Gold recovers as uncertainty rises

Forex News and Events

EUR/USD suffers from EU political uncertainty (by Arnaud Masset)

The US dollar continued to retrace gains on Friday as investor confidence in the strength of the US economy continues to dwindle. This week’s FOMC minutes suggest that the Fed is in no hurry to lift borrowing rates, while on the political front, investors are becoming increasingly impatient to know the details of Donald Trump’s fiscal boost. After testing the 1.05 support level, EUR/USD bounced back to 1.06 on Friday. The currency pair is still trading below its 50dma, suggesting that the momentum remains on the downside. However, a break of that key resistance would open the road toward the next one standing at around 1.0750-1.08.

The upside is however quite limited in EUR/USD due to the highly uncertain political environment stemming from the ongoing French presidential elections. This environment has further capped euro gains against the greenback despite an improving economic outlook in the European Union. Against this backdrop, the risk remains on the downside in EUR/USD.

Gold is showing strong demand (by Yann Quelenn)

Things are certainly looking up for the precious metal, which has hit its highest level since November 11th. The bullish pressures on gold are further bolstered by this week’s Fed minutes. We have maintained a dovish stance on the US economy for the past two years and believe that there is further room still for disappointment on the monetary policy front. In our view, the Fed will not raise rates more than once this year and in this regard we believe that financial markets have overestimated the number of rate hikes. The demand for gold is therefore unlikely to stop.

All eyes will soon be on Trump’s upcoming talk in front of congress. So far, no defined plan to increase jobs has been revealed but even IF there is a plan there is nothing that will magically transform the economic situation overnight. This is why we maintain our bullish view on gold. Technically speaking, the road is now wide-open towards $1300 an ounce.

Gold - Breaking Key Resistance Area.

 

The Risk Today

Yann Quelenn

EUR/USD is back around 1.0600. Hourly resistance is given at 1.0679 (16/02/2017 high) while hourly support can be found at 1.0521 (15/02/2017 low). The technical structure suggests that the current underlying move is a bullish consolidation. In the longer term, the death cross late October indicated a further bearish bias. The pair has broken key support given at 1.0458 (16/03/2015 low). Key resistance holds at 1.1714 (24/08/2015 high). Expected to head towards parity.

GBP/USD has exited symmetrical triangle. However, the pair is still lying below strong resistance given at 1.2771 (05/10/2016 high). Key support is given at 1.2254 (19/01/2016 low) while hourly support is given around 1.2400. The long-term technical pattern is even more negative since the Brexit vote has paved the way for further decline. Long-term support given at 1.0520 (01/03/85) represents a decent target. Long-term resistance is given at 1.5018 (24/06/2015) and would indicate a long-term reversal in the negative trend. Yet, it is very unlikely at the moment.

USD/JPY's demand is fading after its increase from support given at 111.36 (28/11/2016 low). Bearish pressures arise around hourly resistance given at 115.62 (19/01/2016 high). The technical structure suggests further weakness around former resistance given at 112.57 (17/01/2017 low). We favor a long-term bearish bias. Support is now given at 96.57 (10/08/2013 low). A gradual rise towards the major resistance at 135.15 (01/02/2002 high) seems absolutely unlikely. Expected to decline further support at 93.79 (13/06/2013 low).

USD/CHF's short-term momentum is definitely bullish. The pair lies within an uptrend channel. Hourly resistance is implied by upper bound of the uptrend channel. Key resistance is given at a distance at 1.0344 (15/12/2016 high). We believe that the pair is likely to strengthen again above parity. In the long-term, the pair is still trading in range since 2011 despite some turmoil when the SNB unpegged the CHF. Key support can be found 0.8986 (30/01/2015 low). The technical structure favours nonetheless a long term bullish bias since the unpeg in January 2015.

Resistance and Support:

EURUSD	GBPUSD	USDCHF	USDJPY
1.1300	1.3445	1.1731	121.69
1.0954	1.3121	1.0652	118.66
1.0874	1.2771	1.0344	115.62
1.0590	1.2536	1.0052	112.48
1.0454	1.2254	0.9967	111.36
1.0341	1.1986	0.9862	106.04
1.0000	1.1841	0.9550	101.20