Dallas FED Index Falls, Choppy Trade In Gold

The holiday season is always a challenge to trade. Lagging volumes and inconsistent price action are more common, each making it difficult to generate solid returns. However, this year appears to be more active than most. Today’s stimulus-driven stock market rally has spiked participation for gold, currencies, as well as equities.

Aside from Congress passing COVID-19 stimulus package number two, there was very little on today’s economic calendar. Here are the highlights:

Event                                                                            Actual                Projected           Previous

2-Year Note Auction                                                     0.137%                    NA                   0.165%

6-Month Bill Auction                                                     0.10%                      NA                   0.09%

Dallas FED Manufacturing Index (Dec.)                        9.7                       NA                    12.0

This group of figures is peripheral, at best. Nonetheless, the headliner here is the plunge in the Dallas FED Manufacturing Index (Dec.). The figure is down by 2.3 month-over-month, suggesting that COVID-19 lockdowns continue to hamper economic growth. While not a surprise, the news certainly isn’t good, especially from a normally robust business region such as Texas.

The gold markets have been all over the map today in response to the stimulus news. Now, it looks like traders are happy with prices just beneath the 1900.0 handle. Let’s dig into the daily technicals for the February contract and see where this market stands.

February Gold Futures Stagnate Beneath 1900.0

From a technical point of view, gold continues to trade in a consolidation phase. For the past six sessions, the market has rotated between 1900.0 and 1865.0. Can anything shake bullion from its slumber?

Here are the levels to watch as the trading week gets started:

• Resistance(1): 62% Retracement, 1894.6
• Support(1): Bollinger MP, 1864.5

Bottom Line: If we see February gold test the Bollinger MP, a buying opportunity may come into play. Until elected, I’ll have buy orders in the queue from 1865.4. With an initial stop loss at 1863.4, this trade produces a tidy 20 ticks on a standard 1:1 risk vs reward ratio.

ABOUT THE AUTHOR See More

Shain Vernier

US Analyst

Shain Vernier has spent over 7 years in the market as a professional futures, options and forex trader. He holds a B.Sc. in Business Finance from the University of Montana. Shain's career includes stretches with several proprietary trading firms in addition to actively managing his own accounts. Before joining FX Leaders, he worked as a market analyst and financial writer.

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