Gold reaches its highest level since late January, triggering a bullish run on other precious metals. EUR/USD and AUD/USD trade with a bid tone, but the technical picture calls for caution.
The first two trading days of the week brought more of the same US dollar weakness seen during the previous week. Although some Fed members discussed the possibility of tapering asset purchases again, the market is yet to react.
Before looking at some markets, it is worth mentioning that this is the trickiest period of the trading month. With only a few trading days left in the month and with the US dollar stretched to such extremes, caution is required.
Stocks continue to trade well. The Dow Jones sits comfortably close to its all-time highs, trading above 34,400 points, and the German DAX climbed above 15,500. With no significant economic news ahead and with the cryptocurrency market correction averted, the bid behind the equity markets is likely to continue.
Gold broke above $1,900 for the first time since January. The move higher triggered renewed upside pressure on silver too, and overall commodity prices remain elevated.
With the exception of crude oil inventories and FOMC member Quarles giving a speech, there is little to move markets on today’s economic calendar. As such, the focus remains on how the market participants position for the PCE inflation data on Friday and for the end of the trading month.
Markets to Watch
Silver, EUR/USD, AUD/USD – markets in focus today.
Silver benefited from the gold’s bullish run and recovered from dynamic support. The move higher confirms the bullish channel, as the series of higher highs and higher lows points to more upside. Should the price of gold march even higher, it will support silver on every dip.
This is one of the charts to remember when trading the US dollar pairs toward the end of the trading month. The EUR/USD formed a rising wedge, and the price action continues inside the two trendlines. While doing so, the price action remains bullish, but the market is only able to make marginal new highs. A break below 1.22, and, more importantly, below 1.2150, opens the gates for more weakness in the days to follow.
For the past month, the AUD/USD pair traded in a tight range. More precisely, it moved between 0.77 and 0.78, with one exception, which quickly retraced. That heralds speculation of a head and shoulders pattern, and conservative traders may want to wait for the market to close below 0.77 before going for the measured move.
Winners and Losers
The US dollar keeps losing ground, while commodities, led by gold, remain well bid.