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  • S&P 500 contending with its proverbial ‘line in the sand’ as bulls and bears battle for directional control. How we close/trade around the 50-day moving average could serve as a noteworthy bellwether for risk trends headed into next week. I remain cautious below ~4,480. $SPX $ES
  • USD/JPY trades to a fresh monthly (110.57) amid the pickup in longer-dated US Treasury yields, and the exchange rate may stage a larger advance over the coming days. Get your market update from @DavidJSong here:
  • US yields continue to climb, with the 10-year Treasury yield trading above 1.45% $ZN $ZB
  • $USDJPY bull thesis appears quite constructive. Technicals show topside breakout above trend resistance following a period of consolidation. Bond yields providing the fundamental catalyst. Eyes on Aug/YTD highs. A broad-based deterioration in market sentiment poses downside risk.
  • WTI posting another session of strong gains, currently flirting with the 74 handle $CL #Oil #OOTT
  • The New Zealand Dollar’s bullish breakout attempt in early-September was rebuffed. Price action at the end of the month is telling a different story. Get your market update from @CVecchioFX here:
  • So much for that Evergrande recovery. Shares of the troubled Chinese property developer are down approximately -12% today following yesterday's impressive rally (biggest in a year)
  • Retail trading platform Robinhood announces hire of new Chief Compliance Officer amid regulatory scrutiny
  • There is a ridiculous number of scheduled Fed speeches on the docket next week. Powell specifically will be speaking multiple times including at an ECB hosted forum on central banking (which also has a panel with Fed, ECB, BOE and BOJ heads)
  • USD Ascending Triangle, Bullish for Q4 - #DXY chart on @TradingView
Gold Prices Plunge as Fed Embarks on QT- Support Targets in View

Gold Prices Plunge as Fed Embarks on QT- Support Targets in View

Michael Boutros, Strategist
Gold Prices Plunge as Fed Embarks on QT- Support Targets in View

Fundamental Forecast for Gold:Neutral

Gold prices fell for the second consecutive week with the precious metal down more than 2.1% to trade at 1295 ahead of the New York close on Friday. The losses come on the back of FOMC interest rate decision where Chair Yellen & Co reaffirmed expectations for another rate hike in 2017 and announced the commencement of the balance sheet offload (quantitative tightening) starting next month. While the prospects for higher rates are likely to weigh on bullion prices, rising geopolitical tensions may limit the magnitude of the decline.

The Federal Reserve released its 4th quarter projections this week and although the committee did upwardly revised their year-end GDP forecast to 2.4%, they lowered inflation expectations with Core PCE (Personal Consumption Expenditure) revised lower to just 1.5% from 1.7%. This was the second consecutive reduction we’ve seen in the Fed’s inflation forecast and continues to suggest the central bank remains uneasy with the continued softness in price growth.

It’s also worth noting that the interest rate dot-plot suggests the Fed remains committed to one more hike this year, expectations for the terminal or longer-run rate were lowered with the median forecast now calling for a nominal rate of 2.75%. The point is that although markets did need to reprice the December, the end rate suggests the glide path will likely be even slower than expected. That said, look for USD gains to be limited. From a technical standpoint, the prices do remain at risk near-term with the decline likely to offer favorable points of entry for the bulls.

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Gold Prices Plunge as Fed Embarks on QT- Support Targets in View
  • A summary of IG Client Sentimentshows traders are net-long Gold - the ratio stands at +2.34 (70% of traders are long)- bearish reading
  • Long positions are 7.0% higher than yesterday and 6.6% higher from last week
  • Short positions are 0.6% lower than yesterday and 0.6% lower from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Spot Gold prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger Spot Gold-bearish contrarian trading bias.

Learn how to use Gold sentiment in your trading.Get more information on Sentiment here Free!

Gold Weekly

Gold Prices Plunge as Fed Embarks on QT- Support Targets in View

Gold prices reversed from basic slope resistance earlier this month with the decline now testing the 2017 opening-range high at 1295. A weekly close above this threshold would give prices hope of a near-term rebound. Critical long-term resistance remains at 1380/91.

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Gold Daily

Gold Prices Plunge as Fed Embarks on QT- Support Targets in View

Last week we highlighted that prices had, “set a clean monthly opening-range just above basic trendline support and we’ll be looking for a break of this region for further guidance on the near-term outlook.” A break early in the week kept the near-term focus lower in prices with the decline taking gold back below the June highs. Interim support is eyed at 1281 backed by more a more significant confluence at 1263/68. Key resistance & near-term bearish invalidation stands at 1325- a close above that threshold would be needed to mark resumption of the broader up-trend.

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Gold 240min

Gold Prices Plunge as Fed Embarks on QT- Support Targets in ViewGold Prices Plunge as Fed Embarks on QT- Support Targets in View

A closer look at price action highlights gold prices continuing to trade within the confines of this well-defined descending channel formation. The break below the monthly opening range has us looking for a near-term low next week. That said, be mindful of rallies sub-1304 with a move lower targeting the aforementioned support targets.

Bottom line: look for sideways to lower price action early next week with a breach above channel resistance needed to suggest a larger recovery is underway.

---Written by Michael Boutros, Currency Strategist with DailyFX

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