Last updated: May 3rd, 2017 at 09:58 pm
The announcement of Chinese economic data continues to be of enormous importance to traders, especially since the FOMC used China as a reason why it had failed to hike rates. Today’s announcement that China’s GDP for the third quarter had slipped to 6.9% which was its lowest in 6 years is big news. This is below the government’s 7% target for the year. However this does seem to broadly reflect the continued re-balancing of the Chinese economy towards a more sustainable consumer led economy. Also the figures had not been as bad as the 6.8% the consensus had expected. Also Industrial production numbers may have missed estimates but Retail Sales data came in slightly better than expected. The market has taken this news with uncertainty, with mixed performance across Asian markets, whilst European markets are slightly lower in early trading.
Forex markets the dollar has comes under some slight corrective pressure as the European session has taken over from the Asian session. The euro has been supported today, whilst Sterling and the yen are also gaining ground. Commodity prices are lower with gold silver and oil all weaker as the China data has not helped this morning.
Traders will continue to react to the Chinese economic data whilst also keeping an eye on the US housing data this afternoon with the NAHB Housing Market Index which is expected to remain at 62 when it is announced at 1500BST.
As perhaps can have been expected the gold price was not the only precious metal to turnaround its outlook recently. Silver has also driven a key breakout. Just as gold has broken through $1170, the silver price has moved decisively above $15.50. The rebound is also above all the moving averages so the outlook is certainly now improving and the bears have lost control. Momentum indicators also reflect this improvement with the RSI consistently above 60 when previously this is the level at which it had failed at. The medium to longer term chart shows how important it is that silver now builds above $15.50 as this has been a crucial pivot level in the past year. The past couple of days has seen the price just drifting lower and could test this support again today. The outcome of this test will determine the medium term outlook and makes today’s trading incredibly important.
The near term corrective outlook is playing out as the euro has pulled back from the key resistance around $1.1465. However this still has the look of a counter trend move and although the near term sellers have been controlling the moves in the past couple of days, I still expect this to be short lived. The medium term technical indicators such as the RSI and MACD are positively configured and although the Stochastics show a near term correction, once this has played out I still see the bulls in control. There is a good band of support now $1.1200/$1.1300, with Friday’s low at $1.1333 so far holding today. I expect further pressure back on the range highs in due course but I am still looking for the near term buy signal first. Resistance at $1.1420 protects a move back towards the $1.1465 resistance once more.
Cable remains in consolidation mode as the sharp run higher has just stalled for the time being. A second small bodied candle with little shadows reflects this and we wait for the next catalyst. Momentum indicators are settling down on the daily chart whilst the hourly chart shows the pair has been trading between $1.5413/$1.5508 for the past few days. I am still mindful that the RSI on the daily chart is stalling once more around the 60 point and for the near term recovery to continue in a serious manner the RSI needs to push above 60 and towards 70 to reflect the momentum. Above $1.5508 opens $1.5660. There is a decent band of near term support $1.5300/$1,5385.
After the strong downside move last week comes the rebound, but what we need to know is whether the rebound is now a counter trend move. I see the yen as a strengthening force in this pair and the momentum indicators on a medium term basis suggest that rallies are a chance to sell. The rebound has moved into the resistance band 119.20/119.50 and this is causing the recovery to stall. Today’s trading will be interesting as the hourly MACD lines have already rolled over and are suggesting that the recovery has run out of steam. There is now support around 118.90 which if it is lost then the sellers could return again to retest the key support band 118.30/118.50. A move above 120.00 would require me to seriously rethink my strategy.
Since gold completed the breakout above the key resistance at $1170 I have been talking about the next phase in the recovery. I have been saying that there needs to be a new higher low posted in place ideally between the breakout levels of $1156/$1170. This assessment is now being tested today as the price has continued ot drift lower today. The momentum indicators are drifting off and the momentum has just been lost a touch for the bulls This means that the reaction to the next support and buy signal will be key. If there is luke warm interest at the next support then this will raise serious issues over the potential for further gains. There is initial resistance in at $1184.20 prior to the $1190.60 high.
The bulls have stepped in once more to prevent what was becoming a worrying slide on WTI. This has meant that the band of support $43.20/$44.00 has been bolstered and provided an extra support now with Thursday’s low at $45.23. However, I am not getting overly excited yet as most technical indicators imply a range play now with uncertainty of the near term direction. The neutral candlestick patterns of Thursday and Friday hardly smack of a big buy signal, whilst the Stochastics, MACD and now RSI are also all but neutral, as are a flat pair of Bollinger Bands (with a $6 range between $43.40/$49.40). The intraday hourly signals are equally uncertain and now there are key levels within the range to watch – the support at $$45.23 and the resistance at $48.43. Much in between now is just noise as breaches of these two levels will drive direction near term.
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