Risk Off Sentiment Strengthens On Renewed Trade War Threats

Intraday Technical Analysis 07 May 2019

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The risk-off sentiment strengthened as the markets digested the renewed threats of trade wars between the US and China. President Trump’s threat to impose tariffs on China by the end of the week sent investors seeking safe haven assets.

The threats come as Chinese officials are expected to meet in Washington this week. Meanwhile, oil markets bounced back on reports that the US deployed a warship to counter Iran’s threats of blocking the Straits of Hormuz, a key choke point for oil from the Middle-East.

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Euro Holds on to Gains on Services PMI

The services sector in the eurozone performed better than expected. Data for April saw the services sector activity rising to 52.8 beating the flash estimates of 52.5. The data for April was also higher compared to March’s activity of 52.5. The euro, therefore, ended up rising 0.27% on the day.

EURUSD Likely to Test 1.1226 Once Again

The common currency is expected to retest the resistance level of 1.1226. This comes as the current bullish momentum keeps the common currency biased to the upside. But a breakout above 1.1226 is required in order for the euro to post further gains. Above 1.1226, there is scope for a test to 1.1246. Failure to advance above the resistance level could keep the currency pair trading flat.

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Oil Prices Recover But Sentiment is Mixed

Crude oil prices rose over 2% on the day after the news about the US warship being deployed in the Persian Gulf. The move comes following Iran’s threats to block the Straits of Hormuz, a key choke point for oil from the Middle-East. The threat by Iran comes after the US ended the waivers on Iranian oil on May 2nd.

Can Oil Prices Advance Further?

The rebound off the lower support at 60.33 sent WTI crude oil prices to retest the previously held support level of 62.85. The rebound to this level marks a correction amid what we expect to be a correction in the prices. As long as the resistance level is not breached, oil could be seen extending declines. A retest back to 60.33 support is likely with a breakout below this level pushing oil prices toward 57.50 support.

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Gold Settles Into Range

The precious metal posted modest gains on Monday. But price action remains somewhat biased to the upside. The retest of the 1285 level will be crucial as it could potentially give way for further upside gains in price. Gold prices caught a bid amid renewed risk-off sentiment in the market. Fed members, Quarles will be speaking at an event later today.

Can Gold Breakout Higher?

The retest to the 1285 handle will be crucial as it could lead to a possible breakout above this level. This will shift the bias to the upside with the 1290 region being the next level of resistance. A daily close above yesterday’s high of 1285.74 could potentially confirm this view. Alternately, failure to close with gains today could push gold prices to maintain the sideways range within 1285 and 1273 levels.forex gold

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