- The risk sentiment was negative on Tuesday, dollar catches a safe haven bid.
- Gold stays positioned above a cluster of 4hr and daily MAs.
- We still have a relatively neutral-bearish outlook on the daily charts for silver.
- Bulls are in good shape above the bullish opening gap and the 10-D SMA located at 52.31 still.
The risk sentiment was negative on Tuesday and the benchmarks are down more than 2%, due to the growing scepticism over how significant the handshake 90-day cease-fire made between Trump and Xi should be for markets considering the tentative nature under which it was made where attitudes towards one another fluctuate on a daily basis. Much of the details are ambiguous, and Trump has already been showing signs of hostility towards China, threatening more tariffs if they do not meet his requirements. At the same time, the market is digesting a flattening yield curve in U.S. government debt, which leaves the 2-year yield -2.79% and the 10-year rate -2.88% at the lowest points of the day. However, the DXY has broken its correlation to rates as rade war fears persist and hawkish comments from Fed’s Williams enabled the index to recover to a high of 97.13, weighing on the commodity complex. While the USD remains vulnerable from heavy long positioning, the downside is limited until sentiment abroad improves.
Precious Metals
Gold is currently trading at $1,238, down from a high of $1,242 and was solid on a bonce from $1,230 the low. Silver is trading at $14.50, a little sift, down from a high of 14.68 and off the $14.36 low. “A weaker USD in combination with stronger EM currencies, particularly the CNY, along with lower yields have provided a bid to gold and friends, but any upside triggers remain far off,” analysts at TD Securities noted. “The upside trigger for gold stands north of $1300/oz, silver above $17/oz and platinum above $900/oz.”
Energy Markets
As for crude, at the time of writing, WTI is trading at $53.19, down from a high of $54.70 and up from a low of $52.80 for the session recently traded.
The start of the week was positive although the trend is well entrenched ahead of OPEC+ meeting Vienna as the next catalyst for crude – a cut of at least 1m bpd from the cartel. However, global demand concerns have eased following the Trump/Xi handshake which gave WTI some demand, sending it to the 54.66bbls at the start of the week on the opening gap. That gap could come into jeopardy though on a breakdown of sentiment towards a clean trade deal between Washington and Beijing, and just two days into the week of the handshake, there are already jitters and, the morning after doubts over the 90-day case fire that is pressuring risk on Tuesday. WTI has consequently started to slide, printing a low of $52.80 so far. “The days leading into the Thursday/Friday OPEC+ meeting could provide volatile markets as trial balloons are floated,” analysts at TD Securities argue.
Technical analyses
Gold:
Gold stays positioned above a cluster of 4hr and daily MAs, but the price is now testing the 21-hr SMA with shorter-term RSI times frames leaning bearish. A break of the 21-hr SMA located at 1237 opens 1234 prior support/resistance that guards a run back to 1230. The Bulls did manage to pierce the 38.2% Fibo target at 1238.06, but failures there leave a negative twist on the precious metal. However, so long as the bulls hold above the 21-D SMA at 1220, the price should breach the Fibo target. A break above the Oct 25th high of 1243 leaves the yellow metal in good stead to go onto to challenge the 200-D SMA located at 1258, guarding the 50% fibo at 1262. On the downside, however, 1180 double bottom lows will be critical on the way there. Bulls will need to get over the 38.2% retracement Fibo of the 2018 decline to recent lows at 1238.
Silver:
We still have a relatively neutral-bearish outlook on the daily charts with the price still above the 21-D SMA and 50-D SMA. However, the price also needs to hold above the 21-4hr SMA and in the more immediate future, the 200-4hr SMA is located at 14.42 – A break there could lead to profit taking and threaten the 21-4hr SMA quite quickly – This is found at 14.34. Critical support is situated at 13.90 – as being the November low while crucial resistance is at 14.79 – as being the 23.6.% Fibo retracement 2018 downtrend.
Oil:
Bulls are in good shape above the bullish opening gap and the 10-D SMA located at 52.31. On the upside, the 23.6% Fibo retracement of the recent rout from just below the 77 handle at 56 with the confluence of the 21-D SMA at 56 is the first significant target to overcome. While daily & weekly RSI has managed to climb back above 30, the danger is that the monthly RSI and DMI remain with a negative bias and bears are otherwise in control. To the downside, the 123.6% Fibo extension target comes in at the 43.90s while the June 2009 lows are nearby at 41.83. On the wide, the 161.18% Fibo extension target is situated at 33.77, and the Jan 2016 low is down at 26.03.
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