A weak close on Wall Street on Friday put the pressure on the Asian session overnight and it would appear as though early European trading is going the same way today. Risk appetite has retrenched following on from the Non-farm Payrolls report which showed the US economy failing to continue its recovery from February despite the harsh US winter coming to an end. March saw 192,000 jobs added, which was lower than a revised 197,000 a month previous. This result was that the Dow and the S&P 500 both closed over a per cent lower while the tech-laden NASDAQ was 2.6% lower.
With the Japanese yen showing signs of some strength, over in Asia, the Nikkei fell by 2% on the day to leave European traders with a disappointing handover today. Although there is no significant selling pressure as yet, forex trading remains fairly risk averse, with most of the major pairs slightly lower. The legacy of the payrolls report could continue throughout today though as there is very little economic data for traders to be majorly distracted by.
Chart of the Day – DAX Xetra
The strength of the recovery in the DAX has been remarkable over the past few weeks. The index has now retraced the whole sell-off (FTSE 100 has only just pushed past its 50% retracement). However this does leave it susceptible to some profit-taking, which looks to be on the cards today as European trading comes under pressure early on. The daily chart shows the initial reaction low at 9592, with the next support not until 9543 and the gap back at 9469. The hourly momentum indicators remain in positive configuration and suggest that corrections will be bought into so the outlook is set to be tested today. Throughout March the rising 55 hour moving average provided a decent gage of support so is worth keeping an eye on at 9609.
The sequence of lower highs and lower lows on the daily chart over the past 3 weeks continues to pull the Euro back towards a test of the key 144 day moving average which has been the basis of support currently at $1.3651, while the next key price support comes in at $1.3641. Daily momentum indicators remain corrective and the outlook certainly seems to suggest that selling into strength. Despite all the Non-farm Payrolls related noise from Friday afternoon, Euro/Dollar has not moved too much, however the intraday moving averages and momentum indicators are all in bearish configuration now and there is a decent band of resistance now between $1.3730/50 which should now be looked upon as a good area to sell as the stepped decline continues. A breach of Friday’s low at $1.3671 re-opens the downside.
The consolidation drift lower has probably now gone a bit too long for this to be considered a potential flag pattern on the daily chart as the price continues to slide back towards the support of the 89 day moving average. However, there is as yet no major sense that the bears are in control yet and the medium/longer term outlook remains fairly uncertain, with the legacy of the uptrend since August 2013 still having a roll to play. The intraday hourly chart paints more of a negative picture, as the top pattern completed below $1.6610 has now hit its $1.6555 target. The falling 55 hour moving average at $1.6591 is important here, having played the basis of support through the run higher, it is now the basis of resistance as rallies look to be sold into. The early European trading seems to be adding further downside pressure and a retest of $1.6552 look likely, with a breach opening the next reaction low at $1.6507. The 38.2% Fibonacci retracement at $1.6603 remains the key overhead resistance to breach to change the corrective outlook.
The sharp reversal on Friday came following the Non-farm Payrolls report which has since seen the yen strengthen by one big figure. The retracement of the big run higher from 101.71/104.12 is now on for Dollar/Yen. The 38.2% Fibonacci level at 103.19 briefly was supportive but has since broken and now we look towards the 50% Fibonacci level at 102.91 to do a similar job. The likelihood is that the rate will retreat towards the 102.83 level which has acted as a pivot on numerous occasions over the past few weeks. Hourly momentum indicators remain corrective and suggest selling into rallies. There is a resistance band 103.17/103.41.
Friday’s strong recovery saw the gold price back above $1300 for the first time since 27th March. However, as yet this is only the very early stages of a recovery, while the daily momentum indicators still have much to do to convince that this can be sustained. So, with the outlook now improving, the gold bulls will now be looking to leave in place some key support levels to bolster. The initial move is now retesting the psychological $1300 level. As intraday hourly momentum indicators unwind some of Friday’s exuberance, it is probably more realistic to be aiming at another higher low around the previous breakout level around $1294.60. With the 55 hour moving average, which has become a decent gauge over the past few days, now rising around $1293, this can be expected to be retested again at some stage in the coming days.