Gold intermarket: bulls coming to the table in a change of market climate

Gold continues to climb while the DXY drops back to fresh lows for the month of May and 2017 for that matter, down at 98.18 for a YTD return of -3.88%.

WTI has not been the driving force today but the Yen was boosted overnight by upbeat comments from BoJ Gov. Kuroda. "The current policy stance was deemed appropriate, however, market participants were likely caught off guard by the Governor’s comments on policy normalisation discussing the prospect of an exit from QQE and yield curve control, " explained analysts at Scotiabank who expanded on their outlook for the yen here: Yen strength and upbeat comments from Kuroda - Scotiabank

In respect to the dollar, The U.S. Dollar is Bending, but Will It Break? offers a technical charting picture by Mike Paulenoff at MPTrader.com. "The price structure is pressing on a two-year up-trendline, the violation of which could have meaningful consequences for the financial and commodity markets."

• DXY inter-markets: next target 95.91?

However, this is not surely just about the dollar and the US economy. We have seen a run of poor data of late and indeed it will be concerning to dollar bulls who are banking in the Fed continuing to speak up rate hikes. In fact, we might need to look across the pond from America and head to the euro area where rate differentials in Europe are narrowing as markets, post Macron victory, start to look for a more hawkish tone in the ECB’s policy stance. Should the yen also find traction and indeed in an overbought US stock market with the Dow struggling at 21000, gold could come out on top. US 10-years below 2.3% will also be problematic for dollar bulls. 

What's poor for the dollar is usually bullish for gold and the current change of winds could be a taste of what is to follow in the months ahead. Gold can target the 200 EMA o the 4hr initially at $1,245.53 ahead of $1,260 key resistance area.