(Stefanos Oikonomidis – XM)
Gold bounces off 6-week low, retains bearish bias
Gold has been trending lower since early March, generating a profound structure of lower highs and lower lows within a descending channel. Although the precious metal’s latest downleg came to a halt at the six-week low of 1,688, the broader bearish technical picture remains intact.
The short-term oscillators currently suggest that near-term risks remain tilted to the downside. Specifically, the RSI is flatlining beneath its 50-neutral mark, while the MACD histogram is below both zero and its red signal line.
Should selling interest intensify further, the price might encounter immediate support at the six-week low of 1,688. Sliding beneath that level, the bears could aim for the one-year low of 1,681. A violation of the latter would send bullion to form fresh bottoms, where the next obstacle could be found at the April 2020 support of 1,640.
On the flipside, if negative momentum fades and the price drifts higher, the recent support of 1,727 may cap initial advances. Piercing through this region, the precious metal could ascend towards 1,765 or higher to test the August peak of 1,807. Crossing above the latter, gold traders may shift their attention to the 200-day simple moving average (SMA), currently at 1,835.
Overall, despite the latest signs that the market is trying to push for some recovery, gold maintains both its bearish short- and long-term outlooks. For the former to alter, the price needs to decisively cross above the 1,807 ceiling.
More misery for EURUSD ahead of ECB
EURUSD opened with a gap lower on Monday to chart a new 20-year low at 0.9877.
The constraining descending line, which connects all the lows from August 2018, continued to buffer downside pressures ahead of Thursday’s ECB policy announcement, but despite that floor, the technical picture cannot detect any buying appetite. The RSI has erased its latest bounce and is heading south again. Likewise, the Stochastics have also pivoted to the wrong side, while the MACD is trying to resume its bearish wave below its red signal and zero lines.
As regards the market trend, there is no improvement here either, with the pair maintaining a series of lower lows and lower highs within the 2022 bearish channel. The negative slope in the simple moving averages (SMA) is backing the bearish direction too.
Should the bears claim the 0.9900 region, the pair could directly descend towards the 2002 limits registered within the 0.9780 – 0.9700 area. A sharper decline could shift all attention to the the channel’s lower boundary at 0.9600. Another disappointment here could see an extension towards the 0.9450 barrier last seen during 2000 – 2001, further worsening the bearish outlook.
In the event of an upside reversal, the 20-day SMA could once again ruin any recovery around 1.0067. Higher, the 50-day SMA and the channel’s upper band both seen within the narrow 1.0156 – 1.0186 territory may defend the negative direction in the market. If they prove fragile this time, the bullish correction could fasten towards the August peak of 1.0367, a break of which is needed to reverse the bearish trend.
Summarizing, the odds have once again shifted in bears’ favor and unless the 0.9900 base stands firm, the sell-off could exacerbate towards the 0.9780 – 0.9700 zone.
AUD/NZD primed for falls? [Video]
(Giles Coghlan LLB, Lth, MA – HYCM)
The RBA meets on September 06 and there are a number of factors likely to weigh on the AUD going forward.
China’s growth is slowing and the AUD tends to rise and fall with China’s economic growth.
The key export commodities from Australia have seen lower prices. Iron ore, coal, and copper prices have all been tracking lower on global growth slowdown worries.
The veteran economist Saul Eslake sees the RBA abandoning the 50 bps rate hike going forward. He expects unemployment to rise and GDP to miss the RBA’s projections.
So what’s the trade?
Well, if the RBA does take a more dovish stance at its upcoming rate meeting then that can be nicely expressed through an AUDNZD short at market.
Also, look at the strong seasonals favouring AUDNZD selling. With 16 falls between Sep 06 and Sep 19 over the last 22 years the seasonal favour AUDNZD weakness too.
Major trade risks
The major risk here is that the RBA take a more hawkish stance at their upcoming meeting and that can lift the AUD. The other risk is that a turnaround in China’s growth picture and/or commodity prices can nullify this outlook.