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German polls positive for euro

Four markets in focus today.

EUR/USD

The pair has spiked up on open, after exit polls revealed that Angela Merkel and the CDU/CSU has polled strongly in the German elections. At the time of writing we still don’t know if the CDU party will claim a majority of over 300 seats; a result which would please traders and should cause EUR to gain across the board. We don’t however see a huge amount of upside for EUR/USD given the lack of concern shown from traders coming into this election. The fact the polls are predicting that the anti-euro AfD party have polled 4.9% of the votes is also positive, as they need 5% to gain representation in the lower house. Traders should also look out for manufacturing and services PMI in Germany, France and eurozone composite in European trade.

Germany 30 (DAX)

The index is in a strong uptrend and pullbacks should be supported around prior highs at 8557 and 8457. Like EUR/USD, traders should take heart that Germany should either see the previous government continue to govern or potentially a ‘grand coalition’ with the SPD party. While economic data is also out, traders will be keen to hear from Mario Draghi at 23:00.

Spot gold

Gold reversed on Friday, selling off aggressively after James Bullard of the St Louis Fed talked openly on Friday about October being a possible month for tapering to begin. Mr Bullard is seen as a dove and thus his comments are very interesting and clearly negative for gold. Trend resistance from the August high comes in at $1370 and we would suggest stops on short positions could be put just above here. At 23:20 AEST and 23:30 AEST we hear from Dennis Lockhart and Bill Dudley and traders should listen out for comments on future tapering. Bill Dudley is part of the Fed’s core (along with Ben Bernanke and Janet Yellen) and thus his comments are most important.

Newcrest Mining (NCM)

Gold found strong selling pressure on Friday and thus should weigh on gold miners today after recent strength. NCM is trending higher and traders will be keen to see if they can again bounce off trend support at $11.94. A break of this level could see the company pullback to $11.00.

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