Market worries tend to ease as de-escalation appears on the horizon

Market worries for the US-Sino trade war tended to ease yesterday and during today’s Asian session, as a de-escalation seems to appear on the horizon. US President Trump asserted that trade talks were underway, despite China refuting this earlier on. Also easing the market’s worries were the news that China is considering to roll back tariffs on a number of US products, which would be the first tangible albeit temporary act of de-escalation. As for financial releases we note that the durable goods growth rate for March, released yesterday surpassed market expectations indicating an increase of investments in the US economy and thus more confidence from businesses to actually invest in the US economy. Today we note the release of the final University of Michigan consumer sentiment for April which is to provide a view on the demand side of the US economy. Overall, the market uncertainty seems to be easing as the week draws slowly to a close, which in turn may assist riskier assets like equities and commodity currencies while at the same time weigh on safe havens like gold.

We recalibrated gold’s first resistance and support lines in order to better reflect the current movement of the precious metal’s price action. On a technical level, we note that Gold’s price dropped after hitting on the 3340 (R1) resistance line. The movement of gold’s price over the past two days allows for the sideways motion bias between the R1 and the S1 to be maintained for now. The RSI indicator edged even lower, signalling further easing of the bullish sentiment among market participants. Should the bulls take over once again, we may see gold’s price breaking the 3370 (R1) resistance line and aiming if not breaching the 3500 (R2) resistance level. Should the bears take over, we may see the shiny metal’s price breaking the 3260 (S1) support line and continue to also break the 3167 (S2) support level.

North of the US border the Loonie seems to remain relatively stable against the USD. On a fundamental level for Loonie traders we note that the Canadian Federal elections are looming, as they are to be held on Monday. For the time being expectations are for the Liberals to win an absolute majority, which could have a short-term impact on the CAD, while a surprise win of the Conservatives may cause the CAD to rally. Yet the main issue puzzling CAD traders are the US tariffs on Canadian products at the current stage. As for financial releases we note for CAD traders the release of Canada’s retail sales for February in today’s American session, and should the rate accelerate more than expected, possibly escaping negative territory we may see the CAD getting some support.

USD/CAD remained in sideways motion just above the 1.3815 (S1) support line over the past few days, with little volatility. We tend to maintain a bias for the sideways motion of the pair to be maintained in the near term. Yet the RSI indicator despite edging higher remains at relatively low levels, implying that despite some easing, a bearish predisposition of the market for the pair may still be present. For a bearish outlook we would require the pair to break the 1.3815 (S1) support line clearly and continue to aim for the 1.3645 (S2) support base. A bullish outlook currently seems remote and for its adoption we would require the pair to break the 1.3975 (R1) line and continue higher, reaching if not breaching the 1.4100 (R2) resistance level.

Other highlights for the day:

Today we got UK’s retail sales rate which slowed down less than expected in a positive signal for the demand side of the UK economy and France’s Business climate for April which unexpectedly rose showing some optimism for the outlook of the manufacturing sector, while we note that later today ECB Board Member Buch, Riksbank First Deputy Governor Breman and BoE MPC member Greene are scheduled to make statements.

XAU/USD Daily Chart

• Support: 3260 (S1), 3167 (S2), 3055 (S3)
• Resistance: 3370 (R1), 3500 (R2), 3600 (R3)

USD/CAD Daily Chart

• Support: 1.3815 (S1), 1.3645 (S2), 1.3420 (S3)
• Resistance: 1.3975 (R1), 1.4100 (R2), 1.4280 (R3)

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