A look at gold, oil, the rand and the FTSE 100
This week much like the last started fairly slowly. Financial markets were mostly calm in the runup to Tuesday's key data from the USA. Friday's decent NFP and declining rumbles from the Sino-American trade war have dominated the news so far.
This has been reflected fairly prominently in overall gains for oil, gold's stutter and a mostly better performance by emerging currencies.
Both crude oil and gold reacted quite sharply to the unexpectedly positive release of ISM non-manufacturing PMI from the USA on Tuesday afternoon. 54.7 indicated stronger than expected growth and might demonstrate that last September's three-year low of 52.6 was an outlier.
On the other hand, oil's rally faltered on Tuesday night as American stocks of crude grew unexpectedly.
UK100 has been in focus among indices this week in light of oil's gains and tightening regulation affecting bookmakers in the UK. Britain's index like many others has found considerable fundamental support from reports that the USA and China might be moving closer to a resolution of their long-running trade war.
American light oil, four-hour
Crude oil has made big gains since the end of last week, with a classic three soldiers upward visible on Friday night. Monday and most of Tuesday saw the incipient trend continue. Two golden crosses of the 50-period simple moving average (from Bands) over both the 100 and 200 SMAs since the middle of last week would suggest some momentum.
On the other hand, the slow stochastic here clearly shows overbought, and we can also observe that volume has decreased significantly on Wednesday morning.
This would usually be taken to mean that price might consolidate for a few periods before testing recent highs again. Many traders will be looking for a daily close above the 61.8% Fibonacci expansion area to buy in.
Gold-dollar, daily
Although somewhat less exciting than crude oil so far this week, gold has been an object of attention because of its relatively muted reaction to weaker fundamentals on Monday and Tuesday.
The yellow metal did make a sudden loss on Tuesday afternoon, though, driven by surprisingly good PMI from the USA. Conversely, there's no immediate sign that losses are likely to start mounting.
With Fibonacci retracement here drawn based on the latest sustained upward movement in August, we can see that price has stayed fairly consistently between the 23.6% and 50% retracement areas.
The faster MAs and the deviations from Bands have also clustered since the end of last month. A breakout one way or another seems to be likely soon. Given the limited reaction to this week's news so far, it seems possible that XAUUSD could keep moving upward this month.
UK100, four-hour
Typically one would expect UK100 to mirror the performance of crude oil fairly closely given the number of constituent oil companies; October 2019 was no exception. In much the same way as oil, price started to consolidate within overbought at the beginning of the week and volume started to drop.
The series of golden crosses since the second half of October and the obtuse angles of consolidations after gains seem to suggest that Britain's main index might be getting ready for a stronger upward trend over the next few fews. Nevertheless, with a general election looming next month, entering a long-term buy here is very risky.
Euro-rand, daily
EURZAR is one of the most volatile forex pairs in the world, but even here we can see a degree of stability since the beginning of October. The range between the 61.8% and 23.6% Fibonacci retracement areas, i.e. about R16.80 and R16.15, has mostly held for more than five weeks.
As elsewhere, bunching of moving averages and narrowing deviations of Bands combined with lower volume suggest that a breakout could be coming. The biggest data in the near future that might catalyse this are German inflation and GDP growth next week.
This article was submitted by Michael Stark, market analyst at Exness
Disclaimer: Any opinions made may be personal to the author and may not reflect the opinions of Exness.
