Markets continue to be volatile after the recent week and one should look no further than the gold market as a shining example of why the market is currently a little trecherous. With the current global economy looking a little shaky and QE packages globally not looking all the more tantilising it would seem that the more speculative metals such as gold are doing incredibly well at present. Admittedly, the market may be a little overbearing on this part as US data continues to be somewhat upbeat with the unemployment rate recently falling to 4.9% (exp 5.0%), which is certainly another record low and shows a healthy labour market. However, markets are ever human and when they think something is not right the market will accordingly act in a panicked manner.
For me gold remains quite elevated in the marketplace and the current highs pushed today have been somewhat of a stretch for belief, however downward pressure looks to have been applied when gold tried to break through strong resistance at 1191.36 as traders looked to unwind positions. And as much as I would expect to see the bears take control here it looks unlikely given the steep trend that has been in play now for some time. For the bears to look even in control here they would have to break through the 20 day moving average which has been acting as dynamic support in recent weeks and there is certainly a lot more give before that becomes a reality. If gold were to retreat it would find strong support at 1141.42 and the market may look to take another crack at higher highs, especially if these market concerns continue to persist.
The New Zealand dollar is also hitting the hit lines with the recent IMF comments saying it is only 10% overvalued. While this is of no surprise it has added further pressure to the high flying kiwi as it says there is room to ease further as inflation pressure continues to be weaker than expected. The RBNZ will most likely already pay little heed to this, but it's always worth noting when it comes to the study of FX markets and the general market perception can be a powerful thing when central banks look to act. With falling dairy prices and the Canterbury rebuild looking to slow it could certainly be the future shortly for the NZ economy that we see some sort of possible rate cut, and many of the current banks are expecting something in 2016.
On the charts it's a case of wait and see. Current resistance at 0.6615 is looking to hold back any further major moves. For me any extension lower is likely to find support at 0.6556 and the market will be looking to pressure this level in an effort to break lower to test the trend line and the 20 day moving average. It's also worth noting that each bullish wave has continued to be weaker and weaker which shows the market is losing patience for the chances of breaking higher highs. I would anticipate that after a test we could either see a run higher before failing to make a higher wave, or a complete breakdown of the trend and a push back into bearish territory.
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