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Traders have been actively shorting gold in the wake of the FOMC meeting and when you see US bond yields moving higher it subtracts from gold’s investment case. When you adjust a bond yield to take into consolidation inflation and the end result is a positive number, then this is what is called ‘positive real yields’. The higher the ‘real’ yield, the less appealing gold is as an investment. The metal is in a text book downtrend and would need to rally above $1240 to break the late October downtrend. With gold looking a touch oversold, the bulls will be hoping to see the June low of $1180 hold.
Natural gas is breaking out to the topside in all currency terms and should be on everyone’s radar right now, especially those looking for a strong trend. Overnight we heard from the EIA (Energy Information Administration), who detailed the stockpiles on the week fell by a record amount. Nat gas rallied 4.7% on the day and printed a higher high in the process.
Traders will be looking out for commentary from the BoJ in today’s trade. As usual there is no set time for narrative to come out of the meeting, but the usual situation is the less they have to say, the earlier in the day they release the statement. Judging by the recent improvement in the TANKAN report, very little should be detailed today and perhaps Haruhiko Kuroda’s press conference (scheduled for 15:00 AEDT) will be more interesting, especially his opinion around the recent Fed moves. There is divergence seen on the daily chart, with USD/JPY making a higher high, while the RSI printed a lower high. Still, the bulls will be hoping for a move to 104.71 (initial wave-5 target) and perhaps even onto 105.50 (the 61.8% retracement of the 2007 to 2011 sell-off).
The Chinese market found sellers yesterday, as once again the PBOC refrained from its usual liquidity operations and allowed money market rates to move higher. The seven-day repo rate moved up 75 basis points to levels not seen since June and the impact of higher interbank rates results in headwinds for growth. Overnight we heard the PBOC injected around $30 billion into the markets and thus we should see these money market rates fall (when the market opens later today), which in turn could see the Chinese equity and futures markets rally.