying to 1759.80 and that the move looked like a typical retracement that is likely to result in the price of gold moving lower. At the same time, stocks rallied strongly. We indicated that the S&P 500 CFD could move to our resistance zone at 3897 – 3937. Yesterday’s close was 3905 with the day high at 3915.   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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Equity rally was supported by better than expected ISM Manufacturing PMI release (60.8 vs. 58.7) from the US while US construction spending was also a positive surprise at 1.7% (0.7% expected). The rise in equities was also credited to calmer bond yields, vaccine roll-outs in the US and the $1.9 trillion stimulus package. The final manufacturing PMI from the UK came was confirmed at 55.1 (54.9 expected) and the Canadian manufacturing PMI came in at 54.8 (54.4 expected). Canadian GPD release is due today at 1:30 pm GMT. The consensus expectation is that the growth rate will drop from 0.7% to 0.1%. For more details on macroeconomic releases see our economic calendar.

Today’s main event was the RBA cash rate decision and their press conference. The bank kept the cash rate at a historically low level (0.10%) even though the rise in property prices causes some economists to worry. The house prices nationally are at the highest in 17 years.  AUDUSD has reacted slightly lower after the announcement. The RBA says they don’t expect the wages and prices to rise to such an extent that they would cause the bank to raise rates until 2024. AUDUSD is trading near the bull channel low and retracing almost to the 61.8% retracement level. The pair has bounced from the proximity of the 50-day moving average which is a positive for the bulls. However, the strong move lower could mean the market might not be ready to rally straight away and needs more consolidation first. A reactionary low created above the rising trendline support would be another positive for this market and suggest that the bulls have taken control again. A break below this trendline would negate any short term bullish ideas and could take the pair to levels near the 0.7563 support. The other key levels in AUDUSD are 0.7462, 0.7692 and 0.8006.

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Gold price fell 2.4% since the publication of our bearish analysis yesterday. This move took the price near the long term channel low while our support zone at 1672 – 1690 (for more details see the Bullish & Bearish Markets video here). Gold has rallied today 1% from the low of 1707.18 with buying fuelled by an asset bubble warning from China. A senior Chinese official expressed his concern about asset bubbles in markets outside China. This sent the Asian shares lower and helped gold to stay bid. If stocks sell off now (S&P is trading inside our resistance zone) the price of gold could be able to stage a further rally. It definitely makes sense to pay attention to the interaction between these markets today. Open a VIP Black account with us. There are no per trade execution or monthly fees on our VIP Black accounts.

S&P 500 rallied to our resistance zone at 3897 – 3937 and is now reacting lower. At the time of writing the index has retreated 0.84% from yesterday’s high of 3915.25. Apart from technicals, we pointed out in yesterday’s report traders have been influenced by the Chinese warning about asset bubbles. It looks likely that the index moves lower before the bulls can give it another push and try to take it higher. The key price levels in S&P 500 are 3787.35, 3937.45 and 3963.75. A break below the 3787.35 support would be negative as it would take the index below the rising trendline. The next key support below the trendline is at 3664.

Recent macroeconomic data releases

  • New Zealand Final ANZ Business Confidence 7.0, 11.8 previous
  • Australian Private Capital Expenditure q/q 3.0%, 1.1% expected
  • US Prelim GDP 4.1%, 4.2% expected
  • Swiss KOF Economic Barometer 102.7, 96.5 expected
  • Chicago PMI 59.5, 61.0 expected
  • UK Final Manufacturing PMI 55.1, 54.9 expected
  • CAD Manufacturing PMI 54.8, 54.4 previous
  • US Final Manufacturing PMI 58.6, 58.5 expected
  • US ISM Manufacturing PMI 60.8, 58.7 expected

Important macroeconomic data releases today

  • Australian Cash Rate 0.10%, 0.10% expected
  • Canadian GDP 0.10% expected

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

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Trade Safe!

Janne Muta
Chief Market Analyst

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