CM – European Open: futures point lower, gold clings to trend support

Matt Simpson
July 19, 2021 5:23 am

The Hang Seng was the worst performer and is currently trading -2.00% lower. The ASX 200 fell to a 6-day low but scaled back early losses just above the 7241.5 low. And the Nikkei 225 fell -1.4% to retest its 200-day eMA for the second time in 7 sessions.

The FTSE 100 closed just above the June low at 7008.09 and printed one little rikshaw man doji who was reluctant to break down immediately. However, Friday’s 20-day eMA is capped as resistance and the futures markets are in the red so it is possible that we could see a break below 6948.63.

The economic calendar does not contain any major market moving events, but the tone of the session could again be dominated by the surge in Covid cases. Friday’s risky tone spilled over into the Asian session overnight, with the Japanese yen and US dollar being the strongest currencies and commodity FX (NZD, CAD and AUD) the weakest.

AUD / JPY broke Night below its 200-day eMA and hit a 5-month low. CAD / JPY followed suit and is now at a 3 month low and we continue to watch EUR / JPY break below 129.57.

GBP / AUD found support on its 10-day eMA and after reversing up while trying to create a bullish engulfing candle on the daily chart. A break above the 1.8662 high will require a bullish continuation.

EUR / USD is working hard on lower lows and volatility is easing, so we are open to the potential scenario of 1.1772 a swing low and the pair could be prone to jumping up. However, should the US dollar index (DXY) break above 92.85, the euro should drop below that low.

WTI prices fell over -1% on Monday after OPEC agreed to increase production. 70.00 and 69.77 are the next big support level bears need to hit despite a bullish hammer above 70.00 forming on Friday, so there is a case for a technical upturn, especially if DXY above the gap resistance falls.

The price of gold is holding above trend support, making it a crucial level to watch over the course of the week. In addition, TIPS (a proxy for real returns) and concerns about rising cases of the delta variant, which could support the price of gold in a low-risk environment, are falling.

On the 4-hour chart, we can see that a bullish trend has developed since the June low. However, the weekly chart produced a rikshaw man doji and prices failed to break above 1818.40 on Wednesday after breaking above that level. We are therefore aware of its potential to break lower current levels and a break below the 200-day eMA will see a bearish continuation as it invalidates trend support. A relapse above 1818.40 could cause prices to retest last week’s high.

You can view all scheduled events for today in our economic calendar and keep up to date with the latest market news and analysis.

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