US markets continue to be a massive driver for the global economy, as economic optimism continued to pick up pace in the US sending equity markets and the USD higher. While construction spending was down at -1.0% (0.6% exp) the focus was solely on the ISM manufacturing PMI which lifted to 57.7 (56.0 exp) which showed growth in optimism from the managers index. With this sort of optimism it's hard not to be positive about risk appetite in the global economy and the hopes for further economic expansion. Topping this off was also the FED's Brainard speaking on interest rate hikes and commenting that he expects to see one soon. All of this will further add weight to the likelihood of an interest rate rise for the US economy, and a restoration of normal monetary policy.
I spoke candidly yesterday regarding the USDJPY and I still feel that as the US economy picks up pace we will continue to see people unwinding hedging positions in the Yen. Further adding momentum is the USD as a whole, as interest rates pick up, and as dollar bulls push the USD back to the global heights it was once. The Bank of Japan in all likelihood will do little to stand in the way of the USD as it looks to see its currency devalue once more and aid in the possibility of further inflation, something the Abenomics has long been struggling to get as of recently.
For traders looking at the USDJPY the first level of resistance was always going to be the 50 day moving average which had fended of bulls previously, this is no longer the case. So far the USDJPY looks to have pushed above the 50 day moving average and resistance at 113.707, which has of course become support after the movement upwards on the new daily candle. The next level of likely resistance can be found at 114.542, but in reality there are going to be much higher levels if the dollar bulls get their way with the Yen.
Previously I have also touched on Gold and its hedging properties which have been very popular after Trumps administration came to power. However, yesterdays speech seemed to show Trump as a president who may indeed come good on his promises and act the man required for the job. The markets have responded accordingly as positive economic data also weighs on gold bulls and as a result we have seen Gold dropping.
So far the bears have attacked gold and have driven it lower to support at 1245.69, with a pause being a real possibility at this stage. What I would also be looking for here is the 20 day moving average acting as dynamic support at this stage, as yesterdays candle showed that it still has a number of gold bulls riding of this key indicator. In the event the bulls can retake control, I would anticipate gold making a jump to resistance at 1262.18.
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