Gold treads water as markets await a slew of central bank decisions in the coming days.
The recent break above the daily resistance at 1805 is a prerequisite for a bullish turnaround. However, the rally has met stiff selling pressure at the supply zone around 1813 which is at the origin of the September sell-off.
Along with a repeatedly overbought RSI, a combination of profit-taking and fresh selling may weigh on the precious metal in the short term. 1777 is the immediate support and its breach would send the price to 1760.
USDCAD pierces through supports
The Canadian dollar surged after the Bank of Canada ended its QE.
As the RSI from the daily chart showed an oversold situation, the greenback had attracted bargain hunters at its four-month low around 1.2300. However, it has given up all recent gains as it revisits the bottom.
1.2430 is now fresh resistance and the downtrend may resume. 1.2200 would be the next target as those who have been waiting for a catalyst join in. An oversold RSI has caused a temporary rebound which is likely to meet strong selling interest.
USOIL retraces after overextension
WTI crude tumbled after an unexpected surge in US inventories. Medium-term sentiment remains bullish, though an overbought RSI on the daily chart may prompt buyers to proceed with caution.
A fall below 82.50 and then 81.00 has exacerbated profit-takings as late buyers rushed for the exit. 79.50 is the next support.
A bearish breakout would extend the correction to 77.00 which was previously a resistance, making it an area of interest. An oversold RSI may trigger a rebound with 82.30 as a fresh resistance.
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The US dollar steadies over lower-than-expected initial jobless claims.
Sentiment remains upbeat, however, the pair is struggling to climb past the psychological level of 115.00, probably due to overextension. The RSI’s double top in the overbought area and bearish divergence suggests that the rally could be losing steam.
A breach below 113.90 would prompt weaker hands to exit, leading to a pullback towards 113.00. A rebound past the said resistance would send the price to March 2017’s high of 115.40.
XAGUSD to test critical ceiling
Silver stalls as the greenback reclaims some lost ground. The break above the round number of 24.00 indicates strong commitment from the buy-side.
The bulls are looking at the major resistance at 24.80 from the daily timeframe, as a breakout would end a five-month-long correction and pave the way for a bullish reversal.
However, an overbought RSI coupled with a bearish divergence suggests possible exhaustion in the run-up. 23.60 would be the first level to watch for if the price pulls lower in search of support.
SPX 500 tests all-time high
The S&P 500 flies high supported by better-than-expected third-quarter earnings. The index has reached the previous all-time high at 4550.
A breakout may trigger a runaway rally. Nonetheless, a repeatedly overbought RSI may cause a limited pullback as buyers take profit.
A drop below the immediate support at 4515 would pull the trigger. 4445 would be next as it coincides with the 38.2% Fibonacci retracement level of the October rally. The bulls are likely to buy the dips though after sentiment turns optimistic.
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The pound’s rally stalled after Britain’s core CPI dropped below 3% in September. The pair’s recovery has picked up the pace after a close above the daily resistance at 1.3730.
1.3900 is the main hurdle and a bullish breakout would resume the uptrend. However, the RSI’s triple top in the overbought area indicates an overextension. A pullback is necessary to let the bulls consolidate their gains.
The supply-turned-demand zone around 1.3710 is the first level to watch for. Its breach may trigger more profit-takings towards 1.3630.
USDCAD sell-off continues
The Canadian dollar rallied after solid inflation data in September. The US dollar has found little buying interest near July’s lows (1.2310).
A bullish RSI divergence out of the oversold area suggests a deceleration in the downward momentum. But buyers need confirmation of a reversal, and a break above1.2370 would be the first step to force sellers to cover.
Sentiment remains bearish unless the pair lifts offers around 1.2500. Failing that,the greenback could be vulnerable to a new round of sell-off towards 1.2250.
USOIL gains support
WTI crude bounced back after the EIA reported a surprise drop in US inventories.
A previous double top had indicated potential exhaustion as the price struggled to achieve a higher high. However, the price has found support at 81.00 as buyers were eager to stake in at a better price.
Overall sentiment remains upbeat and a close above at 83.80 may trigger an extended rally to 86.00. An overbought RSI may temporarily limit the momentum. But as long as the price is above the said support the directional bias stays bullish.
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The US dollar retreated after retail sales fell below 1% in September. The euro’s rally above 1.1570 has led some short interests to close their positions.
The pair is testing the key resistance at 1.1640, which coincides with the 20-day moving average and the first resistance on the daily chart. A bullish breakout could pave the way for recovery to 1.1750.
However, buyers could be hesitant to commit after an overbought RSI caused profit-taking. In case of a pullback, 1.1540 is fresh support to keep the current rebound relevant.
NZDUSD tests key resistance
The New Zealand dollar rallies as Q3 inflation beats estimates.
After a few days of sideways action, the indecision ended with a break above 0.7020, the origin of the last sell-off. In turn, this set the kiwi on a bullish course.
Sellers would scramble to get out after their failed attempts to push lower. An overbought RSI may cause a temporary pullback.
0.7040 is the immediate support, then 0.6980 is the second line of defense in case of a deeper correction. A close above 0.7110 would lift the pair towards the previous peak at 0.7170.
GER 40 heads towards the major hurdle
The Dax 40 bounces higher as the market bets on a prolonged low-interest environment.
The major floor at 14800 has seen strong buying interest as traders bought the dip. A bullish close above 15200 has put the short side under pressure. Then a rally above the 30-day moving average indicates further commitment from the buy-side.
The momentum could slow down momentarily as the RSI shows an overbought situation. 15300 would be the first support. A break above the daily resistance at 15700 may resume the uptrend.
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The yen plunges as low Japanese bond rates reflect the divergence in monetary policies. A close above the pre-pandemic peak around 112.10 has triggered a runaway rally.
A bullish MA cross indicates an acceleration to the upside. Strong momentum and a lack of resistance are lifting the greenback towards November 2018’s high at 113.70.
The RSI’s repeated overbought situation may lead to profit-taking, causing a limited pullback. Patient buyers may be waiting to stake in near the round number of 112.00.
NZDUSD struggles to rise
The New Zealand dollar bounces back as risk appetite makes a timid return after a mixed NFP.
The pair is in a narrow consolidation range between 0.6880 and the psychological level of 0.7000. However, the short-term mood remains downbeat after the kiwi almost gave up all its gains from late August.
The RSI’s double-dip in the oversold area has attracted some buying interest. But the bulls will need to lift the major resistance before they could jump-start a reversal. Failing that, the kiwi would be testing the daily support at 0.6810.
US 30 hits resistance
The Dow Jones climbs back as investors rotate into blue-chip values amid economic recovery.
Multiple tests of the demand zone around 33500 reveal the bulls’ commitment to keeping the index afloat. A close above 34660, the last leg of the previous sell-off, is an encouraging sign.
A push above 35050 would open the door to 35000 near the all-time high. An overbought RSI has temporarily held the bullish fever back.
34200 is the immediate support for buyers to build momentum. Further down, 33850 is their second line of defense.
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The US dollar initially tumbled after a minor drop in August’s core CPI. However, the pair can capitalize on strong buying interest from the trough near 0.9150.
A tentative break of August’s high at 0.9240 suggests that buyers are in control of price action. Though an overbought RSI has tempered the bullish drive, the latest pullback to 0.9180 can be an accumulation phase.
A rebound may lift bids to July’s high at 0.9275. A breach of that ceiling would attract momentum buying and resume the greenback’s rally.
XAUUSD bounces off demand zone
Gold surged thanks to a decline in Treasury yields. The precious metal had met stiff selling pressure at the triple top (1830) from the daily chart.
Short-term sentiment has turned positive after a week-long consolidation above the demand area of 1780. The break above 1803 would prompt the bears to cover their bets. An overbought RSI may trigger a temporary pullback.
A rebound would challenge the critical level of 1830 once again, where a bullish breakout may resume the five-week-long rally.
US 30 breaks support
The Dow Jones 30 retreated as last month’s US inflation remained above the Fed’s target. The index was bought out of the dip over the daily support at 34580.
The rebound turned out to be short-lived after a breakout invalidated this key floor. A bearish MA cross indicates that sentiment has become increasingly downbeat.
The psychological level (34000) from last July would be the next target. On the upside, 34950 is a fresh resistance where sellers would be eager to erase any rebound.
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Market Morning Briefing: Dollar-Yen Has Risen Above 110.61
STOCKS
Dow has risen just above 35250 and while that sustains the rise to 36000 that we have been expecting can be seen in the coming days. DAX continues to hover at the upper end of its 15200-15800 range. We expect it to break the range on the upside and rise to 16000-16200. Nikkei can move up within its 27000-29500 range. Shanghai has room to move up and test 3580-3600 in the near-term. Sensex and Nifty continue to consolidate at higher levels. Outlook is bullish to break this consolidation on the upside and see a fresh rise from here.
Dow (35264.67, +162.82, +0.46%) has closed just above 35250. While this sustains the rise to 36000 that we have been expecting can happen in the coming days. Only a fall below 35000 will bring the Dow under pressure. But that looks less likely as seen from the charts. As such our broader bullish view is likely to remain intact.
DAX (15770.71, +25.30, +0.16%) continues to hover below 15800tested 15800. A strong rise past 15800 is needed to see the rise to 16000-16200 that we have been expecting. As mentioned yesterday, a fall below 15600 from here can drag the index down to 15400-15200 again and will keep the 15200-15800 range intact for some more time.
Shanghai (3533.43, +3.50, +0.1%) has risen well above 3500 and can now head up towards 3560/3580 and 3600 in line with our expectation. As mentioned yesterday, a strong rise past 3600 is needed to become bullish again and negate the danger of falling back to 3400-3300. Price action at 3600 will need a close watch.
COMMODITIES
Crude prices have bounced a bit and could move up some more before falling back while Gold is stable near levels seen yesterday. Gold is bearish while below 1750 and could move back to test 1700 or lower soon. Silver has fallen and could test support near 23, which if breaks can make the price vulnerable to a fall towards 21-20. Copper can rise to 4.40 while support near 4.20 holds well.
Brent (70.66) and WTI (68.31) both have risen as immediate supports near 68 and 66 held respectively. The corrective bounce seen now could take Brent and WTI towards 72.50-73 and 70/71 respectively before again falling back in the medium term.
Gold (1732.60) is almost stable and we may expect a near term trade within 1700-1750/80 before a further decline is seen towards 1680/70 in the longer run. Immediate view is stable to bearish.
Silver (23.29) has dipped further and is headed towards support near 23. A break below 23, if seen is bearish for a fall towards 21-20 in the medium term.
Copper (4.3385) has risen slightly today. We continue to expect support at 4.20 to hold while the price can is slowly move back towards 4.40. a range of 4.40-4.20 can hold for now. Any break below 4.20 can make Copper vulnerable to a sharp fall towards 4.0-3.80 in the longer run.
FOREX
Dollar Index is strongly bullish opening up scope for a fall in Euro towards 1.17-.1.16. EURJPY can test 130.50 before falling off from there. Pound and Aussie look stable to bearish. Dollar Yen has broken above 110.50 and if it does not stop at 110.80/85, it may rise above 111 soon. USDCNY can rise to test 6.49/50 before falling while USDINR can rise towards 74.60/80 while above 74.40. On the downside 74.20/10 is immediate support.
Dollar Index (93.06) is trading above 93 and need to fall back from 93.30 to keep up hopes of a possible fall in the medium term. A rise on the flip side above 93.30 would make it bullish towards 94.0-94.50 in the medium term.
Euro (1.1723) has fallen and could test 1.17. Any break below 1.17 can drag it down to 1.16 before any bounce can be expected. View is strongly bearish.
EURJPY (129.70) has risen and if the rise continues, we may again test 130.0-130.50 before falling off again towards 129 or lower. Watch price action near crucial resistance at 130.50.
Dollar-Yen (110.61) has risen above 110.61 and could test 110.80/85 which may produce a short rejection. Failure to fall from 110.80/85 can take the pair higher towards 111-111.20. View is strongly bullish.
Aussie (0.7344) has risen a bit. While above 0.7320, view is bullish towards 0.7370. A trade of 0.74-0.73 for now looks likely.
Pound (1.3831) has continued to fall on dollar strength. A test of 1.38/37 is likely in the medium term before a bounce is seen.
INTEREST RATES
The US Treasury yields continue to move up in line with our expectations. The 10Yr and 30Yr are at their key intermediate resistances. A rise past these resistances can see the corrective rally extending further in the coming days before resuming the broader downtrend. It will have to be seen if the Consumer Price Index (CPI) inflation data release today can provide the trigger to move up further. The German yields hover above their key supports. We expect a corrective rally from here in the coming weeks before a fresh fall is seen. The 5Yr GoI remains lower and has room to dip further from here and then bounce-back again.
The US 2Yr (0.24%), 5Yr (0.82%), 10Yr (1.35%) and the 30Yr (2%) Treasury yields have moved up further in line with our expectation. The 10Yr and 30Yr are at key levels of 1.35% and 2% respectively. As mentioned yesterday, a sustained rise above these levels can take the yields up to 1.4%-1.45% (10Yr) and 2.1%-2.2% in the coming days. Thereafter a fresh fall can be seen to resume the broader downtrend.
The German 2Yr (-0.75%), 5Yr (-0.73%), 10Yr (-0.46%) and 30Yr (-0.01%) yields continue to trade stable above their key supports. Our view remains the same. We expect the support at -0.45%/-0.40% (10Yr) and -0.05% (30Yr) to hold. A corrective rally to -0.30%/-0.25% (10Yr) and 0.10% (30Yr) in the coming weeks. Thereafter a fresh fall is possible.
The Indian 5Yr GoI (5.7421%) continues to trade lower and keeps intact our view of testing 5.7%-5.69% on the downside in the near-term. Thereafter a fresh bounce to 5.74% and even 5.78% is possible.
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Market Morning Briefing: Dollar Index Has Risen To Test 93
STOCKS
Dow has to sustain above 35000 to keep the chances alive of breaking above 35250. Else a fall is possible. DAX seems to lack strength to break above 15800 and can retain its 15200-15800 range for some more time. Nikkei can rise within its 27000-29500 range. Shanghai also looks positive to move up towards 3550-3600 in the near-term. Sensex and Nifty are consolidating at higher levels and continue to look bullish.
Dow (35101.85, −106.66, -0.30%) has come-off yesterday. It has to sustain above 35000 to keep alive the chances of breaking above 35250 and see a rise to 36000 that we have been expecting. A fall below 35000 can drag the Dow down to 34250-34000 and will keep the broader 33000-35250 range intact for some more time.
DAX (15745.41, −16.04, -0.10%) tested 15800 for the second consecutive day but did not break above it. A fall below 15600 will indicate that the 15200-15800 range is still intact and can drag DAX down towards 15400-15200 – the lower end of the range in the coming days. It will then delay the expected break above 15800 and the rise to 16000-16200 that we have been expecting.
Shanghai (3495.09, +0.46, +0.013%) has risen above 3480 and looks bullish in the near-term to test 3560-3580 and even 3600 on the upside. From a bigger picture, Shanghai will have to rise past 3600 to become bullish again. Else a pull-back to 3400-3300 again cannot be ruled out. Price action in the 3580-3600 region will need a close watch.
COMMODITIES
Commodities trade lower today with Copper, Gold and Silver still looking bearish for the near term while Dollar strengthens. Gold can remain bearish below 1750 while Silver can trade below 25 and Copper can test 4.20 (initial support) or even 4.10/00 (deeper support zone) before bouncing back to higher levels. Crude prices look bearish too towards 65 (Brent) and 60 (WTI).
Brent (69.02) and WTI (66.66) both trade lower today. We may expect a fall towards 65 on Brent and 60 on WTI if the fall continues in the near term. Immediate resistance are seen near 70-72.50/73 on Brent and 69/70 on WTI.
Gold (1735.10) has bounced well from yesterday’s low of 1677. Although the corrective rise is in place, we are bearish on Gold while below 1750/60. A strong Dollar in the near term can prevent any rise in Gold indicating bearishness for this week and possibly the next.
Silver (23.51) tested 22.35 breaking below 23, but has bounced well from there. If the bounce sustains, it can rise towards 24-25 can be possible. But if Dollar Index continues to strengthen, it is bearish for Silver for an eventual fall towards 21-20 in the medium term.
FOREX
Dollar Index looks strongly bullish but we would wait to watch if it faces any rejection from 93.30/40 region or move up straight towards 94.0-94.50 on the upside. Euro on the other hand has fallen below 1.1750 as it could not sustain the rise seen yesterday. A fall to 1.17-1.16 cannot be negated while the Dollar continues to trade strong. Aussie and Pound look bearish towards 0.73-0.7286 and 1.38-1.37 respectively. USDJPY can rise to 110.50/80 before falling off from there. USDCNY can rise to 6.49/50. Weakness in Chinese Yuan and Euro can drag Rupee lower today taking t beyond 74.40. USDINR offshore rate quotes 74.43 and could indicate a sharp gap up opening today on the onshore markets and eventually take it higher to 74.60/70.
Dollar Index (92.99) has risen to test 93 and could be headed towards initial resistance near 93.30/40 which if manages to break could be strongly bullish towards 94.0-94.50 in the next 1-2 weeks.
Euro (1.1732) rose to 1.1769 yesterday but could not sustain higher as it fell sharply to below 1.1750 and is heading towards 1.17 now. A break below 1.17 would drag Euro further down towards 1.16. View is strongly bearish for the near term.
EURJPY (129.45) has bounced a bit but we cannot negate a fall to support near 128.70 before bouncing back h=sharply from there. On the upside, 130.50 continue to hold as important resistance.
Dollar-Yen (110.30) trades higher and at immediate short term resistance. A break above 110.30 will eventually take the pair higher towards 110.50/80 on the upside before a reversal is seen. Immediate view is bullish while dollar Index heads higher.
Aussie (0.7319) looks weak and could fall towards 0.73-0.7286 initially.
Pound (1.3838) is bearish as it falls towards 1.37. Watch for any interim support near 1.3790-1.3800. Resistance below 1.40 is holding strongly.
USDCNY (6.4795) has dipped after a test of 6.4881 yesterday. We continue to look for a range of 6.45-6.49/50 within which a test of the upper end of the range looks more likely before a fall is seen in the medium term. Watch for a rise to 6.49/50 in the next few sessions.
USDINR (74.27) rose to test 74.2850 on the onshore markets yesterday in line with our expectations of a rise to 74.25/30 that looked like an immediate resistance yesterday. But the weakness in Euro and Chinese Yuan has been significant and can drag Rupee too beyond 74.30 today. USDINR can test 74.50/60/70 on the upside on a sharp upmove that looks most likely today. The offshore rate quotes at 74.43 just now indicating a possibly higher opening on the onshore markets today. Rupee weakness in on the cards for the next few sessions contrary to our expectation of 74.25/30 to hold (mentioned yesterday)
INTEREST RATES
The US Treasury yields sustain higher. Though there is an immediate resistance ahead, the chances of an extended rally breaking above the immediate resistances cannot be ruled out. The US Consumer Price Index (CPI) inflation data release tomorrow will need a close watch to see if it triggers an extended rally or not. The German yields are holding above their supports and can see a corrective rally in the coming days. The 5Yr GoI has come-off sharply and can test 5.7%-5.69% in line with our expectation and then can bounce-back.
The US 2Yr (0.22%), 5Yr (0.79%), 10Yr (1.31%) and the 30Yr (1.96%) Treasury yields remain higher. The 10Yr has immediate resistance at 1.35%. A break above it can see an extended corrective rise to 1.4%-1.45%. Similarly, the 30Yr can move up towards 2.1%-2.15% on a break above 2%. Thereafter the broader downtrend in the Treasury yields can resume with a fresh fall.
The German 2Yr (-0.76%), 5Yr (-0.73%), 10Yr (-0.46%) and 30Yr (-0.02%) yields remain stable after bouncing back sharply on Friday. We retain our view of seeing a corrective rally to -0.30%/-0.25% (10Yr ) and 0.10% (30Yr) in the coming weeks. Supports at -0.45%/-0.40% (10Yr) and -0.05% (30Yr) are holding well as of now.
The Indian 5Yr GoI (5.7290%) has come-off sharply in line with our expectation failing to break above 5.78% yesterday. Our view of seeing a test of 5.7%-5.69% on the downside remains intact. Thereafter a bounce-back move to 5.74% is possible
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Rehana William |Financial Consultant _Forex_Gold Xauusd| Fund Manager 