Markets turned around yesterday after risk off moods took hold late last week and extended into Tuesday’s European session. It wasn’t until the US open, that news hit of a decision by US President Trump to delay tariffs to help maintain product levels and prices in the run into the Christmas period. Tariffs of 10% on cell phones, shoes, laptops, toys and other consumer goods have been delayed until 15th December, from the initial date of 1st September. Other items have been removed from the tariff list based on national security, safety and health factors and will not face the additional 10% tariff. Markets responded with a swing to risk on sentiment, stocks gained while gold fell. Soon after, it was reported that the representatives of the two counties would meet to re-establish trade talks, with a phone call scheduled for two weeks time and more planned communication going forward. China has responded by again committing to purchase agricultural products from the US, but more critically, the PBOC has set the USDCNY mid-point at 7.0312 today, versus 7.0326 yesterday. The US Navy has made a request to visit Hong Kong but this has been denied by China. The disruption caused by protests in the city may potentially create a new flash point between the two powers. China has moved troops close to city as there were further protests at the airport yesterday. Argentina is also a cause for concern, with their stock market crashing by 50% this week. The Argentine Peso fell 15% against the USD on Monday alone in response to the loss of the weekends Presidential Primary Election by the incumbent President Macri. The left wing candidates, Alberto Fernandez and Cristina Fernandez de Kircher, toppled the presidential bid and his efforts to rebuild the financial system in the country after the 2014 debt default.
Today the economic calendar has already given us some weaker economic data from China, as Industrial Production and Retail Sales fell, while the Unemployment rate has ticked higher. German Preliminary GDP is expected to fall to -0.1% from 0.4%. UK CPI is expected to slip to 1.95 from 2.05 previously. Later this morning Eurozone Industrial Production is expected to fall back into negative territory of -1.4% from a previous 0.9%.
The Gold chart resembles a rollercoaster in yesterdays timeframe as the metal tumbled as risk on sentiment materialised. This price action has created a spinning top candle in the daily chart, with a high at 1535.00 and a low at 1479.00, effectively straddling the important 1500.00 level. Price consolidated around this level over the last week as traders digested the implications of FED policy and the ongoing US China trade negotiations. A break back above the initial resistance at 1510.00 may set up a test towards the 1535.00 area. Beyond this the 1555.00 area from February 2013 may be used as resistance.
A move lower away from the 1500.00 area may ignite further profit taking if price fails to gain ground against the new high. A loss of the 1479.00 area would effectively create a lower low. The 1456.00/1453.00 area may be used as support in the event of a move lower followed to a lesser degree by 1450.00. Below this level the former resistance zone under 1440.00 may provide support if it turns over to attract buyers to the area. The 1400.00 level may potentially be used to support price action followed by the higher low at 1381.85.
Wall Street 30
The Wall Street 30 Index has reversed its losses from Monday’s trading after slipping under 26000.00, early this week, but bouncing higher with yesterday’s relief rally. The Index suffered against the trend line resistance in July with the failure to create higher highs against the line and the 27400.00 level dragging price lower when sentiment shifted. A break back above 26500.00 may potentially open the way to a retest on the April May highs around 26700.00/26710.00. Above this the 27000.00 level comes into focus followed by 27400.00 and the trend line at 27660.00.
Support for the index has initially formed around the old 26270.00/26240.00 area. A break down from here, may open the prospect of the creation of a higher low, potentially testing the 26000.00 round number. However a loss of the level may shift the point of focus to 25887.00 or the higher low formed yesterday at 25764.00. The March low comes into play at 25222.00, followed by this month’s low at 25078.00 ahead of 25000.00.