Wednesday, April 26, 2017

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3 Potential Trade Ideas In Gold - April 21st Morning Brief

Author: Arslan Butt, Commodities & Indices Analyst/Friday, April 21, 2017/Categories: Daily Opportunities

Happy Friday, traders. The last day of the week seems really exciting, particularly after a great week. Considering the thin volatility due to the Easter holidays, our trading signals did really well.

Overall, nearly all the trading instruments remained highly volatile at different timeframes upon the release of the latest fundamentals. For example, the GBP/USD was a major mover this week. It soared more than 390 pips after the U.K.'s proposed early elections. The Sterling also caused a bullish trend in the single currency Euro due to their strong positive correlation.

Lastly, the dovish remarks from Donald Trump in regards to the U.S dollar, and the ongoing conflicts between the U.S, North Korea, and Syria kept the dollar weaker. This resulted in a boost in demand for the haven assets such as Gold and Silver. We will discuss the Gold further, but before then let me highlight the major macroeconomic events today.

 

Major Economic Events To Watch Today

Today, we have several economic releases coming from the Eurozone, although these aren't very high impact. However, their collective impact could shake the Euro.

 

EUR    

  • French Flash Manufacturing PMI (8:00)
  • French Flash Services PMI (8:00)
  • German Flash Manufacturing PMI (8:30)
  • German Flash Services PMI (8:30)
  • Flash Manufacturing PMI (9:00)
  • Flash Services PMI (9:00)

GBP    

  • Retail Sales m/m (9:30)
  • MPC Member Saunders Speaks (12:45)

CAD    

  • CPI m/m (13:30)
  • Common CPI y/y (13:30)
  • Median CPI y/y (13:30)
  • Trimmed CPI y/y (13:30)

USD    

  • FOMC Member Kashkari Speaks (14:30)
  • Existing Home Sales (15:00)


Gold (XAU/USD) - The Safe Haven Asset

The yellow metal Gold continued to trade in a well maintained narrow trading range of $1276 - $1282 in the morning sessions today. As mentioned earlier in my previous report on Thursday, the Gold is likely to break out but investors are searching for clear evidence as to which side it will break on.

There is no one reason behind a bullish Gold. Over the previous week, it remained supported due to global uncertainty. Whereas the massive drop in the U.S dollar extended support to falling gold prices.

Additionally, as per the Fed’s Beige Book, the U.S economy has shown nominal growth despite better than expected labor markets and upward pressure on wages. For instance, their unemployment rate fell to 4.5% from 4.7%. Slower economic growth increases concerns and risk in the market.

Lastly, the WTI Crude Oil prices fell rapidly after the EIA recorded a less than expected draw in crude oil inventory figures. This means the market has used less crude oil in the previous week, perhaps due to less demand in the market. The lesser demand can result in fewer sales and falls in corporate earnings. Therefore, it's rational to invest in safe haven assets rather than equity markets.

Gold - 4 Hourly Chart Gold - 4 Hourly Chart 

 

Technical Outlook - Intraday

I really don't see any change in the technical side of the Gold. It's still consolidating above a strong support level of $1276 while having a resistance at $1283.

I find it amusing that the Gold has formed almost every type of candlestick pattern such as doji, hammers, bearish and bullish engulfing but failed terribly at coming out of the $1276 -$1283 range. Besides that, the precious metal Gold has also formed a descending triangle pattern in the hourly timeframe. Let me add that the descending triangle patterns are meant to break downward.

In the hourly timeframe, the Gold prices are still holding below the 50 periods EMA along with the RSI below 50 and both of our technical friends are suggesting a bearish bias for the metal.

 

Forex Trading Signal - Gold

We have 3 trade ideas for today.

  • First - Sell on the upper range of $1283 with a minimum stop loss of $1286 and a take profit of $1277.
  • Second - Buy at the lower range of $1276 with a stop loss of below $1274 and a take profit at $1281.
  • Third - Sell below $1275 with a take profit of $1269 and a stop loss of $1277.

 

Ending Remarks

Friday often comes with huge volatility as most traders try to offset their positions before the weekend. Hence, we need to strictly follow our money management strategies and trail our stop as soon as our positions come into the profit zone.

Arslan Butt, Commodities & Indices Analyst

Arslan Butt is our Lead Commodities and Indices Analyst.

Arslan is a professional market analyst and day trader. He holds an MBA in Behavioral Finance and is working towards his Ph.D.

Before joining fxleaders.com Arslan served as a senior analyst in a major brokerage firm.

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