- A volatile session on Wall Street overnight saw US and European equities trade broadly lower. When precious metals also fall with stocks it suggests traders have closed their gold and silver positions to pay for margins calls on their leveraged equity positions. This is what appears to have occurred last night.
- Gold fell to 1880 but recovered later in the session to close back above 1900. The VIX (volatility index) spiked above 30 and WTI and Brent fell -4.4.% and -4.0 respectively. All major markets we tracked far exceeded their ATR’s (average true ranges).
- A rise in Covid-19 cases across Europe and the US unsettled traders. And the passing of Supreme Justice Ruth Ginsberg over the weekend raised fears it will delay the new stimulus package from the government.
- News that the UK is considering another lockdown to tackle the latest rise in Covid-19 cases saw the FTSE 100 (UK100) sell-off sharply and break below 6,000.
- The USD acted as the safe haven and rose sharply against commodities FX pairs (AUD, NZD, CAD and ZAR).
- It’s a quiet economic calendar today, although sentiment in Asia will more likely be dictated by overnight action (so we could either see a resumption of equities selling off, or markets go into a holding pattern as they await direction from the US).
- RBA’s Assistant Governor Guy Debelle speaks at 10:30 Sydney.
- BOE’s Governor Andrew participates in the British Chambers of Commerce webinar at 17:30 Sydney.
USD/CAD: Firm Close Above Resistance
- Yesterday’s bullish range expansion closed firmly above 1.3250 resistance. With a higher high and higher low in place, it warns of a change in trend on the daily chart.
- Bias remains bullish above 1.3250. Bulls could consider entering long during a period of consolidation, or wait for a retracement towards 1.3250 before considering new longs.
- A close beneath 1.3250 invalidates the breakout.
CAD/CHF: Bearish Outside Day Suggests Swing High has Formed
- We have patiently waited for a bearish signal on the daily chart, after it formed a strong rejection of 0.7000. Yesterday formed a bearish outside day to suggest a lower high has formed.
- Bears can seek bearish setups within yesterday’s range or wait for a break beneath today’s low and target the 0.6805 and 0.6750 lows.
- A break above yesterday’s high invalidates the bearish bias.
Nasdaq 100 (USTEC): Potential For a Minor Rally From the Lows
- Despite aggressive selling across global indices the Nasdaq 100 held up well. In fact, it printed a bullish hammer by the close. So, if sentiment were to improve today or tomorrow, Nasdaq looks the most appealing among major indices for a potential bounce higher.
- A slight bullish RSI has formed and the daily chart has (so far) refused to close beneath 10,900.
- Bulls could consider longs above yesterday’s high and target the 11,5800 area. A break beneath the hammer low invalidates the near-term bullish bias.
FTSE 100 (UK100): Bears drove prices firmly lower. If already short, great. However, to enter short at current levels is undesirable as its just above the 5,800 lows, so bears may want to wait for a retracement or for a break below 5,800.
USD/CHF: Prices nearly hit our bullish target around the monthly R1. Now we are wait to see if it can break above 0.9200.
CHF/JPY: Bears remain in control as it heads towards our 110 initial target. However, the bullish hammer warns of the potential for a retracement before further declines.
EUR/JPY: Prices retraced to the 124.30/43 resistance zone before rolling over and hitting our target. Removed from watchlist until further notice.
EUR/USD: Removed from the watchlist. Bullish momentum failed to materialise.
NZD/USD: Removed from the watchlist. Friday’s bearish pinbar failed to close above 0.67880 resistance (bull-trap) and momentum has now turned lower.
Silver (XAG/USD): Removed from the watchlist. Prices broken beneath Thursday’s hammer low without breaking above 27.62.