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Gold Price Fills Gap, Stocks Drop as Trump Bemoans Trade Progress

Gold Price Fills Gap, Stocks Drop as Trump Bemoans Trade Progress

2019-05-06 12:37:00
James Stanley, Currency Strategist
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Gold Price Talking Points:

- Risk aversion is the name of the game to start this week, after a couple of tweets from President Trump on Sunday afternoon denoted the lack of progress in trade talks with China.

- Chinese stocks had their worst day since February of 2016, and that risk aversion has carried through Europe and into US equity futures ahead of the US open. Gold prices gapped-higher to start this week and remain in a spot of potential for bullish scenarios, particularly should risk aversion continue as a dominant theme.

- DailyFX Forecasts are published on a variety of currencies such as the US Dollar or the Euroand are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.

Do you want to see how retail traders are currently trading the US Dollar? Check out our IG Client Sentiment Indicator.

Gold Price Gaps Higher, Stocks Drop After Trump Tweets

Friday saw the S&P 500 close at a fresh all-time-high. But, one weekend later, and market participants are looking at a markedly different picture, and that appears to be emanating from ongoing concerns around global trade. On Sunday afternoon, President Trump sent two tweets that received an unusual amount of attention from markets, both of which denoted that trade talks with China weren’t going so well, and that tariffs on Chinese goods would be hiked.

This created a risk-off move in Asian equities, and that weakness has spread across global equities. At this point, both the Dow Jones Industrial Average and the S&P 500 are set to gap-down after Friday’s highs; and Gold prices have caught a bid to push back above the 1280 level on the charts.

Gold Price Hourly Chart

gold price hourly chart

Chart prepared by James Stanley

At this point, the Gold price chart has just filled the remaining unfilled-gap from this weekend, and this could be an area of focus for bulls, looking for support to hold at-or-around the Friday close of 1278. This would keep alive the late-week bounce from a failed break-down at the lows, which can keep the focus-higher for Gold prices. The resistance side of the symmetrical wedge projects currently to around 1293 on the chart, and a break-above that exposes the prior resistance zone that runs from 1302-1310.

Gold Price Daily Chart

gold price daily chart

Chart prepared by James Stanley

Equities Tumble Ahead of US Open

Perhaps more noticeable than the bump in Gold prices ahead of this morning’s US equity open has been the overnight move in stocks. Stocks in China experienced their worst one-day performance since February of 2016, a full three-plus years ago. The China A50 index dropped below a number of support levels already this week, breaking the 2019 bullish trend in the process.

China A50 Daily Price Chart

china a50 daily price chart

Chart prepared by James Stanley

That move of risk aversion has held through European trade, with the German DAX turning at a really big level around 12443. This is the 23.6% Fibonacci retracement of the 2016-2018 major move, and this was confluent with the bullish trend-line making a channel that’s governed this year’s bullish advance. Prices have already tested below two-week-lows, and there aren’t many nearby areas of support potential until the 12k psychological level comes into play.

DAX Daily Price Chart

DAX Daily price chart

Chart prepared by James Stanley

S&P Futures Drop Below Rising Wedge

In US equity futures, that weakness has started to get priced-in ahead of the US open. The S&P 500 has seen prices fall below a rising wedge formation, and this is a setup that will often be approached with the aim of bearish reversals. This formation initially gave way last week around the FOMC rate decision on Wednesday; but strength soon returned on Friday to push up to those fresh all-time-highs. But, at this point, the S&P 500 has caught support at the low from April 11th, taken-around the 2880 area on the charts. Short-term resistance is coming-in from the 2900 area, around last week’s swing lows.

S&P 500 Four-Hour Price Chart

spx500 four hour price chart

Chart prepared by James Stanley

Dow Jones Tests 26k, Fresh Monthly Lows

The blue-chip index out of the US is also looking ready to gap-lower on the morning, and price action support has already played-in on Dow futures, with buyers showing-up around a re-test of the 26,000 psychological level. This is the first time that price has been tested since March, and this marks a fresh monthly low on the index as short-term resistance has been showing in the prior zone of support, taken from around 26,067-26,110. A push back-above that zone, which had previously helped to provide support in April, can re-open the door for a test of the 26,200 level, and this could remain of interest for those looking to fade this gasp of risk aversion ahead of the weekly open.

Dow Jones Industrial Average Four-Hour Price Chart

dow jones four hour price chart

Chart prepared by James Stanley

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts for Q2 have a section for each major currency, and we also offer a plethora of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers an abundance of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

--- Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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