IRON FOREX: Gold rebounded on Wednesday, after it hit support near the 1223 (S1) support zone. Nevertheless, the advance remained limited slightly below the 1250 (R1) resistance hurdle. Bearing in mind that the yellow metal oscillates between these two territories since the 23rd of February, I will maintain my “wait and see” stance for now.
I would like to see a move above 1250 (R1) before I get confident again on the upside. Something like that could initially aim for the 1265 (R2) line, marked by the peak of the 11th of February. Taking a look at our short-term oscillators, I see that both the RSI and the MACD stand slightly above their equilibrium levels but they point sideways.
What is more, both of them stand below their respective downside resistance lines. These signs support my choice to stay flat for now. On the daily chart, I see that on the 4th of February the price broke above the long-term downside resistance line taken from the peak of the 22nd of January 2015.
This keeps the medium-term uptrend intact in my view. However, I see that our daily oscillators reveal slowing upside speed and this is another reason I prefer to take the sidelines for a while.
• Support: 1223 (S1), 1210 (S2), 1195 (S3)
• Resistance: 1250 (R1), 1265 (R2), 1285 (R3)
Asian stocks extend their gains Most Asian stock markets closed up today for the 3rd consecutive session, as rising oil prices and signs of improvement in the US economy seem to have eased concerns of a global downturn, at least temporarily.
The risk appetite was revived following the PBoC’s move to cut banks’ reserve requirement ratio on Monday and after several oil companies announced a cut or freeze of their production output.
We believe that the risk-on sentiment could remain elevated for a while and may continue supporting pro-risk currencies such as AUD and NZD. At the same time, this might lessen demand for safe havens like JPY, CHF and Gold.
In our view, rising confidence could also spill over into the European equity markets, where we may see indices such as DAX and Eurostoxx adding to their recent gains as well.
Beige Book offers little comfort to Fed The Fed’s Beige Book revealed a mixed outlook of the US economy for the first two months of the year. Most districts reported that economic activity expanded and that spending rose. Wage growth varied from flat to strong, but the manufacturing sector continued to struggle.
The FOMC gathers in two weeks to decide on interest rates, where it is widely expected that officials will remain on hold in order to assess any impact on the US from the recent global volatility.
Even though the Beige Book is likely to be one of the key pieces of information that Committee members will be working with to evaluate that impact, it offers little evidence to warrant a rate hike in the near-term. Nevertheless, the report did not show that the US economy was strongly affected by the negative sentiment of the past two months, something that keeps alive the possibility for more than one rate hikes during the year.