Asian markets were lower overnight after mixed GDP data out of China showed that growth in the world’s second largest economy fell slightly in Q4 2013 to 7.7% which was down from 7.8% in Q3. Industrial output for China came in slightly below estimates at 9.7% while retail sales were in line at 13.6%. With Wall Street on public holiday for Martin Luther King Day, investors will be using this Chinese data as the main lead in what is likely to be a day of light volumes. With financials in Asia suffering it is likely that appetite for risk may be quite low and that European trading will begin on the the weaker side. Throughout the day there is very little on the way of economic announcements for traders to go on before Tuesday’s German ZEW and the IMF’s economic outlook.
Friday’s sharp move lower following the huge beat in UK Retail Sales has so far failed to breach the key support low at 0.8226, however the downtrend and falling moving averages on the daily chart continue to suggest selling into strength is the way to play this one. Momentum indicators show further downside potential for a test of the support. If 0.8226 breaks it would be a 12 month low and opens the next band between 0.8106/0.8164. As momentum unwinds the intraday chart has settled to build support at 0.8229, however any bounce into the 0.8277/0.8282 resistance band looks a chance to sell.
The downside pressure is now beginning to mount on the daily chart as the Euro falls to a six week low below $1.3547. The uptrend which had been supportive since July has now given way and a test of the key November lows at $1.3398 and $1.3295. The intraday chart has found some support at $1.3506 and as an oversold position unwinds this may give another chance to sell. There is a band of resistance in at $1.3580 which would be a decent area to look for short positions. Back on the daily chart the underside of the old uptrend now becomes resistance.
The sharp spike higher on Friday hit a high at $1.6457 just under the 14th January high at $1.6463 before consolidating. This move has muddied the waters slightly although a head and shoulders top pattern that completed on an intraday basis on Friday remains possible until a break above $1.6517. As the European trading hours have taken over today, Sterling has strengthened once more and a push higher back towards the $1.6463 resistance looks on again.
The key reaction high at 105.12 remains intact as the bounce from 102.83 has just run out of a steam for the moment. Leaving another possible lower high on the daily chart at 104.92, the 21 day moving average which had been a good basis of support is now beginning to act as resistance and is beginning to turn lower. The near term technicals have rolled over and look corrective now, with upside impetus for the dollar having waned. The hourly chart shows resistance at 104.47 with the moving averages turning lower and momentum indicators suggesting that this could be a good chance to sell. A retest of the low at 103.84 could be seen, with the next band of intraday support 103.50/103.60.
A strong push higher overnight has seen gold rise to a 5 week high and brings the December high at $1267 into range. However the resistance from the big downtrend is also looming overhead, while the momentum indicators suggest that if this move is anything more than merely corrective within the downtrend, the bulls need to back it now. The hourly intraday chart suggests that perhaps upside momentum is waning with a MACD sell signal and RSI falling away. A move above $1267.26 would certainly cheer the bulls, with support at $1234.10 increasingly important on the downside.