Gold and Wall Street 30

The market once again has managed to hold its gains or trade in a narrow range ahead of the FOMC meeting release this evening. The week began with a quiet economic calendar but the FOMC on Wednesday is now the highlight of the schedule and will be followed by US Unemployment Claims on Thursday, along with the RBA and BOE rate decisions and statements. Markets are building energy in anticipation of the event where the FED is expected to maintain rates at the <0.25% range. With the expectation that policy will remain on hold this month, the focus will be on forward guidance and the outlining of the tools that the FED has available to use in order to achieve its future aims. Bank of America has outlined its view on the FOMC in the following piece, “we expect the Fed to take the first step in shifting from stabilization to accommodative policies at the upcoming meeting. This will likely take the form of stronger forward guidance, linking the ZLB to an inflation overshoot. We also expect the Fed to tweak the statement to tie the balance sheet policy to supporting the economy rather than market stabilization. We do not expect any other policy changes but Powell should address the toolkit in the press conference and perhaps offer some guidance about the triggers to using these additional tools. The US rates market will be most focused on changes to forward guidance and any balance sheet adjustments. We see risk the rates market is underwhelmed by the guidance provided by the Fed, which would support higher back-end rates and a steeper curve. We anticipate a subdued reaction in the FX market, with risks somewhat skewed USD-negative on the day depending on forward guidance language”. The meeting in general is expected to give an overview of the structures available to the FED going forward but not go into too much detail and certainly not take any formative action on future action. But as the FED shifts from a market stabilization stance to an economy supporting stance, the FED is expected to embark on a range of policy changes. The Japanese 225 has closed flat, while the Hang Seng and the Shanghai Composite are both trading down, -0.33% and -0.67% respectively. USDJPY is trading at 105.350 and Gold has slid back to 1958.50. European Futures are pointing to falls of around -0.1%.

Today the schedule begins with Eurozone Trade Balance data which is expected to rise to 19.3B from 17.1B. In the afternoon, US Retails are expected to fall to 1.1% from 1.2%. Core Retail Sales are forecast to fall to 1.0% from 1.9%. The FOMC decision will be released in the evening.

Gold

 

The Gold chart shows that the commodity created a parabolic move higher with the breakout in July, but has now consolidated into a triangle pattern. Price is now testing the 1958.00 level after testing support at 1900.00. Price broke the 2000.00 price level leading to a break out higher to 2075.00 and traders then took profit as the USD found strength. The price action fell through supports at 2000.00 and 1900.00 to hold support at the 1865.00 level. Price is now trading at 1958.50 with support at 1910.00 and resistance at the 2000.00 round number. Further support has been built at 1800.00, 1775.00 and 1750.00/1747.00. New support may have formed at 1865.00/1850.00 and 1830.00 to support price going forward. The 2000.00 level was used and may form as resistance ahead of 2015.00, followed by 2032.50 and 2065.00 incorporating the high at 2075.00. Below the 1865.00 area, 1850.00 guards the way to 1800.00, with a break below this level opening up a test on 1750.00.

The 1750.00/1747.00 area may be used as support on a break below 1800.00/1790.00 and 1765.00. A loss of the 1700.00 area may provoke a test on 1694.00/1692.00 followed by the higher low at 1670.00. 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 29600.00 this year but has moved back up once it found support at 18190.00 in March. Price is currently trading at 28040.00 after the fall below the trend line, with supports at the 27200.00 level and the 27000.000 and 26000.00 round numbers. The Index has broken down after sharp selling last week. Further support below 26000.00, may be found at 25850.00 and 25500.00. A loss of these levels may push price back towards the 25200.00 area followed by 25140.00 and 25000.00 levels. These levels are then followed by 25000.00, 24900.00 and 24836.00 levels. There is also potential support at 24150.00 and 2400.00. 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 low at the 23000.00 area makes this level critical to the move higher, but if it gives way, the move down may open the way for a test on 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.

The price action shows that the index pushed up to a new higher high, since the March low, at 29195.00. Price action tested the 27500.00/27630.00 area ahead of the 28000.00 level and fell away after the FOMC meeting in June. Resistance may now be seen around the 28244.00 area and 28500.00 as a lead into 29000.00. Resistance has potentially formed at the early August high of 28155.00, with a breakout suggesting a test on the 28800.00 area and the high may be followed by the 29000.00 round number. Resistance ahead of the all time high has now potentially formed at the 29250.00 level and a break back above this level may open the path for a test on the 29400.00. A break higher from there, may seek to reengage the 29500.00 area and the old high from February at 29585.00. This would open the way for a test on 30000.00 and potentially beyond.

Philip Konchar

Core Spreads

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