EURUSD: Signs of stabilization until tomorrow
(Vasilis Tsaprounis – TopFX)
The common European currency is trying to stabilize near the level of 1,02 , after the significant losses suffered in the last few days and huge ”stop loss” orders were executed below the level of 1.0350 .
Improving sentiment in International stock markets is also helping to stabilize the Euro as more demand for the dollar as a safe haven currency are on a temporary pause .
As we mentioned yesterday a continued decline directly to 1/1 level without first signs of reaction and stabilization will not be an easy task .
While tomorrow’s day with important Economic data waiting to release is expected to prevent traders from taking new big positions .
The speech of the president of the European Central Bank Christine Lagarde and the announcement on the course of unemployment and new jobs in the United States are awaited with great interest by investors.
As we have already noted several times we await with particular interest President Lagarde comments regarding the euro current levels and especially if approached the level of 1/1 more .
For these reasons we would be very difficult to see further significant decline for the euro before tomorrow , with signs of stabilization and correction to be the most possible scenario.
What’s going on with gold?
(Giles Coghlan LLB, Lth, MA – HYCM)
Gold has been touted as an inflation hedge and as a stagflationary play which are two major influences in markets. So, if you just considered those two factors you may be asking yourself, why is gold not roaring higher? Earlier this week gold took out a key reversal area and invalidated a decent technical reversal signal.
What’s pressuring gold lower?
The reason for gold remaining pressured lower is due to the interplay between real yields and the USD. Now, many traders know that strength in the USD is a headwind for gold. This provides part of the reason for gold’s weakness. The USD index surged above 106 in a surprise move after the US returned from the July 04 holiday. This was a key driver for gold’s move lower. On top of this real yields are still elevated. It is a strong USD and relatively elevated real yields which are keeping gold prices pressured. Look at the chart below (gold is in yellow, TIPS is in blue, and DXY is in purple).
What needs to change for gold to gain again?
What gold buyers are looking for is an environment where real yields and the USD are both falling. When this happens gold tends to gain. This is a helpful summary:
- Rising real yields and rising USD = gold pressured,
- Falling real yields and falling USD = gold upside.
As long as this dynamic between yields, inflation, and the USD remains then gold traders should pay careful attention to it in reference to where future gold prices might go.