Fresh Sentiment Triggers Directional Shift
Another choppy and heavy session marked Thursday’s trading as highly volatile on the back of geopolitical and economic headlines.
ECB’s president Draghi re-cited downside risks and low inflation, BoJo pushed for an early election, hitting back at Labor. Finally, Mike Pence, US Vice President, delivered a worrisome US-Sino speech.
Meanwhile, US data were mixed, with bearish momentum offsetting upbeat data and vice versa. Regardless, gold did make a move for a number of reasons.
“Arrivederci” speech Shapes Fresh Declines
The euro fell across the board following Mario’s speech yesterday at his last policy meeting. The now-former President reiterated September’s dovish policy language.
With Europe’s growth outlook stuck and inflation stuck ECB’s accommodative policy will remain unchanged at least until Lagarde’s first speech.
EURUSD Test Below 1.11 Hints to Further Softening
Euro traders eyed the 1.11 round level following Draghi’s speech. Price action remained contained within certain limits but these were wide.
The currency pair is expected to remain under pressure with the next breakeven stops seen near 1.060 and then 1.1047. The latter is the 1.618 Fibonacci extension of the first corrective wave down to 1.11 test arear.
The pace of the decline should depend on how the dollar performs.
BoJo Pushes For Early Election While Waiting on EU’s Extention Approval
UK’s PM supported the dovish-President theme yesterday. Calling for an early election on December 12 he triggered a fresh sentiment biased to the downside.
The direction of the pound in the next few trading sessions will depend on whether the EU grants an extension and for how long.
GBPUSD Corrects Deeper, Now Eyeing 1.27
The pound broke below the 1.28 handle yesterday following the latest headlines.
Cable traders could send prices lower for a deeper correction, where wave C of the zigzag-looking pattern could complete as the chances of EU delaying the response to UK’s Brexit extension request increase.
Gold Up As Geopolitics and Economics Take Their Toll
Poor Brexit and ECB flows kept gold upbeat yesterday as the risks of uncertainty and further Europe-wide economic hurdles weighed on sentiment.
In addition, markets were seen reacting risk-averse on the back of US-Sino headlines and Pence criticized “China’s actions in Hong Kong”.
XAUUSD Points to Higher Levels But Appetite Could Shift Anytime Again
Following the triangle breakout markets could expect the yellow metal to appreciate further now.
With the current medium-term structure however pointing to a bearish complex correction investors should remain cautious. Gold could simply be on a throwback formation.