Risk aversion appears to have crept back into the markets in the past day. Political tensions in the Ukraine have encouraged Russia to step up military exercises along its border as Putin wants to appear ready to flex his muscle. As this news filtered through yesterday afternoon, there was a decisive shift back towards the safe haven currencies as Euro/Dollar, Cable and Dollar/Yen all fell away (although both Cable and Dollar/Yen subsequently recovered). This mood change resulted in a cautious session on Wall Street and mixed Asian trading. This has left European markets with uncertainty in early trading.
A significant impact on traders’ thoughts today will come with the second and delayed testimony of Janet Yellen to Congress, this time to the Senate Banking Committee, which is scheduled to start at 15:00GMT. In her first testimony to the House, she cited that weather may be a reason why the recent Non-farm Payroll reports had been so weak. The economic data since then has remained on a fairly weak trend, so traders will be looking for Yellen to provide more detail which is likely to come during her questioning by Senators.
Other key events to watch out for today include German inflation at 13:00GMT which is forecast to remain at 1.3% but could certainly provide the euro with some volatility. Also from the US there is Durable Goods data and Weekly jobless Claims, both at 13:30GMT
Chart of the Day – Silver
Having underperformed gold in recent times, the silver price had more of a price shock yesterday afternoon amid the flight to safety. The move has taken the price below the support of a trading band that had been building at $21.29. This broken support now implies a move back towards the neckline support of the big base pattern on the daily chart at $20.50. Momentum indicators on the daily chart have rolled over and are now in correction mode. A couple of attempted rallies overnight have failed around the old support band at $21.30/$20.35 which now turns into resistance. The resistance is now key as continued failure around this level would mean the chances of sustained correction would increase. A move below the $20.96 overnight low would open the downside.
After several days of trading broadly sideways, yesterday saw a significant shift in sentiment to the bears. This was a huge move in the context of the previous days and decisively changes the outlook for the near term. Having already broken the intraday uptrend, has completed a top pattern fall below the support at $1.3685 which now suggests a move back towards $1.3600 could be on. There is now significant overhead supply in place with the resistance from the old lows within the trading band which look set to cap any thoughts of recovery. With a minor rally hitting a peak at $1.3695 overnight, there is resistance to overcome between $1.3701 and $1.3714 if the bulls are going to get back on track. A move early in European trading back below yesterday’s low at $1.3660 has now re-open the downside once more.
The sell off from yesterday afternoon formed a low at $1.6619 and although the support around $1.6603 (the 38.2% Fibonacci retracement of the previous bull run to $1.6822) has held, the outlook seems to be shifting back towards one of uncertainty once more. The intraday hourly moving averages are flattening off and perhaps more importantly, the 200 hour moving average has now rolled over and could begin to provide resistance at $1.6668. Momentum indicators are fairly neutral on the hourly chart and the intraday price action suggests that Cable needs to break back above $1.6701 to begin to suggest an improving outlook once more. Failure to do so could result in another drift back to test yesterday’s low at $1.6619 and perhaps the $1.6603 retracement level once more.
An element of volatility crept back into the chart of Dollar/Yen yesterday. As the news about Russian troops on the Ukrainian border filtered through there was first a spike lower (yen strength) and then a spike higher (dollar strength) only to settle back to where it was originally. So where does this leave the chart? Neutral once more and looking for direction, unfortunately. The rate continues to range and is now forming a band between the 101.98 low (basically the 102.00 pivot level still) and now 102.61 (the peak on the last three moves higher). Momentum indicators are not showing much, but at least the uptrend on the intraday chart remains intact. We continue to wait for a serious breakout.
Yesterday’s decline on gold was disappointing, as given the political tension that is building over Ukraine and Russia, gold would have been expected to gain on the argument that it is an “insurance trade”. There was a move to the downside which has taken the price back into a support band $1315/$1328. The price is now back to the rising 200 hour moving average which is being used as support currently at $1325.51 and also the support of a re-drawn uptrend. With intraday momentum indicators turning higher once more, for now we just treat yesterday’s price action as a blip within the uptrend and probably as more of a buying opportunity. The daily chart remains strong still.