After the jump in Non-farm Payrolls on Friday, investors on Wall Street were yesterday able to put aside the concerning aspects of the payrolls report (lack of progress in hourly wages and a lower participation rate) and also a lower than expected HSBC China Manufacturing PMI, to eek out a slightly positive close. Sentiment was helped by a strong service sector report, with the ISM Non-Manufacturing data rising to its highest in six months. This air of positivity was carried into the Asian session which was also broadly positive with Japan closed for public holiday.
European stock markets are subsequently pushing for slight early gains today. Forex trading has also been fairly positive for risk appetite, with a tendency towards dollar weakness today.
Data to watch for comes with the Eurozone services PMIs throughout the morning, with the UK service PMI at 09:30BST. The US trade balance at 13:30BST could have an impact on the dollar.
Chart of the Day – AUD/USD
As has been the case with several of the major currencies, the Aussie dollar has a daily candlestick chart with a series of long tails. This denotes uncertainty and a lack of conviction to back aa breakout. This was certainly the case on Friday with the Long Legged Doji candle which tried to show US dollar strength only for a false breakdown. The move formed support again on 0.9200 which is now the key near term support. Momentum indicators have though turned towards positive once more and actually look as though this recent corrective downtrend is beginning to move towards breaking the sequence of lower highs and start on the journey higher once more. A sustained break above the 21 day moving average at 0.9323 would be a good indication. The intraday hourly chart shows a sharp intraday spike this morning (on the announcement that the RBA kept interest rates unchanged), however the rate remains rangebound. The intraday chart shows 0.9316 as the key near term price resistance with 0.9250 as support.
The complete turnaround in Friday’s session reflects a willingness for traders to support the Euro through this period. However the rate continues to trade in this range $1.3775 to $1.3905 and as yet has been unable to breach through the high. Despite this though, momentum indicators are in positive configuration whilst moving averages are in bullish sequence. Corrections within the range are being bought into with $1.3810 the latest low, on Friday. The intraday hourly chart is messy but again positive and suggesting that it it building for the breakout. The risk is though the Euro has had several sharp corrections only to be entirely retraced (admittedly these have come with the big fundamental news of German inflation, Eurozone inflation and Non-farm Payrolls). A move above $1.3905 opens $1.3947 and then the key high of $1.3967.
For over three weeks now Cable has been making very slow but steady gains. It took a while to break out above the $1.6822 key high from February, but this has now been seen and has since been used as the basis of support for Friday’s mini correction. Momentum indicators all remain positive, although the Stochastics continue to flirt with a sell signal. The big question is whether Cable can continue to make this slow and steady advance or whether it is building for a sharp reversal, which can often be the case after a period of sustained gradual advance. At this stage we have to back the bulls and stay with the uptrend to push back above $1.6918. All moving averages are rising in bullish sequence, with the 21 day ma at $1.6805. The intraday hourly chart shows a series of higher lows that could be used to signal a correction if they break. Beyond Friday’s reaction low at $1.6820, the two tat stand out initially are $1.6791 and $1.6775.
The difficult near term trading sequence continues as the complete turnaround on Friday left another false breakout. The rate then retreated back towards the support of the rising 144 day moving average once more which has been the basis of the buying pressure over the past couple of months. The concern is that the shorter moving averages are increasingly putting downside pressure and the RSI and Stochastics momentum indicators are gathering downside impetus once more. The intraday hourly chart is also portraying a downside bias with pressure on yesterday’s low at 101.84 likely to continue. A move back above 102.30 would help to improve the near term outlook once more.
This extremely choppy period of trading for gold continues as once more what had looked to be shaping up for a retest of the $1268.24 key low has rallied strongly back above $1300 once more. The has been once constant through this, with the support of the 144 day moving average remaining a feature. There is little to suggest any trend developing over the past few weeks and the uncertain nature of trading is likely to continue as the geopolitical situation in Ukraine continues. In recent times, gold has moved higher as tensions have flared up only to then drift lower again as things have calmed relatively. There is now support around $1305 near term with $1300 generally seen as a bit of a line between bullish and bearish control near term. A move above $1315.60 re-opens the upside.