The in-line Non-farm Payrolls report may not have blown the lights out, but investors took it as a positive, meaning Friday was another push into all-time high ground on Wall Street. This has seen a glass half full outlook for the beginning of the new week, with Asian markets largely showing broadly positive gains. Sentiment was boosted as Chinese exports for May beat expectations at 7.0% (6.7% exp), whilst Japanese annualised Q1 GDP data was also strong at 6.7% (5.6% exp). This means that European traders start the day firmly on the front foot with the DAX pushing above 10,000 and the FTSE 100 back within sight of its key highs once again.
Forex trading shows early weakness for the dollar, as both the sterling and the euro start the day in positive mood, whilst the commodity currencies, Aussie and Kiwi dollars are both positive after the strong Chinese exports data. The yen is only showing very slight strength.
There is little for traders to look forward to in terms of economic data releases so speeches by the Fed members Bullard and Rosengren could gain some attention this afternoon.
Chart of the Day – Silver
At the end of May silver broke below its key long term support at $18.80. This was a decisive move that confirms that the outlook for silver is negative. The price has since rallied from $18.60 back to the resistance band $18.80/$19.17. However, the momentum indicators remain in negative configuration and are simply unwinding to renew downside potential. Furthermore all the moving averages are falling in bearish sequence, with the 55 day ma (currently $19.44) having provided resistance on two previous rallies. The suggestion is that this recovery should be sold into. The intraday hourly chart also offers little suggestion that this is anything other than a bear rally. Expect a retest of $18.60 before further weakness towards the 12 month low at $18.19. A move above at least $19.80 would be needed to change the outlook.
Despite the significant volatility experienced late last week the Euro made very little ground, but early trading today is showing some further strength. Friday’s failed attempt to break through the neckline resistance at $1.3670 would have been a blow for the bulls as his was a second time in two days. This increases the importance of today’s move which needs to make a clean breakout. The daily technical studies show an improving picture, but still more needs to be done to prevent this just simply being another chance to sell within the bear phase. The intraday hourly chart now shows the importance of resistance at $1.3677. There is immediate support at $1.3620 and a break down today would see the downside momentum increase for a test of $1.3585.
I talked on Friday about the intersection of the old uptrend and the new downtrend coming together to form resistance and this has been the case so far as Cable starts to drift lower again. There is now a key resistance in place at $1.6844 which is a potentially a second lower high under $1.6920. The RSI has a near term corrective configuration with the latest move peaking around 50. The intraday hourly chart shows more of a positive picture remains, with a move above $1.6780 having completed a near term base pattern which implies $1.6860. The neckline also formed the basis of support on Friday. This level therefore becomes key to the near term outlook as a breach would now suggest the bears are regaining control. In a seller’s market the upside targets tend not to quite be reached and the supports come under increasing pressure once more. Therefore once the immediate consolidation ends, the two key levels at $1.6780 and $1.6844 are key.
I have been anticipating for the last few days that the bulls needed to post a second higher low above the key 102.00 pivot level in order to maintain the near to medium term improvement in the dollar. Friday’s low at 102.10 could now be that low as it also comes around the support of the 89 day moving average which had been the basis of resistance during April and May but has recently turned positive again. This now makes the resistance at 102.79 increasingly important for the near term. The dollar recovery was stalled at the resistance of the underside of the old uptrend last week and this needs to be reclaimed for the dollar bulls to regain control. However for now, building support above 102.00 is a positive development to start with.
If and when the rally in gold came it was always going to struggle with so many bands of overhead resistance lying in wait. And so it has seemed as the price was unable on Friday to continue the recovery started following the ECB announcement on Thursday. Resistance at $1260 is the first barrier, whilst there is also the key level at $1268.24 and then $1276.60. Furthermore, technically the price is trading below the barrier of the falling 144 day moving average (currently $1276.85). With momentum indicators still in bearish configuration the outlook looks to be one of selling into strength still. The intraday hourly chart shows a near term trading band $1245.81/$1257.50 as consolidation takes hold. However there is little sign of any really positive momentum building and subsequently rallies should be seen as a chance to sell.