Once again, this continues to effectively rule out a chance of a move in July. That said, markets have also settled on that i.e. no rate cut in July, for a while now already.
This article was written by Justin Low at www.forexlive.com.
Precious metals have lost much of their momentum from May trading but while silver has retraced the upside move by quite a bit, gold is still pretty much in consolidation territory. Granted, the run higher in gold largely came earlier in March and April. In May, gold threatened fresh record highs above $2,400 but ultimately settled lower during the month. So, where does that leave us now?
Even as major central banks are kicking the can down the road on rate cuts, gold is still holding up quiet well as of late. I mean, such sentiment is also reflected in equities, so it speaks to the broader market sentiment as well I guess.
That being said, gold’s surging run higher in March and April might be calling for a further correction down the road. And I still hold that view until today. I’d view such a retracement to be a healthier one for gold in the bigger picture. Not to mention, that will be another opportunity for dip buyers to get in on the action.
And while gold has been lingering between $2,300 to $2,400 mostly as of late, the perceived resilience may be a deceiving one if you go by the technicals.
As seen from the daily chart above, we can note that a head-and-shoulders pattern is emerging.
The most important part of that is the neckline around $2,280 to $2,295. As such, if we do get a break of that as the next key move in gold, the target looks to be a potential drop towards $2,100. That will coincide with a shove towards its 200-day moving average (blue line), at least for the time being.
The key technical level there is one where buyers can definitely lean on for support, should the structural narrative for gold continue to hold. And that is if we do see this head-and-shoulders pattern play out accordingly.
But as we know, things in markets are never that straightforward. However, this is one of the risks that should be acknowledged and could potentially pan out for gold price action in the short-term.
As for the longer-term outlook, I’m still one that is very much bullish on gold. Central banks are looking to rate cuts as the next step and the dollar will see some of its resilience over the last two years ebb once the Fed gets to that stage.
However, I’d much prefer if we do get a bit more of a retracement before that next leg arrives. That will make a more convincing argument for gold to really take off once the stars align.
This article was written by Justin Low at www.forexlive.com.
We got some very good news last week as both the CPI and PPI came in on the softer
side. This should support the stock market in the bigger picture as it will
give the Fed more confidence to start cutting rates at some point in the last
part of the year.
The FOMC decision last week turned out to be a bit more hawkish than expected but Fed Chair Powell made it clear that their
forecasts can change as they remain very data dependent, so the market looked
past the Fed’s projections.
The risk sentiment is still a bit murky, but it looks like the negative
mood from the last week is starting to dissipate. We have the US Retail Sales data
today where positive figures should give the market a boost and support the
risk sentiment.
S&P 500
Technical Analysis – Daily Timeframe
On the daily chart, we can
see that the S&P 500 keeps making all-time highs despite other risk assets
finding it harder to rally. We got a strong push to the upside yesterday
without any catalyst as the path of least resistance remains to the upside.
From a risk management
perspective, the buyers will have a better risk to reward setup around the trendline where they will also find the confluence
of the previous all-time high and the 61.8% Fibonacci
retracement level. At the moment though, it’s unlikely that we will see
such a big pullback unless we get some really ugly US data.
S&P 500 Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that we have a good support
zone around the 5450 level where we can find the confluence of a minor
trendline and the 38.2% Fibonacci retracement level. If the price gets there, we
can expect the buyers to lean on the trendline with a defined risk below it to
position for another rally with a better risk to reward setup. The sellers, on
the other hand, will want to see the price breaking lower to increase the
bearish bets into the next trendline around the 5350 level.
S&P 500 Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, we can
see that we have another minor support around the 5510 level. If we get a dip
into it on weak US Retail Sales data, the buyers might step in around there to
fade the reaction and position for new highs. The sellers, on the other hand,
will want to see a break to increase the bearish bets into the trendline around
the 5450 level. The red lines define the average daily range for today.
Upcoming
Catalysts
Today we have the US Retail Sales and US Industrial Production. On Thursday,
we get the US Housing Starts, Building Permits data and the latest US Jobless
Claims figures. On Friday, we conclude the week with the and US PMIs.
This article was written by Giuseppe Dellamotta at www.forexlive.com.
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