President Trump’s press conference ended up producing sanctions which were lighter than the markets had feared, causing the USD Index (DXY) to end the week lower after a 4th straight day of losses.
The DXY looks set to end the week at the 98.31 level, down 0.16 on the day and 1.5% on the week as President Trump has announced he would revoke Hong Kong’s special trade status and suspension of US visas for some Chinese nationals. He also said the US would scrutinize the operations of Chinese companies listed on US exchanges. He however stopped short of mentioning any trade sanctions or suspension of the Phase 1 deal signed with China last year.
The pronouncements were not as bad as feared, judging from the market reaction. US markets have reversed the earlier losses of the day, but the USD Index was unable to follow suit.
The daily chart shows that the USD Index broke below the symmetrical triangle and blew past the 98.60 support level, but only just as the 200-day moving average continues to exert
some supporting impact on the DXY. The DXY has bounced off the 98.19 support and looks set to form a hammer. If this is the case, we could see a bounce that will allow for a retest of the 98.60 price level. Price advance beyond 98.60 takes the DXY towards the 99.42 resistance.
On the flip side, worsening sentiment on the US Dollar as markets assume a risk-on sentiment could allow the DXY a chance at defeating the 98.19 support. If this happens, then 97.16 could be on the cards as a further target down south. With the way markets have ended the week on President Trump’s comments, we may see a risk-on commencement to the coming week.
But you never know what the Chinese comments over the weekend may bring, if at all this is the case.
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Gold prices are diving as the US trading session gets underway. The move lower in gold prices is fueled by a stronger US Dollar and US stock markets being near their all-time highs, lowering the demand for gold. However, the mood may change in the next few hours as the US ISM Non-Manufacturing Index is due.
Technically, gold prices are trading sideways between the October 11 low of $1473.68, and the October 25 high at $1518.41. The benefit of this well-defined rectangle pattern is that when the price finally starts trending the price should hopefully not look back and reach its target. The pattern also provides price targets.
If gold prices were to trade above the October 25 high of $1518.41, then the price might be able to reach the $1563.14 level, as the difference between the upper and lower limit of the pattern is added to the October 25 high. On a break to the October 11 low at $1473.68, the price might be able to reach the $1428.95, as the difference in the range is subtracted from the October 11 low.
Time will tell if bullish or bearish traders will command price as the chart pattern itself is neutral in its outlook.