Archive March 2019

Asia Pacific Market Open Talking Points

• USD/CAD drops, eyeing support after rosy GDP data
• GBP/USD weakens as Brexit was delayed to April 12
• Asia stocks may rise with AUD/USD as JPY weakens

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Key FX News Friday

The Canadian Dollar was the best-performing major on Friday, bolstered by January’s local GDP report. At a time where most major countries are slowing, Canada’s economy should resilience as growth clocked in at 1.6% y/y versus 1.3% expected and from 1.1% in December. Local front-end government bond yields rallied, hinting at fading dovish Bank of Canada monetary policy expectations.

USD/CAD Technical Analysis

USD/CAD dropped about 0.7% on Friday in its worst single-day performance since February 22nd. This followed another retest of resistance just under 1.3469. This has left the pair eyeing near-term support which is a range between 1.3251 and 1.3291. Keep in mind that this area is also reinforced by former descending resistance from January (upper blue dashed line on the chart below).

USD/CAD Daily Chart

Chart Created in TradingView

On the flip side of the spectrum, the British Pound depreciated. For a third time, UK Prime Minister Theresa May failed to get her Brexit deal passed through Parliament. Even though MPs voted against a ‘no deal’ divorce previously, it was not legally binding. As such, leaving the EU without an agreement remains a possibility. For now, Brexit has been pushed back to April 12 on unconditional terms.

Monday’s Asia Pacific Trading Session

Monday’s Asia trading session contains a couple of event risk for the Australian Dollar such as local business confidence and Chinese Caixin PMI data. Risk trends will also be competing for Aussie’s focus. Wall Street edged higher on Friday, brushing off disappointing personal spending data. Markets may be eyeing US-China trade talks this week. With that in mind, a rosy day for equities may weaken the anti-risk Japanese Yen further as AUD/USD and NZD/USD climb.

US Trading Session Economic Events

Asia Pacific Trading Session Economic Events

** All times listed in GMT. See the full economic calendar here

FX Trading Resources

— Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

Crude Oil Forecast – Crude Oil May be Overextended, But Watch Out For Trade Headlines

Crude oil prices remain supported by supply cuts and trade deal hopes even as the economic data have proven disappointing. That support could wane a little this week

British Pound Forecast – GBP/USD Rate Threatens Bull Trend Ahead of Brexit Deadline

The British Pound may face a more bearish fate ahead of the Brexit deadline in April as the GBP/USD exchange rate threatens the upward trend from late last year

US Dollar Forecast – US Dollar May Rise as Sentiment Succumbs to Potent Headwinds

The US Dollar may rise, spurned on by haven-seeking capital flows as risk appetite finally succumbs to a broad assortment of potent headwinds.

Gold Forecast – Gold Price Outlook Bearish as USD May Rise on Soft Econ Data, RBA

Gold prices could be weighed down if the US Dollar rises in risk aversion on soft economic data. Other hazards for the precious metal include a more dovish RBA and Brexit updates

Equities Forecast – Dow Jones, FTSE 100, DAX 30 and ASX 200 Fundamental Forecast

The Dow Jones will look to a slew of economic data out of the United States while the FTSE and DAX await Brexit clarification. Elsewhere, the ASX 200 awaits a rate decision from the RBA.

See what live coverage is scheduled to cover key event risk for the FX and capital markets on the DailyFX Webinar Calendar.

See how retail traders are positioning in the majors using the IG Client Sentiment readings on the sentiment page.

Check out our Economic Calendar for upcoming economic data and central bank events.

Crude Oil Forecast– Crude Oil Prices Edge to 5-Month High, Doesn’t Feel Like a ‘Breakout’

US crude oil prices closed out this past week with a sense of progress that varies according to what time frame you evaluate. While the quarter (Q1) was extraordinary, the carry over into next week alone looks more tepid.

British Pound Forecast –No Brexit Deal- Pound Losses Mount

Sterling is set to close just above upslope support as a breakdown in Brexit negotiations weigh on price. These are the levels that matter on the GBP/USD weekly chart.

US Dollar Forecast – USD Starting to Look Exhausted

The recent batch of poor US data prints have been brushed aside by a resurgent US dollar in the past few days, but the recent push higher looks like it is running out of steam.

Gold Forecast – Gold Price Outlook Bearish in Long Run, Eying Support in Near Term

Gold prices concluded another month lower as a bearish reversal pattern formed, hinting of a top in the long-run. For now, the precious metal faces critical support that may hold.

Euro Forecast –Breakdown Potential for Q2

EURUSD has spent five months in a range through a number of Euro-drivers. But with overbought retail sentiment and bears persisting, might a break be in store for Q2?

Equity Forecast – Dow Jones Eyes Breakout, FTSE 100 in Brexit Limbo

The Dow Jones and FTSE 100 posted impressive gains over the final week of the first quarter, but where are the US and UK equity markets heading next?

WEEKLY STOCK MARKET TECHNICAL FORECAST – TALKING POINTS

• The Dow Jones Industrial Average and FTSE 100 equity indices enjoyed healthy advances this past week, gaining 1.38 percent and 1.58 percent respectively
• Stocks will likely turn to US-China Trade War progress in addition to the latest Brexit developments next week as these risks could serve as potential catalysts for a breakout – or breakdown – from recent technical levels
• Looking to expand your trading knowledge? Check out How to Day Trade the Dow Jones

Major equity indices like the Dow Jones and FTSE 100 both gained over 1 percent this past week as stocks across the world enjoyed a risk-on rebound from the prior week’s minor pullback. Despite shaky fundamentals that pose lingering risks, however, it appears that the technical outlook for equities may continue to improve.

DOW JONES PRICE CHART OUTLOOK: DAILY TIME FRAME (OCTOBER 12, 2018 TO MARCH 29, 2019) (CHART 1)

The Dow Jones Industrial Average looks like it is gearing up for another push higher. The US equity index comprised of the largest 30 domestic companies rose back above major confluence around the 78.6 percent Fibonacci retracement line drawn from the respective high and low in October and December of last year.

Do You Know the Major Differences Between the Dow Jones, S&P500 and Nasdaq?

Moreover, DJIA was able to reclaim its 20-day simple moving average this week which could further support additional upside over the near-term. Although the longer-term downtrend extended from the Dow’s high in October 2018 as well as February and March 2019 might serve as resistance and squeeze the index lower, bullish sentiment looks to outweigh this headwind.

Looking for a fundamental perspective on equity? Check out the Weekly Equity Fundamental Forecast.

FTSE 100 PRICE CHART OUTLOOK: DAILY TIME FRAME (SEPTEMBER 12, 2018 TO MARCH 29, 2019) (CHART 2)

The FTSE 100 rests at a precarious level amid the latest Brexit developments which have largely clouded UK outlook. Despite the British equity index’s strong rally so far this year, it appears that gains could be at risk. With the FTSE 100 now sitting between the 61.8 percent and 78.6 percent Fibonacci retracement levels, the British stock market barometer could come under pressure despite the strong rally enjoyed so far this year.

Visit the DailyFX Brexit Timeline for more information covering the history of the UK’s departure from the EU and its impact on financial markets.

Although the FTSE 100’s recent series of higher highs and higher lows has formed a clear upward trend, prices could come under pressure from the longer-term downtrend formed by the lower highs made in September 2018 and March 2019. That being said, the index has potential to gravitate lower towards support near the 61.8 percent Fibonacci retracement and upward sloping trendline.

TRADING RESOURCES

Whether you are a new or experienced trader, DailyFX has multiple resources available to help you: an indicator for monitoring trader sentiment; quarterly trading forecasts; analytical and educational webinars held daily; trading guides to help you improve trading performance, and even one for those who are new to FX trading.

– Written by Rich Dvorak, Junior Analyst for DailyFX

– Follow @RichDvorakFX on Twitter

Other Weekly Technical Forecast:

Crude Oil Forecast– Crude Oil Prices Edge to 5-Month High, Doesn’t Feel Like a ‘Breakout’

British Pound Forecast –No Brexit Deal- Pound Losses Mount

US Dollar Forecast – USD Starting to Look Exhausted

Gold Forecast – Gold Price Outlook Bearish in Long Run, Eying Support in Near Term

Euro Forecast –Breakdown Potential for Q2

Dow Jones, FTSE 100, DAX 30, and ASX 200 Fundamental Forecast:

• The Dow Jones – with dark clouds overhead – looks to dodge disappointing data in the upcoming week for trend continuation purposes
• FTSE 100 traders will once again await Brexit clarity following Friday’s vote
• The ASX 200 awaits a rate decision from the RBA, a dovish RBNZ last week may be a sign of what’s to come

Looking for a technical perspective on the Equities? Check out the Weekly Equities Technical Forecast.

Dow Jones Fundamental Forecast: Neutral

The Dow Jones will face a laundry list of important economic data in the week ahead. Recent economic data has been rather underwhelming, and another week of disappointment could see the index pressured after a stellar first quarter. Manufacturing and employment data will be released throughout the week all leading up to Friday’s non-farm payroll report. Last month’s data was particularly underwhelming and spurred a minor selloff in the Average. Another lackluster report this Friday could see deeper losses as employment trends lower.

Learn the differences between the Dow Jones and S&P 500 and how they might contribute to different outlooks.

Trade wars will also be a theme to watch in the week ahead. Talks between US and Chinese officials were conducted last week in Beijing and will continue this week in Washington. Recent commentary on progress has been few-and-far between and investors may begin to see fear overtake optimism once again.

Dow Jones Price Chart: 4-Hour Time Frame (August 2018 to March 2019) (Chart 1)

How to day-trade the Dow Jones

FTSE 100 Fundamental Forecast: Bullish

After British MPs rejected Theresa May’s Brexit withdrawal agreement for a third time on Friday, the uncertainty for the FTSE 100 will continue. Given the adverse reaction to the news in the British Pound, the FTSE 100 enjoyed a notable close higher as exports became more attractive to other nations. Barring an exit from the EU without a deal, GBP weakness may continue to buoy the FTSE in the week ahead.

Brexit Timeline

A no-deal exit is highly unlikely to occur next week as the EU waits for its April 10summit to convene and the date for a “hard Brexit” is April 12th. With limited economic data due next week, the FTSE 100 will likely take its cues from other European indices while it awaits Brexit developments.

FTSE 100 Price Chart: 4 – Hour Time Frame (June 2018 – March 2019) (Chart 2)

DAX 30 Fundamental Forecast: Bearish

Economic data out of Germany is similarly light. Therefore, the index will look to trade war developments, global growth concerns and regional factors to influence price action. Disappointing data out of the United States could spread concern to the DAX as investors try to ascertain the exact level of growth in the world’s largest economy. Given the severe lack of catalysts for the DAX, check out a technical forecast for the index for deeper insight.

DAX 30 Price Chart: 4 – Hour Time Frame (December 2018 – March 2019) (Chart 3)

DAX day-trading strategies

ASX 200 Fundamental Forecast: Bullish

If last week’s Reserve Bank of New Zealand meeting was any indication of monetary policy leanings in the region, the ASX may be primed to climb this week following a rate announcement from the Reserve Bank of Australia. The US-China trade war and slowing global growth have weighed on both New Zealand and Australia and the headwinds have influenced monetary policy in return. A seemingly dovish tone from the RBNZ battered the New Zealand Dollar and bolstered local equities.

With that in mind, a similar policy outlook for the RBA could beget similar price action for the Australian Dollar and the ASX 200. Given the lack of other data out of the country in the week ahead, Tuesday’s RBA decision will likely be the primary catalyst for the index. For further equity insight, follow @PeterHanksFX on Twitter.

ASX 200 Price Chart: 4 – Hour Time Frame (October 2018 – March 2019) (Chart 4)

–Written by Peter Hanks, Junior Analyst for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

DailyFX forecasts on a variety of currencies such as the Pound or the Euro are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.

Other Weekly Fundamental Forecast:

Crude Oil Forecast – Crude Oil May be Overextended, But Watch Out For Trade Headlines

British Pound Forecast – GBP/USD Rate Threatens Bull Trend Ahead of Brexit Deadline

US Dollar Forecast – US Dollar May Rise as Sentiment Succumbs to Potent Headwinds

Gold Forecast – Gold Price Outlook Bearish as USD May Rise on Soft Econ Data, RBA

Fundamental Forecast for the Euro: Neutral

– Euro rates continues to be negatively impacted by the latest Brexit negotiations

– The ‘Easter Effect’ may be present in the forthcoming Eurozone inflation report, given the calendar discrepancy over the past year (Easter was on April 1, 2018; will be on April 21, 2019).

– The IG Client Sentiment Indexshows that retail traders are buying EURUSD dips – a contrarian signal that more losses may be yet to come.

See our long-term forecasts for the Euro and other major currencies with the DailyFX Trading Guides.

Euro Rates Week in Review

The latest Brexit news are weighing on all the European currencies, not just the British Pound, and that negative sentiment was certainly reflected in Euro rates over the past week. For EURGBP (+0.58%), the missed original March 29 Brexit deadline has boosted speculation that UK Prime Minister Theresa May could be at the end of her time in office; both EURCHF (-0.59%) and EURUSD (-0.75%) reacted in line with what ‘safe havens’ would be expected to do when uncertainty rises.

Elsewhere, there was little strength the Euro could muster on its own, for every other EUR-cross’ could be explained by exogenous factors: for EURCAD, it was the better than expected January Canadian GDP report; for EURNZD (+0.35%), it was a further repricing of RBNZ rate expectations following the March meeting; and for EURJPY (+0.11%), it was global equity markets running higher.

March EZ Inflation Due Monday; Inflation Expectations Have Decoupled from Energy Prices

The Eurozone economic calendar for the coming week is once ‘barbell’ shaped: heavy on the front and back ends, thin in the middle. Traders will want to pay attention to data due out on Monday and Thursday, with little practical need to pay attention to any other European data release in between.

The preliminary March Eurozone Consumer Price Index on Monday may be impacted by the ‘Easter Effect’ due to the timing of the holiday this year (April 21) relative to last (April 1). Otherwise, the bump in Brent Oil prices over the past month (+5.1%) should filter through and help prove supportive to price pressures. The Bloomberg News forecast calls for headline CPI to come in at 1.5% and core CPI in at 1%; given the context, misses would be extremely disappointing.

Stability in energy prices have seemingly done little to filter through into inflation expectations (Brent Oil prices up by +5.1% over the past four-weeks), a strong indication that growth concerns are driving the turn lower. ECB President Mario Draghi’s preferred measure of inflation, the 5-year, 5-year inflation swap forwards, closed last week at 1.351%, sharply lower from where it was one month earlier at 1.499% (-14.8-bps).

March ECB Meeting Minutes on Thursday

The March ECB meeting minutes on Thursday will draw interest this week considering the Governing Council’s decision to announce its third TLTRO program starting this September and push back its forward guidance to indicate that rates would stay on hold through at least the end of 2019. Likewise, we’ll get some insight into how much more the central bank is willing to do at a time when fiscal policymakers are hamstrung by seemingly endless domestic woes.

Economic Data Momentum Continues to Improve

An objective look at European economic data shows that conditions have stabilized, relatively speaking, over the past few weeks. In recent days we’ve seen the March German IFO surveys and February German Retail Sales beat expectations, while Eurozone economic, industrial, and services confidence all dropped in March. As a result, heading into the coming week, the Citi Economic Surprise Index for the Eurozone has moved up to -61 from -61.6 one week earlier; for comparison, three months earlier, the index was at -73.3.

EURGBP to Stay at Center of Attention

Over the course of the week, the Brexit negotiations in UK parliament will hold considerable sway over EURGBP, and as a result, still on the broader EUR-complex. Our heuristic still holds that good Brexit news means EURGBP likely depreciates; when GBP leads EUR, other EUR-crosses have tended to outperform. And vice-versa: bad Brexit news means EURGBP likely appreciates; when EUR leads GBP, other EUR-crosses have tended to underperform.

UK PM May could try and push her EU-UK Withdrawal Agreement through UK parliament for a fourth time, and if she succeeds, then a May 22 deadline would emerge for Brexit. If not, the April 12 deadline remains (“the new March 29”). It’s possible she calls for a General Election as no path forward emerges. But to be clear: the European Union will not be the entity to push the UK out the door; they will keep offering extensions and even allow the UK to participate in European parliamentary elections.

March RBA Meeting on Tuesday, March US Nonfarm Payrolls on Friday

The first week of a new month and a new quarter typically brings the usual smattering of important economic data releases and events, and the first week of April and Q2’19 is no different. Whereas the important Eurozone data is due out on Monday and Thursday, the top events from elsewhere in the FX world come on Tuesday and Friday, in the forms of the March Reserve Bank of Australia meeting and the March US Nonfarm Payrolls report, respectively.

For EURAUD, odds are low that the RBA takes any action at all, with only a 7% chance of a 25-bps rate cut this week. But traders should be on the watch for any significant shift in tone, in line with the dovish shift seen by the RBNZ last week. Rate cut odds are building for later this year, with overnight index swaps now pricing in a 54% chance of a cut at the July meeting.

For EURUSD, the March US labor report represents another opportunity for the US economy to prove that early Q1’19 economic malaise has been overcome. After all, right around the time we got the putrid February US Nonfarm Payrolls report that showed that the economy only added 75K jobs, the Atlanta Fed GDPNow growth tracker for Q1’19 was near a mere 0.2%. Yet now, with the headline March US jobs report due to show gains of +180K and the Atlanta Fed GDPNow growth tracker up at 1.7%, traders may be less inclined to be so aggressively dovish on the Fed this year (Fed funds pricing in a 25-bps rate cut at the September 2019 meeting).

Shorts Build in Futures Market, Dragging Euro Rates Lower

Finally, looking at positioning, according to the CFTC’s COT for the week ended March 26, speculators increased their net-short Euro positions to 80.3K contracts, down from the 77.7K net-short contracts held in the week prior. The largest net-short position since December 13, 2016. It’s not difficult to envision the significant short position in the futures market playing a role in any major price developments around the latest Brexit news.

FX TRADING RESOURCES

Whether you are a new or experienced trader, DailyFX has multiple resources available to help you: an indicator for monitoring trader sentiment; quarterly trading forecasts; analytical and educational webinars held daily; trading guides to help you improve trading performance, and even one for those who are new to FX trading.

— Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher, email him at cvecchio@dailyfx.com

Follow him in the DailyFX Real Time News feed and Twitter at @CVecchioFX

EURUSD Talking Points:

• EURUSD has moved back to test a familiar level on the chart at 1.1212, which is the 61.8% Fibonacci retracement of the ‘lifetime move’ in the pair, taking the low from the year 2000 up to the 2008 high.

Do you want to see how retail traders are currently positioned? Check out our IG Client Sentiment Indicator.

Welcome Back, 1.1212

Going back to just a few years ago, EURUSD was stuck in a range while much of the economic world saw the pair breaking-down to parity. This was after the ECB had just gotten started with their QE program; the announcement of which compelled a 3,000+ pip breakdown in EURUSD with prices in the pair testing below the 1.0500 handle. But, as European QE got up and running, EURUSD price action churned within a range for the next two-plus years.

Delineating resistance in that range for most of the period was a key Fibonacci level at the spot price of 1.1212: This is the 61.8% retracement of the ‘lifetime move’ in EURUSD, taking the low from the year 2000 up to the 2008 high.

EURUSD Monthly Price Chart

Chart prepared by James Stanley

EURUSD prices left that level behind in June of 2017, just as a wave of rather surprising strength was starting to show in the single currency. As investors began to brace for the eventual move away from stimulus by the ECB, EURUSD began to rally in a theme that lasted into the next year as prices re-tested the 1.2500 level. But that’s where the bullish trend died-out, and as political risks started to re-appear through the Euro-zone, another wave of selling showed in the pair that pushed through the second and third quarters of last year. This pushed EURUSD right back down towards that 1.1212 level, which helped to hold the November low and continues to show support as the door opens into Q2 of 2019.

EURUSD Weekly Price Chart

Chart prepared by James Stanley

EURUSD Technical Forecast: Bearish

The 1.1212 level has continued to play out with importance in EURUSD price action. That November swing-low caught support around this area, and that led into yet another range formation; and that’s been building over the past five months.

Amazingly, this five-month stretch of range has seen a number of bearish Euro factors come to light, including: A debt standoff between Italy and Brussels that carried potentially existential implications for the Euro-zone, and an announcement of stimulus exit, which was followed just a few short months later by another announcement of a fresh round of stimulus. Through it all, the range has remained.

EURUSD Daily Price Chart

Chart prepared by James Stanley

For next week, the technical forecast for the Euro will be set to bearish, looking for a downside test below range support as the well-weathered zone faces another series of tests.

Supporting that thesis is an overweight long position via retail traders as shown via IG client sentiment, currently sitting at +2.57, as of this writing. This is an apparent attempt from the retail crowd to look for range continuation, which is somewhat of an oddity as this is a group that will traditionally be swinging for the fences. The fact that they aren’t here makes the bearish case all the more attractive.

EURJPY for USD-Avoidance

Another option for traders looking for short-side exposure in the Euro is the EURJPY cross-pair. This was my chosen candidate to work with that theme coming into 2019. But, more recently, the pair has started to show tendencies of further breakdown; and I looked at short-side setups coming into this week that filled-in to the first target fairly quickly. This can remain as an option for traders that want to look for short-Euro exposure without having to take on risk in or around the US Dollar.

EURJPY Eight-Hour Price Chart

Chart prepared by James Stanley

To Read More:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q4 have a section for each major currency, and we also offer a plethora of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers an abundance of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

— Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

Other Weekly Technical Forecast:

Crude Oil Prices Edge to 5-Month High, Doesn’t Feel Like a ‘Breakout’

British Pound Forecast –No Brexit Deal- Pound Losses Mount

US Dollar Forecast – USD Starting to Look Exhausted

Gold Forecast – Gold Price Outlook Bearish in Long Run, Eying Support in Near Term

Gold Technical Forecast: Bearish

• Gold prices fell, concluding a second month of losses
• Path of least resistance for gold in long-run may be lower
• Interim signals not quite as clear, consolidation may ensue

Find out what the #1 mistake that traders make is and how you can fix it!

Anti-fiat gold prices experienced the worst week since the beginning of March, weighed down by a stronger US Dollar. The precious metal also concluded its most disappointing month since August as we head into the first day of April. Looking at the monthly chart below, March left behind the completion of an evening star bearish reversal pattern.

In the beginning of 2016, the inverse of this candlestick formation, a morning star, preceded a climb of about 20%. Keep in mind that past performance is not indicative of future results, and candlestick patterns ideally require confirmation. As such, if April turns out to be another sour month for gold, we may see a dominant downtrend ensue in the medium-to-long-term scenario. This would fit the forecast in last week’s fundamental outlook.

Looking for a fundamental perspective on gold? Check out the Weekly Gold Fundamental Forecast.

Gold Monthly Chart

In the interim, the technical picture is not quite as clear. Zooming in on the weekly chart, it is tempting to call the recent candles a falling three method pattern (red box on the chart below). This is typically a bearish formation, but it needs to form in the middle of a downtrend. In this situation, it has formed at a potential top, invalidating the setup.

Gold Weekly Chart

With that in mind, let’s take a look at the daily chart. Last week, gold prices fell under a near-term rising support line from March 7th. This is after failing to breach falling resistance from gold’s top in February, which occurred after a formation of an evening star. While the drop in the last week of March was impressive, it stopped short of breaching the range of support between 1276 and 1285.

If this area holds in the week ahead, we may be due for another retest of the falling trend line from February. This opens the door to consolidation between horizontal support and descending resistance. I have highlighted this as the green triangle on the chart below. Clearing the floor opens the door to testing the next area of support at 1260, a psychological level going back to October 2017. This may be the path of least resistance if the technical signals prevail in the long run.

Gold Daily Chart

ChartsCreated in TradingView

FX Trading Resources

— Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

Other Weekly Technical Forecast:

Crude Oil Prices Edge to 5-Month High, Doesn’t Feel Like a ‘Breakout’

British Pound Forecast –No Brexit Deal- Pound Losses Mount

US Dollar Forecast – USD Starting to Look Exhausted

Gold Price Fundamental Forecast: Bearish

• Gold prices’ inverse link to the US Dollar has strengthened recently
• US econ. data may underperform, fueling risk aversion as gold sinks
• Hazards for the yellow metal also include more dovish RBA, Brexit

Looking for a technical perspective on the Gold? Check out the Weekly Gold Technical Forecast.

Trade all the major global economic data live and interactive at the DailyFX Webinars. We’d love to have you along.

Gold prices spent most of last week declining, with the commodity dropping almost 1.5 percent in its worst single-day performance since the beginning of March on Thursday. The anti-fiat precious metal, thanks to a lack of interest-bearing qualities, inversely tracked the US Dollar. At one point, it even weakened alongside a pullback in the S&P 500. This undermined its often-associated trait as a safe haven.

Lately, XAU/USD has been tending to be more sensitive to movements in the Greenback. Looking at the chart below, the yellow metal fell despite a deterioration in front-end government bond yields from developed countries such as the United States and Germany. Simultaneously, its correlation with DXY has been becoming increasingly inverse since the end of February.

Gold Versus Developed Nation 2-Year Government Bond Yields and US Dollar

Chart Created in TradingView

Gold Week Ahead

With that in mind, gold prices will be closely watching what could impact the US Dollar in the week ahead, and there is much to anticipate. Ahead, data such as US retail sales, durable goods and the latest non-farm payrolls report are on the docket. The Federal Reserve is currently in wait-and-see mode as it cooled expectations of two hikes for this year. Can those odds be revived?

The Citi surprise index seems to suggest otherwise. Data has been tending to increasingly underperform in the world’s-largest economy, hinting that more downside surprises could be in store ahead. This was largely the case this past week. It should be noted that Fed funds futures are pricing in about a 70% chance of a hike for this year. Yet, the US Dollar has held up remarkably well all things considered.

If US equities suffer on fears of economic growth slowing on dismal domestic economic statistics, the Greenback may receive a lift. Aggressive risk aversion often diverts investors into the world’s most liquid asset. Another source of uncertainty could come from the RBA given that the RBNZ recently announced that it favors a cut as its next move. If the former follows suit, USD could rally, pressuring the metal.

Gold may move inversely to USD, but the direction of government bond yields should still be taken into account. Let’s not forget that gold’s rise since the latter half of 2018 tracked a flattening in a closely-watched section of the US yield curve before it eventually inverted on March 22. Brexit also remains a wildcard for sentiment. Given these numerous risks, gold bulls ought to proceed with caution.

Gold Trading Resources:

— Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

Other Weekly Fundamental Forecast:

Crude Oil Forecast – Crude Oil May be Overextended, But Watch Out For Trade Headlines

British Pound Forecast – GBP/USD Rate Threatens Bull Trend Ahead of Brexit Deadline

US Dollar Forecast – US Dollar May Rise as Sentiment Succumbs to Potent Headwinds

US Dollar (USD) Technical Analysis

• US growth and inflation prints both miss expectations.
• USD is still the cleanest shirt in the laundry basket.

Q1 Trading Forecasts for a wide range of Currencies and Commodities including USD with our fundamental and technical medium-term technical outlook.

How to Combine Fundamental and Technical Analysis.

Technical Forecast for US Dollar: Neutral

The recent strength of the US dollar in the face of weakening growth and below-target inflation prints, and near multi-month low US Treasury yields, has left many traders confused. The FOMC, and the market, has all but priced out any further interest rate hikes in 2019, while the Fed’s balance sheet normalization program is being slowed down from May and put on hold in September this year. Against this backdrop most currencies would fall lower, testing support levels. The greenback however is not playing by traditional rules with the US dollar basket within touching distance of highs seen back in late-June 2017. This may be partially explained by the USD being ‘the best of a bad bunch’ with both the EUR and GBP continuing to battle with their own problems.

Why Does US Yield Curve Inversion Matter?

The US Treasury curve continues to drift in and out of inversion – short-end yields higher than long-end yields – normally a recessionary warning light, but the greenback still moves higher. The technical set-up of the DXY (US dollar basket) is now showing signs of a late-rally exhaustion and is struggling and while it remains very close to, but under the recent 97.23 highs made on December 14 and March 7, it will need some strong data to break conclusively above here. The 61.8% Fibonacci retracement of the January 17, 2017 – February 18, 2018 move is at 97.74 and will prove a tough resistance level to break if recent highs are taken out. To the downside, initial support from the 20- and 50-day moving averages before an important zone where the 50% retracement of the previously noted move cuts in at 95.87, just above the 200-day moving average at 95.65. The CCI indicator is also nearing overbought territory and may restrain any further upside momentum.

I remain neutral on the short-term outlook for the US dollar but with a bearish undercurrent.

Looking for a fundamental perspective on USD? Check out the Weekly USD Fundamental Forecast.

US Dollar Basket Daily Price Chart (July 2018 – March 29, 2019)

How Central Banks Impact the Forex Market

Interest Rates and the Foreign Exchange Market

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— Written by Nick Cawley, Analyst

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