Gold and US 500 Index

The Pound has moved lower after the parliament vote on the Brexit amendments yesterday evening. The proposed safeguards against a hard Brexit were rejected with the chance of that event taking place increasing by 5%. The EU has been firm in its stance that the deal already offered is the only one that they will accept. Theresa May now has a stronger mandate to return to Brussels and attempt to renegotiate with the EU before the March deadline. Today begins the start of US-Chinese negotiations in Washington but also marks the first FOMC meeting of 2019. Traders will be watching to see if the committee has remained dovish in light of the government shutdown and economic indicators. This may translate into a postponed rate hike to 2020.

The FOMC is due to release its statement this evening and maintain the Federal Funds Rate at 2.5%. The Press conference will follow the release and decision in 30 minutes.

Gold

Price action in Gold has carried the price higher to consolidate its gain above 1300.00 and reach the 1315.00 area. Buyers pushed price above the falling resistance trend line around 1293.00 and opened the way for an advance above 1300.00. Resistance around 1325.00/1328.00 is now the potential focus of traders going forward. Beyond this level, the 1340.00 level may resist upward movement followed by the 1350.00 level. The double top at 1365.30 will potentially have a significant impact on the precious metal and this area should not be underestimated.

Price action in the commodity has built its rally on levels of support. Price is trading close to 1311.00 at present to enable traders to reinforce that area, but the 1300.00/1297.00 zone may have possibly attracted interest since it was traded on Monday. The trend line might turn to support after it resisted attempts to break out through much of January. A loss of this line around 1293.00 may push price lower to support around 1277.00/1275.00. Below this area sellers may take control and target 1264.70 or even the 1250.00 level.

US 500 Index

The US500 Index is consolidating around its 2650.00 level and has set up a series of higher lows and lower highs. The resistance level at 2675.50 has held after the test two weeks ago and created an area for traders to lean against. Factors such as the FED balance sheet, US-China trade and the US Government Shutdown are creating concern and resulting in indecision. A resolution to these risk events may result in a push higher on a stronger earnings season. In the short term this would require price to move above the 2650.00 area and attack the trend line at 2673.00/2675.50. A break out from these levels may push price to test 2700.00.

Support for the index may be seen around the rising support trend line at 2630.00. A move under this line potentially passes control to sellers and may open the way for a test on 2612.26, followed by the 2600.00 area. Further selling may result in a deeper sell off to 2567.00, followed by the 2550.00 area. The 2522.20 area provided resistance in late December/ Early January and this area was retested after price action broke above it. A loss of this area might see sellers targeting 2500.00 or even the 2450.00/2440.00 area.

 

Phillip Konchar

 

 

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