Gold price bounced over $40 yesterday as it found support at the $1,760 area. Stocks declined ahead of the FOMC minutes as risk-off dominated the price action.
Financial markets were in a risk-off move yesterday after the long weekend. Stocks declined during the trading hours in a classic risk-off move.
Investors looked for safety in the Japanese yen and gold. As such, the gold price bounced from support, breaking above $1,800, while oil declined from its six-year high.
The US stock indices declined abruptly, although much of the decline was reversed. Futures point out to higher levels, close to the recent highs. The Dow Jones index futures show that the market recovered the 34,600 level, and the bounce is visible on the S&P500 and Nasdaq 100 indices too. In Europe, the stock market opened relatively flat, with small gains across the board.
The currency market is relatively quiet, expecting more clues from the FOMC minutes. The market participants are keen to find out if the Fed’s hawkish message at the June meeting is confirmed by the minutes. If so, the US dollar looks ready for another leg higher.
Three economic events are worth watching today. One is the EU Economic Forecasts, a report that shows the estimates for the European Union economies over the next two years. Another is the Canadian Ivey PMI, expected at 65 after 64.7 in the previous month. Finally, the highlight of the trading day is the FOMC minutes late in the North American session.
Markets to Watch
Gold, EUR/AUD, EUR/GBP– markets in focus today.
The gold price found support at the $1,760 level and bounced back. However, the move higher looks like the right shoulder in a head and shoulders pattern, and another attempt at the lows is expected. Gold found an unexpected ally in the US 10-year yield, which dropped aggressively yesterday. Because the two are inversely related, the gold price gained while the yield declined.
The EUR/AUD cross is the barometer during a risk-off environment. While the stock market declined, the EUR/AUD bounced from support given by a rising trendline. At this point, the market looks ready to make a new higher high, with the focus on the 1.60 level, a pivotal one for the cross.
The EUR/GBP technical picture shows a bearish channel. Despite resembling a bullish flag, the price action is actually bullish, if we consider the fact that the market failed to break the previous lower highs series.
Winners and Losers
The US dollar remains strong, especially against the euro.