Gold and Wall Street 30

The see-saw price action in markets this week has been largely driven by headlines surrounding the development of vaccines and the fiscal and monetary policies of major countries. The news on Monday that Moderna had a successful first trial of their vaccine was dampened by a lack of hard data once the initial rally ran out of steam. The press release showed a promising outlook for the trial but the rally fizzled once the European session got under way on Tuesday. In Europe the Franco/German proposal for a European recovery fund of €500 billion met with approval but the details of its implementation are scarce. Already this morning, Italian Premier Giuseppe Conte has written to the European Commission President, Ursula von der Leyen, to request for more funds in the proposed €500 billion aid package, according to a report by Corriere della Sera. The news of the proposed fund broke on Monday helping to send markets higher. The concerns at this stage of the lockdown are focussing on reopening while avoiding a second wave of infections and how quickly the consumer will return to the market. The reopening of the economy in Germany has seen a rise in cases and has sent the R, reproduction number, to over 1 last week, but the R number has since dropped back to 0.88. This number needs to be kept under 1 in order to avoid the return of more stringent lockdown measures. Markets are worried that a return to more stringent lockdown measures will further depress the economy and send markets lower again. This is particularly worrisome considering a vaccine may not be widely available until the end of 2021. The focus on the return of the consumer is set to dominate markets going forward, as in theory with a return to work, consumer spending should recover. But again, consumer spending is more reliant on the availability of an effective vaccine, which will allow a full return to normality. Until then consumer confidence is expected to be depressed particularly in the services, hospitality and travel sectors. Markets are holding ahead of the FOMC Meeting Minutes release this evening. The Japanese 225 has closed higher by 0.79% but Chinese markets are down 0.2% to 0.4%. US Futures are higher by about 0.6%. The USDJPY is trading at 107.745 after its tests on the 108.000 over the last couple of days.

CPI data releases for Europe this morning are expected to come in at 0.4%, with Final Core CPI expected to be 0.9%. In the afternoon, Canadian CPI is expected to match the previous reading of -0.6%. Bank of England Governor Bailey is due to speak on the economic impact of COVID-19 before the Treasury Select Committee, in London. This evening, the FOMC Meeting Minutes will be released.

Gold

 

The Gold chart shows that the commodity broke above the previous high at 1747.00 and extended price action to 1765.00. Price is now back testing the 1750.00 level once again. The price action formed a pennant after the test on the previous high and moved back down under the 1700.00 level to test the 1660.00 level as support. The pattern on the chart of lower highs and higher lows broke last week and price pushed higher. Support may form around the 1700.00 area followed by 1680.00. The 1650.00/1641.00 area may be used as support below this higher low. A breakout above the resistance at the 1750.00 area may find price seeking to engage the 1760.00/1765.00 area, which may open the way for a test on the 1785.00 level followed by the 1800.00 and 1820.00.

A loss of the 1700.00 area may provoke a test on 1670.00 as the higher low. The 1640.00 area has been used as support on the chart and is followed by the 1600.00 round number and 1567.50 higher low. A loss of the lower support at 1557.00, may allow a test on the next level of support around 1535.00. This is followed by the 1500.00 area. Below this the new higher low at 1455.00 may be supportive and this is then followed by the 1400.00 area. A continued move to test the 1400.00 round number may indicate a more significant pullback to test the falling trend lines and open up the 1400.00 region. Price consolidated in this area with support at 1380.00 for much of last summer before breaking out. The 1360.00 area may also be used as support in the event of a deeper selloff.

Wall Street 30 Index

 

The Wall Street 30 Index fell back from resistance at 24905.00 last month but has moved up to create a lower high in the 24835.00 area. Price is currently trading at 24322.00 with support at 24150.00 followed by 24000.00 and 23880.00. Below these levels the 23500.00 area may be used as support. Further support may be seen at the 23200.00 area followed by 23175.00. The creation of a lower high this week may suggest that the retracement is in danger of failing, particularly if the 23000.00 area gives way, and it may open the way for a test on the 22000.00 area, followed by 21370.00. The 22685.00 area may be supportive as a former resistance level. A break under the 20264.00 higher low may open the way to 20000.00. A break below this area may see a move into the support of the 19920.00. Below this a loss of the 19000.00 area may instigate a deeper selloff to test the low at 18200.00.

A break back higher may push price back above 24500.00 to re-engage the lower high at the 24830.00 area and allow price push up and test 24900.00 followed by the 25000.00 area. This area featured as an area of previous support and then resistance in March. Resistance for the index has now potentially formed at the 25000.00 level and a break back above this level may open the path for a test on the 26000.00. A failure to get above the 25000.00 area may push the index into the 23500.00 area. A break higher from there, may seek to reengage the 26300.00 area and the lower high at 27100.00.

Philip Konchar

 

 

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