European markets are struggling to put yesterday’s lackluster session behind them as they trade slightly lower again in early exchanges. The newsflow has been fairly quiet in recent days, and it does not appear as though the bomb blast in Thailand has been deemed to justify further weakness. Wall Street closed in mildly positive territory last night after some more upbeat housing data painted over the cracks of weaker New York manufacturing data. The S&P 500 closed 0.5% higher, whilst Asian markets were mixed to slightly lower.
In forex trading shows the US dollar slow drift higher continues with another decent start to the day again. The euro continues to drift lower with the $1.1050 pivot level now under threat, whilst there is a generally dollar positive theme running through equities. The one main exception is the Kiwi which is performing better today after news that Russia had partially lifted a two year ban on dairy products from New Zealand. In commodities, Gold and silver are consolidating, whilst oil has dipped again after closing at its lowest level last night for six and a half years.
Traders will be watching UK CPI closely at 0930BST this morning after comments from Bank of England MPC member Kristin Forbes bordered on the hawkish at the weekend. The year on year data is expected to once more be flat at zero, but watch also for the core data. Any uptick would give sterling some strength today. US traders will be on the lookout for the Building Permits and Home Starts, which come in the wake of the NAHB data which showed further improvement in home prices in the US. The data is released at 1330BST and Building permits are expected to show a slight dip back to 1.23m (from 1.34m last month), with Home Starts expected to improve slightly to 1.19m (from 1.17m).
Chart of the Day – Silver
I have discussed previously that silver has been pulling gold around in recent weeks, as the gold/silver ratio has dropped, whilst also some corrective signals around a key resistance level could mean that the silver bulls are running out of steam. A bearish engulfing candle pattern on Friday (bearish key one day reversal) has left key resistance at $15.61 and changed the outlook near term. The fact that this has taken place around the resistance of the old key floor at $15.50 is interesting as well. The recent rally has unwound the MACD lines to neutral, the RSI back to 60 and the Stochastics have crossed lower and are close to confirming a sell signal. The intraday hourly chart shows that the consolidation in the past couple of days could turn out to be a mini top pattern. Watch out for support at $15.07 being key now near term, with a breakdown suggesting a move back to $14.50 could be seen. The concern is also that the hourly MACD lines have taken on more of a corrective outlook in the past 24 hours and this is a drag on the price. Resistance comes in at $15.40 and $15.61.
The rebound for the euro is now being seriously tested as the bottom of the 50 pip pivot band I see in place between $1.1050/$1.1100 is being challenged early today. The euro is also back to the 144 day moving average (at $1.1058) which the bulls will be looking at as a gauge for sentiment. The momentum indicators are also now beginning to deteriorate again and although there I still some hope with the pivot intact, the signs are increasingly negative. I had previously thought that the upside move on the euro last week had taken the wind out of the bull sails but it would appear that once more the bulls are gradually strengthening their position again. A closing break of $1.1050 would suggest they are gaining control once more. The intraday hourly chart shows a bearish drift in the past three days, whilst the hourly momentum indicators are suggesting further weakness and $1.1020 initial support could come under pressure today, beyond which lies $1.0960. Initial resistance is now in place at $1.1122.
It is uncanny how many times the top of the trading band has been tested and the bulls have failed to breakout. The resistance between $1.5670/90 is sizeable on a near term basis and once again a challenge has come up short. In fact, the reaction at the resistance was so negative that a bearish engulfing candle (bearish key one day reversal) has formed. Now, this is not the first bearish engulfing candle on Cable during this range phase, and the last one did very little to provide direction. So I am not going to get to excited yet about this one, just that once more corrective signals are coming at the range highs again. Momentum indicators remain very much in neutral configuration and continue to play the range. Looking at the intraday hourly chart, in yesterday’s video I spoke about the uptrend since the 7th August, however this has now been broken and the corrective outlook on the hourly momentum has taken over. Hourly moving averages have flattened and Cable is once more back to trading around the 50% Fibonacci retracement level at $1.5558. Around the middle of the range it becomes more of a 50/50 call on whether the net direction within the range is higher or lower.
The outlook has become decidedly uncertain as a third consecutive candle has come within a 60 pip range between 124.00/124.60. Dollar/Yen also continues to trade within this band again today. The dollar bulls appeared to have lost impetus after the big bearish engulfing candle on Wednesday last week but the move has not resulted in a dollar correction, more one of consolidation. The daily momentum indicators are fairly benign, with even the Stochastics now beginning to flatten off (having been corrective). The intraday hourly chart reflects the consolidation, but also that there are a couple of minor higher lows in place, at 124.00 and 124.20, which is putting a little pressure on the overhead resistance at 124.60. I continue to see a decisive move above 124.60 or below 124.00 as required to derive the next direction. Until there are more signals, Dollar/Yen is in consolidation mode.
Of late it would appear that consolidation is the theme across several of these major charts currently, and gold is no exception to that. The bulls will be hopeful after they seemingly stopped the rot from setting in with support formed at $1111.40. This keeps the possibility that there could still be a move back towards the resistance of the old floor at $1131.85. However the candle from yesterday leaves open questions, as the move closed below the day’s midpoint which would suggest the bulls have lost some of the impetus on the day. That makes today’s trading more interesting and a positive day required to suggest a positive near term outlook remains. However, the intraday hourly chart has taken on more of a neutral outlook, with the hourly RSI now fluctuating between 30/70 (which is typical in a range play), and MACD lines also very benign. Key near term resistance is now yesterday’s high at $1122.65.
As yet there is nothing really in the charts to get too excited about from a recovery front, and despite the initial signs of a possible recovery, the bulls have once more been quickly snuffed out. A close below the March low (of $42.03) has just confirmed the bearish outlook which remains open for the next move towards $40. The downtrend is still overpowering and comes in at $43.22 today, which is above the initial resistance. The intraday hourly chart shows Friday’s reaction high at $42.96 is initial resistance, and I was hoping to be able to talk about a possible base pattern today, but the bears have once more taken hold and the pressure is back to the downside again. Tradition says to stick with the downtrend as intraday supports are tested at $41.65/$41.35.