Gold, Wall Street rallies falter as signs of fatigue surface, ASX to open lower

Signs of fatigue have surfaced across several key markets which had otherwise began the week on a strong footing. Gold futures pushed to a new record high of 2531 before handing back over half of the day’s gains, silver made a failed ‘bid’ above $30 to close flat with a bearish pinbar and copper formed a 2-day bearish reversal pattern (evening star formation).

A similar pattern emerged across Wall Street indices. S&P 500 futures snapped its 8-day winning streak with a small doji, a pattern matched by the Nasdaq 100 and Dow Jones, although the Dow snapped a 6-day winning streak and failed to close above 41k.

None of these are particularly bearish moves in the grand scheme of things. But the optimism which saw these markets rush out of the gates on Monday has now faded, and we’re now likely within the low-volatility environment which tends to precede highly anticipated events such as Jerome Powell’s Jackson Hole speech.

So, traders may want to buckle up for not very much, as there is still another two full days and 16 hours before Powell hits the wires.

USD continues to weaken, soft CPI points to further BOC easing

There was however a bit more excitement for forex traders. The US dollar index was lower for a third day, helping EUR/USD close firmly above 1.11 for the first time since December, and trades just pips from its milestone high.

Even the Canadian dollar was lower against the USD despite another softer inflation report, which all but assures another cut from the Bank of Canada. Money markets suggest another two or three cuts could arrive this year. Core CPI slowed to 1.7% y/y, median and trimmed CPI slowed to 2.4% and 2.7% respectively – their lowest levels since Q1 2021.

Events in focus (AEDT):

09:00 - AU PMIs
10:30 - JP services PMI
17:30 - DE flash PMIs
18:00 - EU flash PMIs
18:30 - UK PMIs
22:00 - Jackson Hole symposium
22:30 - US jobless claims
23:45 - US flash PMIs

Gold technical analysis:

While there are minor signs of fatigue at gold’s record high, we should not lose sight of the plethora of support levels nearby. The April, May and July highs are less than a day’s typical trading range away, so unless we’re dealt a sudden risk-off catalyst strong enough to make investors run for cash, dips are more likely to be bought than not in my view. But bears may be able to capitalise on a cheeky short on the intraday timeframes.

The rise to its latest ATH met resistance at the weekly R1 pivot and was accompanied with a bearish divergence on the RSI (14). Bearish momentum was swift to return, and the cautious retracement back within its range looks like a classic swing-trade short could be setting up. The bias is to fade into moves below 2560 with a conservative downside target of 2540, near the 50-bar EMA and just above the July high (previous ATH).

ASX 200 futures (SPI 200) technical analysis:

Yesterday I outlined why I was suspicious of the ASX 200 rally, and today I see it has now retraced. The ASX 200 futures market snapped an 11-day streak after forming a bearish pinbar perfectly at a 78.6% Fibonacci level, below the 8,000 handle. Volumes have been declining during the entire ‘rally’ which shows a lack of bullish enthusiasm, and potentially points to a deeper pullback.

A bearish trend has developed on the 1-hour chart, and the support zone ~7917/25 has now been respected as resistance. The bias is to fade into rallies towards that resistance zone in anticipation of a move down to 7860.

View the full economic calendar

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

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