Investors have been digesting the latest statements from the US central bank, which surprised markets with a far more hawkish stance than expected. While this hasn´t led to a reversal in stock markets, it could limit further gains in the near-term as taper talks intensify.
The US30 has been declining slowly but steadily in the past few days, and the index could soon test the support zone at 33,286-33,455 points. A clear break below the former level would then pave the way for a deeper correction that could take US30 to 32,080 points. While the uptrend remains intact for now, equities are under increased pressure and traders will be closely watching the bond market for further clues..
Gold prices collapsed following the FOMC meeting and extended losses today. XAU/USD broke below the 200 DMA and the psychologically important $1800 support level. For Gold bulls, this represents a major defeat and could trigger position covering from speculators holding long positions. The next major support level now lies at $1676 – which is the March low where XAU/USD posted a double bottom pattern.
The short-term outlook has turned negative and traders looking to buy dips in Gold are increasingly focus on the cross pairs. XAU/EUR has better chances to stage a recovery, and should find strong support ahead of the €1450 level.
The Euro has been struggling as well, and the outlook for the currency is turning increasingly bearish. While the Fed showed its hawkish side yesterday, the ECB is a long way from even considering taper talks. The currency is likely to stay under pressure in the near-term and extend losses, especially against the Greenback.
A daily close below the 200 DMA signals that we could see a test of 1.17 support soon. A break below this level would spell trouble for EUR/USD and force more Euro longs into liquidating their positions. To the topside, imminent resistance is seen at the 200 DMA (currently at 1.19629, followed by the psychologically important 1.20 level.
The exotic currency pairs are worth watching too, as there is potential for a larger short squeeze. USD/ZAR broke above the 14.00 resistance level and is likely to test 14.21 soon - which is the 38.2% Fibonacci level of the March-May decline. The currency pair might see a recovery rally to 14.76 if bullish Dollar sentiment persists.
The information is not to be construed as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; or to participate in any trading strategy. Readers should seek their own advice. Reproduction or redistribution of this information is not permitted.
With equity markets rising to fresh record highs in the United States and Europe, risk appetite is rising again