The Dow Jones index failed to breach 35000 level for a second time and has since entered a technical correction. This has likely resulted in a “Double Top” pattern, which may be viewed as a bearish trend-reversal indicator. Prices remain within an “Ascending Channel” formed since early November, the ceiling and the floor of which serve as key support and resistance levels respectively. Bearish MACD divergence suggests that bullish momentum is weakening.
Australia’s consumer inflation expectations rose to 4.4% from 3.5% the prior month. The data represents a broader theme across markets as consumers face rising prices, driven by rising prices at the factory gate. Major building materials, including copper, iron ore, and lumber, have all seen significant gains through the pandemic. The risk-sensitive Australian Dollar climbed overnight after the sharp turnaround in Treasury yields dragged the US Dollar.
A bullish crossover above the 20-day SMA from the rising 50-day SMA appears to be on the cards in the coming days.MACD looks to be gearing up to move above its signal line, a bullish sign.
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The Bank of Canada surprised when they started talking up the prospect of post-pandemic policy in their April meeting. This is a move the Fed still has yet to make and, by most indications, it doesn’t appear that even talking about that is yet in the cards. This set up for a backdrop of a really strong Canadian Dollar to go along with a really weak US Dollar which allowed for USD/CAD to plunge to a fresh six-year-low.
This week’s economic calendar brings the Bank of Canada for a rate decision on Wednesday followed by an inflation print out of the US on Thursday morning. The expectation for that inflation print on Thursday is for 4.7%, which would provide for another jump from the 4.2% read that printed last month.
This could possibly provide for a backdrop conducive to reversal or pullback themes. The pair remains oversold on a long-term basis and there are two high-impact data points that could threaten to unwind that theme of USD/CAD weakness. This could produce some position squaring ahead of the drivers and depending on how those drivers play-out, this could set up for that backdrop to run into the FOMC event in the following week.
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The S&P 500 index is extending higher within an “Ascending Channel” formed since November. The overall bullish trend remains intact. Bearish MACD divergence hints that upward momentum may be fading as the index shows reluctancy to move decisively higher. A pullback may lead to a test of the 20- and 50-day SMA lines for immediate supports.
The underlying bullish sentiment in the equity markets seemed to be the only factor weighing on the safe-haven XAU/USD. Investors also seemed reluctant to place any aggressive bets, rather preferred to wait on the sidelines ahead of Friday's release of the US Non-Farm Payroll figures.
From a technical perspective, the commodity has been oscillating in a familiar trading band around the $1,900 mark over the past one week or so. The range-bound price action constitutes the formation of a rectangle on short-term charts, marking a pause in the trend. Given the recent strong positive move, this might still be categorized as a bullish continuation pattern. That said, it will still be prudent to wait for a sustained strength beyond multi-month tops, around the $1,913-15 region before positioning for any further appreciating move. The precious metal might then aim to surpass an intermediate resistance near the $1,925 level and accelerate the momentum further towards the $1,950 level.
On the flip side, any meaningful slide below the $1,900-$1,895 region is likely to find decent support near the $1,882 region. This is followed by the $1,870-68 horizontal support, which if broken decisively might prompt some long-unwinding trade. The metal might then turn vulnerable and accelerate the fall further towards the $1,852-50 support zone. The corrective pullback, however, might still be seen as a buying opportunity. This, in turn, should help limit the downside near the very important 200-day SMA, around the $1,843 region.