yearly low, extensions

Gold Trades at 1270 after Dovish Fed

Asian markets closed higher after Federal Reserve struck a hawkish tone at its latest meeting. The Hang Seng benchmark in Hong Kong finished 0.60 percent higher at 29,879. The Shanghai Composite added 0.32 percent higher at 3,078, while in Singapore, the FTSE Straits Times index finished 0.61 percent lower at 3,380. Australian equities slipped back into the red on Thursday, losing most of yesterday’s gains. Losses were across the board, with banks, energy, telcos and mining stocks the biggest weights on the market. The ASX200 closed down 37 points or 0.6% to 6,338.

In commodities markets, crude oil consolidates around 63.30 after the correction from the five-month high as markets digest the US additional sanctions on Iran. Oil industry analysts expect that the sanctions could potentially remove up to 1.2 million barrels of oil per day from international markets. Brent oil adds 30 cents at $71,82 per barrel. Gold breaks lower to 1271 after failure to hold above the $1280 zone. XAUUSD’s technical picture is negative, and now the support stands at the 200-day moving average down to $1251, which if broken can accelerate the downward move to 1200 as sellers will take full control. Strong resistance stands at 1291 and the 100-day moving average, and then the $1300 round figure.

XAUUSD Hourly (H1) Chart
XAUUSD Hourly (H1) Chart

In cryptocurrencies market, bitcoin (BTCUSD) whose market capitalization accounts for more than half of all other cryptocurrencies combined trades higher at 5,318 mark enhancing the bullish outlook. The daily low for BTC was at 5,275 and the daily high at 5,341. BTCUSD’s immediate support stands at the 200-day moving average at 5,093 while next strong support stands at the $5,000 level and then at the recent low at 4,937. On the upside, strong resistance stands at 5600 the recent high. Ethereum (ETHUSD) is adding one dollar at 158, holding above the 50-day moving average at 138, and facing the immediate resistance at 185, the 200-day moving average, while Litecoin (LTCUSD) trades higher at 72.54. The cryptocurrencies market cap holds above $170.0B.

On the Lookout: The US Federal Reserve decided to keep their target range for Fed Funds unchanged at 2.25%-2.50%, as most analysts expected. However, there was a side of the market waiting for a more dovish statement that followed which wasn’t to be. Instead, the Fed stuck to their script reiterated their pledge to remain “patient” and upgraded their assessment of current activity trends to “solid” from “slowed” albeit downgrading their assessment of inflation, noting it has been, “running below 2 percent”.

The Bank of England is to meet later today as traders look for clues to enter new positions on GBPUSD.

The focus on the US macro front will be the data on factory orders with Challenger data on job cuts, productivity and labour costs, the ISM New York index and weekly data on claims for unemployment insurance.

Trading Perspective: In fx markets, the US dollar adds 10 cents to 97,30 as traders digest the comments from Fed Chairman Powel after the FOMC meeting. A stronger US dollar will likely increase the US trade deficit, adding risk that Trump administration continues to target those nations with a significant trade surplus with the US (China – Germany – Europe). The Aussie dollar trades lower at 0.7026 as cash rate futures now see a 71.0% probability of a rate cut in the next RBA meeting coming in two weeks. Kiwi mirrors Aussie dollar lower and trades at 0.6635 as traders renewed RBNZ rate cut bets following New Zealand’s jobs data disappointment and weaker oil prices.

GBPUSD continues higher on positive Brexit sentiment and better UK macro data hitting two-week highs at 1.3076. On the downside, major support will be found at 1.2967 where the 200 and 100-day moving averages cross and then at 1.2830 the support line from February. On the upside, immediate resistance stands at 1.3104, the 50-day moving average.

In GBP futures markets, open interest shrunk by around 2.4K contracts on Wednesday from Tuesday’s final 161,764K contracts, clinching the second consecutive drop. In the same line, volume dropped by nearly 54.5K contracts.

EURUSD trades above and below the 1.12 figure after the dovish comments from the Fed. The pair made the Asian high at 1.1218 and the low at 1.1190. Immediate support can be found at 1.1191 the low from yesterday while more solid support can be found at the yearly low at 1.1115. On the upside, the immediate resistance stands at 1.1236, the bottom of the horizontal resistance line from the three-month trading range, while more offers will emerge at 1.1275 at the 50-day moving average.

In Euro futures markets, traders added more than 3.1K contracts to their open interest positions on Wednesday, reaching the 11th build in a row. Volume, instead, shrunk significantly by around 84.3K contracts, prolonging the choppy performance.

USDJPY trades 0.12 percent higher at 111.52 as earlier tested, the 50-day moving average, a level which if breached can drive prices down to 110.73, the 100-day moving average. Today the pair hit the low at 111.34 and the high at 111.66. Immediate resistance for the pair stands 111.68, the 50-hour moving average, and then at 112.18, the April 2019 high.

In JPY futures markets, the open interest decreased for the second consecutive session on Wednesday, this time by nearly 1.9K contracts. On the other hand, volume rose once again by more than 3.6K contracts.

USDCAD rebounds after yesterday’s heavy losses to 1.3440 as lower prices in crude oil seem to have added further weakness in the Canadian Dollar (CAD). The pair will find immediate support at the 100-day moving average around 1.3335 while extra support stands at the 1.3300 round figure. On the upside, immediate resistance stands at 1.3469 the high from the previous week while a break above can escalate the rebound towards the 1.35  round figure.

USDCAD Hourly (H1) Chart