Morning View: Central Bank Rhetoric and the Safety of Gold | Vantage FX

Morning View: Central Bank Rhetoric and the Safety of Gold

May 15, 2015

Morning View:
Good morning!

It’s Friday so we’ll keep this one nice and light with just a few key quotes and numbers to help you keep on top of what’s happened overnight.

Mario Draghi:

“We will implement in full our purchase programme as announced and in any case, until we see a sustained adjustment in the path of inflation.”

With verbal confirmation of a continuation of QE (like it was ever in doubt), bond markets, and in turn the USD should stabilise and end the recent rout that we have seen across the market. This news coincides with a few key technical levels across the majors which we will take a look at on Twitter today and early into next week.

The Fed:
Jobless claims continued to fall overnight with the 264K print vs the 272K expected actually a REALLY promising number. But while there is progress in some areas of the economy, the recent downturn elsewhere 100% means no rate hike in June. This has been expected for a while now and that is what the recent USD correction has been on the back of.

What markets are looking for now is whether data will continue to miss and force a change in rhetoric at the next FOMC meeting. Fed President Williams has re-iterated the fact that any near term rate hike will be data dependent and that the Fed will look to conduct any changes openly and gradually to avoid any big shocks to travel through the market.

A few clues there to digest and talk about more on social media heading into next week.


On the Calendar Today:
Nothing from Australia or New Zealand on the calendar today but Governor Kuroda speaks from Tokyo. Kuroda has been adament that even with some worrying data points out of Japan, the BoJ did not require a change in policy.

CAD Manufacturing Sales data should see some movement in our USD/CAD trade idea after the pair rallied on the back of mixed US data last night. However, it’ll probably be the University of Michigan Consumer Sentiment that offers the bulk of event risk either way.

JPY BOJ Gov Kuroda Speaks

CAD Manufacturing Sales
USD Prelim UoM Consumer Sentiment


Chart of the Day:
Mixed data from the US has seen the USD get hammered and the relative safe haven of gold come back into favour. Add the ever present concerns in Europe as well as China’s slowdown and you can see from a fundamental point of view why gold is attracting interest.

After the USD fell to fresh 3 month lows on the back of poor retail sales data, gold has rallied into an important technical zone that I wanted to highlight.

Gold Weekly:

Click on chart to see a larger view.

As you can see on the weekly chart, gold has not managed to break through previous resistance now turned support from as far back as 2009.

Gold Monthly:

Click on chart to see a larger view.

Pulling up a monthly chart and drawing a simple fib shows that the swing bottom here is the 61.8 fib support level, further adding to the argument that we will see a bounce.

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Dane Williams – @VantageFX

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