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European Open: RBA Hold, Gold Bulls Eye Break Of 1800

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Fundamental analysis of Forex market

The RBA held interest rates at 0.1% and announced they will discuss whether to retail their 3-yr bond target. And gold appears poised to break above 1800 as bulls square up to this milestone level once more.

Asian Indices:

  • Australia’s ASX 200 index rose by 37 points (0.53%) and currently trades at 7,065.80
  • Japan’s Nikkei 225 index has risen by 62.08 points (0.21%) and currently trades at 29,053.67
  • Hong Kong’s Hang Seng index has risen by 71.09 points (0.25%) and currently trades at 28,428.63

UK and Europe:

  • UK’s FTSE 100 futures are currently up 18.5 points (0.27%), the cash market is currently estimated to open at 6,988.31
  • Euro STOXX 50 futures are currently down -1 points (-0.03%), the cash market is currently estimated to open at 3,999.25
  • Germany’s DAX futures are currently down -18 points (-0.12%), the cash market is currently estimated to open at 15,218.47

Monday US Close:

  • The Dow Jones Industrial rose 238.38 points (0.7%) to close at 34,113.23
  • The S&P 500 index rose 11.49 points (0.27%) to close at 4,192.66
  • The Nasdaq 100 index fell -61.041 points (-0.44%) to close at 13,799.72

FTSE 100 continues to falter at 7,000

After a positive start following Wall Street’s lead, Asian equities are mixed. The ASX 200 is the strongest major benchmark, up 0.5%, followed by the Hang Seng at 0.25%. Equities across China and Japan are lower, with the SEC and CSI300 down around -0.8%.

As for the FTSE 100, bulls continue to challenge (yet fail to keep prices above) 7,000. Without wanting to sound like a broken record, the fact it is struggling at this milestone level without managing to test the April high at 7019 makes this a hard index to be bullish on and two bearish pinbars have formed at recent highs. Over the past 8 sessions it has failed to recoup the 2% loss sustained two weeks ago, so it appears what we have on our hands is a very, slow grinding top (that can’t seem to top out). But, when such moves unravel they can do so quickly, so we continue to watch for the potential for the FTSE to roll over. Perhaps a break below 6929 could finally trigger some bearish follow-through.

FTSE 100 (-0.38%) 09 April 2021:

Outperformers

  • + 4.29% – AstraZeneca
  • + 4.21% – Smurfit Kappa
  • + 3.17% – Hikma Pharma

Underperformers:

  • – 7.00% – Barclays
  • – 4.03% – Ocado
  • – 3.23% – Flutter Entertainment

Commodities: Oil reaffirms support, gold and copper eye new highs

Gold looks keen on breaking above 1800 after rising 1.3% yesterday and stopping just shy of this key level. The 20 and 50-day eMA’s acted as a springboard for gold prices yesterday, after last week’s bearish outside candle failed to hold below key support at 1760. The double bottom pattern from 1676 remains in play and its projects a target around 1835, the daily trend structure suggests we could be facing a breakout sooner than later.

  • A break above 1800 confirms a breakout and brings the 1835 level into focus (double bottom measured move).
  • The bias remains bullish above last week’s low, but if this breakout is to have legs, we wouldn’t expect it to retest yesterday’s low first.
  • As a small flag is forming on the four-hour chart, a break above 1800 could allow us to increase the ‘invalidation point’ to the lows of the flag (currently around 1785).

Copper futures printed a bullish engulfing candle yesterday, suggesting the swing low is in place at 4.4350. Overnight trade has seen prices remain in the top third of yesterday’s range, so we’ll be keeping an eye on a potential breakout above 4.5510 to suggest trend continuation.

Oil prices remain supported after Iraq’s oil minister said he expected oil prices to remain above $65, and the OPEC+ production cuts should help keep prices within normal levels. Support has been found between the 10 and 20-day eMA’s for WTI and it printed a two-bar bullish reversal yesterday.

Forex: Dollar recovers some of yesterday’s PMI losses

The US dollar index (DXY) has recouped about half of yesterday’s losses sustained when US PMI data was softer than expected. Still, whilst the report still contained some punchy numbers, traders were clearly positioned for something better.

USD is the strongest major and up against all its peers in overnight trade, gaining 0.4% against the Swiss franc, and around 0.22% against the British pound, Australia dollar and New Zealand dollar.

The British pound remains firm after the UK announced a £1 billion trade deal with India. GBP/JPY produced a two-bar bullish reversal yesterday and found support at its 10-day eMA, and show the potential to retest the 152.55 high (and perhaps even beyond). EUR/GBP produced a bearish engulfing candle although the 50 and 20-day eMA are currently providing support. A break beneath them brings the 0.8655 high into focus.

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