Top three trading insights on Discord – American session Premium recap

Do you know FXStreet has its exclusive trader's community on Discord? There, Premium users can contact Analysts Yohay Elam and Tomas Salles directly and ask them any questions related to the markets and trading. Here we offer you a selection of the best three questions and answers during this American session.

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1  – USER QUESTION – Do you expect GBP/AUD and GBP/NZD to follow EUR/AUD and EUR/NZD to the upside?

ANALYST ANSWER – Yohay Elam: 

I see a significant divergence between the euro and the pound today and for good reasons. The dovish ECB decision has been digested by markets and the fact that the spread between German and Italian bond yields have stabilized has also helped shore up the euro.
On the other side of the Channel, there have been adverse developments. The UK reported a drop of 0.3% in GDP in April, worse than an expansion expected. Then came today's disappointing jobs report, which showed an increase in the unemployment rate. And to top it off, the British government published a draft bill which would violate the Brexit treaty, potentially triggering a trade war with the EU. 
All in all, sterling is suffering today. Jumping to the South Pacific, there is no major news from either Australia nor New Zealand and both are edging down against the dollar modestly. 
Looking at GBP/AUD, I see it as struggling to move higher, and even falling. Support is at 1.7460, followed by 1.7425, and then 1.7365 and 1.7330. Resistance is at 1.7550, 1.7575 and 1.7645.

 

2 – USER QUESTION – Any thoughts on XAU/USD?

ANALYST ANSWER – Tomas Salles: 

XAU/USD trades at the $1,820.30 level, at the lower limit of the short-term scenario price range. Below the current price, supports are located at $1,816.12, $1,807.62 and $1,800.27. Below the latter, and due to price congestion, the pair would pierce the base of the long-term bullish channel downwards.

On the bullish side, the reference level to declare an active uptrend is at $1,880. Before that level, we can find resistances at $1,837.83, $1,841.60, $1,842.94, $1,857.29, $1,861.62 and $1,869.45.

The Moving Average Convergence Divergence indicator (MACD) on the 4-hour chart lets us see a solid bearish profile. The separation of the exponential moving averages and the slope of the moving averages point to downward moves in the coming hours. On the other hand, the histogram shows that the distance between the moving averages is decreasing, indicating a loss of bearish momentum.

On the daily chart, the MACD is in a bearish pre-signal situation only avoidable with a violent rise in the XAU/USD price – lower ranges do not suggest this possibility.

We believe that gold will remain weak, with a primary target at the base level of the long-term bullish channel at $1,800.00.

 

3 – USER QUESTION – Regarding the US Federal Reserve Interest Rate Decision due tomorrow at 18:00 GMT, what do you think could happen?

ANALYST ANSWER – Yohay Elam: 

At this point, a 75 bps is already priced in according to bond markets and the dollar move depends on the message the Fed conveys – all out fight against inflation + 75 bps in the next meeting or two, or conversely, taking the labor market into consideration and moving more moderately against inflation. That second scenario would initially weigh on the dollar, but it would risk a sell-off in bonds, which would consequently push the greenback higher with yields. 
I think that equities could jump if the Fed doesn't vow to fight inflation all out. It would be a 'buy the rumor, sell the fact'. But, if markets then see the Fed as losing control over inflation by going too soft, markets could turn down. In any case, I'm sure we'll have lots of action around the Fed.