Two Trades To Watch: Gold, FTSE - Thursday, May 20
Gold looks towards 3 month high despite Fed taper talk. FTSE looks to retake 7000.
Gold looks to 3 month high despite Fed’s taper talk
Gold (GLD) saw a volatile session on Wednesday amid the collapse of the crypto market and after the minutes to the FOMC.
Investors selling out of crypto could be buying into gold, lifting the price as most major cryptos lost around 30% in the crash.
The minutes to the Fed meeting revealed that members are ready to start the tapering debate in coming meetings, which sent yields and the USD higher dragging on gold.
Today, as the market continues digesting the minutes yields are retreating giving gold space to continue its recovery.
US weekly jobless claims will be in focus.
Where next for Gold price?
The gold price trades within an ascending channel dating back to early April in a clear upward trend. The trend remains intact despite yesterday’s selloff.
The RSI is heading into overbought conditions so a period of consolidation could be on the cards before further gains.
Gold is attacking resistance on the upper band of the ascending channel at 1875 which is also horizontal resistance the high January 25. A break above here could see yesterday’s high and a three month high of 1890 come into focus ahead of 1900.
A move below 1844 the descending trendline support and horizontal support could negate the near term uptrend and open the door to a deeper selloff.
FTSE looks to test 7000
The FTSE, in line with its European peers, is heading higher, despite a weak handover from the US.
Fed minutes revived taper jitters hitting sentiment for riskier assets.
Today the tone is more promising amid the easing of lockdown restrictions in Europe and growing optimism that the covid vaccine is effective against the Indian variant.
Rising commodity prices could help lift heavyweight resource stocks & oil majors.
Watch for earnings from easyJet (ESYJY), Kingfisher (KGFHY) and Royal Mail (ROYMF)
Where next for the FTSE?
Despite falling over 1% in the previous session, the FTSE continues to trade within its multi-month ascending channel on the daily chart. It found support at the lower band of the channel and the 50 sma in the previous session at around 6900 before rebounding.
The price is testing resistance at 7000, the key psychological level and the 20 sma on the daily chart. A move beyond here could prompt further gains towards the weekly high around 7100.
On the flip side, a move out the ascending channel below 6900 could bring a more bearish view with sellers gaining traction below 6820.
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