Looking To Use Today’s Pullback As A Chance To Buy
Hantec Markets | Apr 07, 2020 13:31
Trading outlook:
The bulls are back in control on the decisive breakout above $1642. We look to use this morning’s intraday weakness as a chance to buy around the breakout.
Fundamentals/Newsflow
Gold has surged to breakout to three week highs. The move has seemingly been decoupled from moves on US Treasury yields. The usual safe haven relationship is less certain now. We show this relationship by inverting the US 10 year yield.
The far more interesting correlations for gold come with USD and equities (we take as the E-mini S&P futures). In the past week there has been a shift in the relationship with the US dollar. Normally the correlation is consistently negative, however during the early weeks of the Coronavirus outbreak (mid-Jan to end Feb), the correlation became positive (both acting as normal safe havens). However, as volatility spiked and gold became more positively correlated with equities in March, the correlation with USD turned negative. It is interesting to see that in the past week, gold and USD are moving in tandem once more. This comes as a positive correlation with equities has begun to tail off. Yesterday’s moves (where gold, USD and equities all went higher) seemed to go against this slightly, but we expect equities to remain choppy in the coming weeks and the USD to retain its performance and markets struggle for sustained risk appetite improvements.
We showed yesterday the improvement in the performance of gold relative to other major currencies. Over the course of trading since 4th March, gold is outperforming all of the majors, including the US dollar.
Get The App
We believe that as the volatility continues to settle, we look for gold to continue to perform well. Looking longer term, we still believe that with real yields expected to remain low and negative with the massive easing of monetary policy, we expect gold to remain supported and medium to long term positive.
Support
- $1642 – breakout support, 26th March high (23.6% Fibonacci retracement of $1445/$1702)
- $1605 – 3rd April low (also 38.2% Fibonacci retracement of $1445/$1702 is at $1604)
- $1595 – 6th April low
Resistance
- $1671 – 7th April intraday high
- $1702 – Multi-year high – 26th March high (23.6% Fibonacci retracement of $1445/$1702)
- $1795 – 2012 high (October)
Technical Analysis
A huge positive candlestick has put the bulls in control of gold once more. The positive candles have been building in recent sessions, but the reaction to an early gap lower on Monday morning was for the market to buy consistently throughout yesterday’s session. Technically, the outlook is strong once more, with the decisive close clear of the resistance at $1642 which also means clearing the 23.6% Fibonacci retracement (of $1445/$1702) at $1642. Momentum indicators are decisively positive now, with RSI confirming the breakout and above 60 whilst MACD lines are accelerating above neutral and Stochastics bullishly configured. After such a strong candle (which added $45 on a close to close basis and $65 from the day low) there can be a tendency for at least an intraday pullback, which could be seen today. However, we look to use intraday weakness as a chance to buy, with the breakout at $1642 as a key support area now. There is an uptrend of the past two weeks rising at $1604 today as a gauge for the near term outlook, but the bulls will certainly now be eyeing the multi-year high of $1702 again. Initial resistance is the overnight high of $1671.
"""DISCLAIMER: This report does not constitute personal investment advice, nor does it take into account the individual financial circumstances or objectives of the clients who receive it. All information and research produced by Hantec Markets is intended to be general in nature; it does not constitute a recommendation or offer for the purchase or sale of any financial instrument, nor should it be construed as such.
All of the views or suggestions within this report are those solely and exclusively of the author, and accurately reflect his personal views about any and all of the subject instruments and are presented to the best of the author’s knowledge. Any person relying on this report to undertake trading does so entirely at his/her own risk and Hantec Markets does not accept any liability. """
Original Post
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.