Week 37: Market update & Gold trading plan

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Market update

Overview: Following an overdue adjustment for the US tech-led rally this week, we continue to watch how prices will trend in the coming week. A string of central bank meetings across Canada, the Eurozone to Asia are expected while data releases will similarly be in abundance. A delayed start to the week is noted for the US market on Monday.

Executive summary:

· US and Canada will find a delayed start to the week with Labour Day holiday to kickstart the week on Monday.

· The European Central Bank (ECB) meets next week and updates their monetary policy decision on Thursday. ECB President Christine Lagarde press conference to follow with another separate online conference on banking noted as well. Following the Fed’s shift towards average inflation targeting, eyes will be on the ECB for similar inclinations of allowing inflation to run hot. EUR/USD run had also been in focus for ECB members of late, one to watch.

· Brexit negotiations to be conducted face-to-face in the coming week between September 7-11. A no-deal split is looking more likely according to officials by the end of the year when the transition period comes to an end.

· US data to watch in the coming week includes the August CPI data and weekly jobless claims data. Headline and core CPI expected to see a third consecutive monthly increase at a subdued level for August ahead of the September 15-16 FOMC meeting. Blackout period will find a lack of central bank speeches next week.

· China data will be out in abundance in the coming week starting with August trade data on Monday and following by inflation readings on Wednesday. Expectations are for continued acceleration of export growth in August for China after the PMI surprises. Factory gate inflation meanwhile likewise expected to see improvement with higher commodity prices noted in the month. Surprises would offer support for Asia markets.

· Japan revised Q2 GDP will be released on Tuesday, expecting a downward revision for the reading for the quarterly GDP to -28.5% according to Bloomberg consensus.

· Bank Negara Malaysia will be meeting in the coming week on Thursday with a majority of economists expecting no change in interest rates at 1.75%. A weak outlook remains the case for Malaysia despite recent lift of Malaysia’s debt limit to 60% from 55% previously to make room for more fiscal spending. Another 25 bps cut is still expected before the turn of the year.

· Gold prices had been relatively directionless of late, but the coming week will have the likes of investors Jeffrey Gundlach and Ray Dalio speaking on Tuesday and Thursday respectively, ones to watch for commentary.

 

 

Gold trading plan:

Weekly Chart: Critical point – base of dip on an uptrend (Bullish if supported; bearish if broken)
As mentioned last week on the importance of monthly candle and we have observed that Gold has closed August month on a red candle. This has reduced the probability of Bull run for gold and has put the current chart into a certain level of uncertainty as mentioned above.
Gold weekly chart has also closed in red candle where it is at the bottom end of the uptrend chart. The support at 1,900 range is very critical in the upcoming week as this would determine the future direction of Gold.
On yesterday’s NFP, we have seen the market doing a very crazy wig saw where it has done a “fake bear” move (i.e. 30mins chart looking very week to stop out weak players for 3hours before closing slightly green for the day.

MACD is still bullish while RSI has shifted to neutral to consolidation.

Key support levels that are still very relevant:

  1. 1900 range
  2. 1860 range

 

Daily chart: Key support on uptrend – critical on Monday’s direction

Gold did not close above 1,988 as expected and market has executed another dip on an uptrend yesterday.

MACD and RSI is down at the moment and it would be important to see which direction Gold opens on Monday.

While Gold has broken out 2 weeks ago, it has done a treacherous back testing to ensure support is strong. Should the support be able to hold next week, Gold would be ready to head towards All Time High (ATH) again.

4hours chart: Recovery ready for bull soon

From the 4hours chart, we can see that the chart is supported and is currently recovering to be ready for the bull run.

Key point to look out for is 1,975 where a strong break out would help to resume the Bull run towards ATH.

As no trading/investments are guarantee sure win, please do your own due diligence and always look at risk to reward and trade with guaranteed stop loss (private message me to know more).

Past article written on how to use guaranteed stop loss; do private message me in Telegram for me to refer you to IG.

Regards,

Ernest Koh