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S&P 500 eyeing another all-time high

Five markets in focus today: Spot Gold, US 500 Cash, Intel, GBP/JPY and AUD/USD.

NYSE
Source: Bloomberg

Spot Gold

Clearly the asset everyone is talking on the trading floors here in Asia today. Price action was looking fairly constructive last week having broken out of the short-term consolidation pattern. Fundamentally, traders were being told of news about strong jewellery demand in Q1 as well, which was putting backbone into the recent rally to $1345.

There doesn’t seem to be one smoking gun attached to the sharp decline though, with some commentators talking about better feeling towards Portuguese banks, less concern around Ukraine and Iraq among others factors. I would also throw in the article released late Friday in the Wall Street Journal about increased debate about a hike in the fed funds rate among the Federal Reserve.

Technically gold was a touch overbought, but not enough to cause a 2% decline, so I feel a position adjustment has materialised, especially after we saw net long positions (as monitored in the weekly Commitment of Traders report by the CFTC) increase to 150,000 contracts – the highest since January 2013. The bulls will also take the fact that spot gold found support and closed above $1305.5 – the 38.2% retracement of the June rally.

US 500 Cash

A big night for earnings is on the cards with Johnson & Johnson, JP Morgan and Goldman Sachs reporting pre-market and Intel and Yahoo in the after-market. IG clients can trade these stocks in any session, so ask your client manager if you need more information around this. At midnight (AEST) Janet Yellen testifies to the Senate and traders will be expecting modestly more hawkish (USD positive) language given she is testifying on behalf of the whole Federal Reserve, rather than her own thoughts. All eyes are on the all-time high of 1985.

Intel (INTC)

Intel report in the post-market and consensus is looking for 2Q EPS of 52c, on revenue of $13.71 billion, with the tech giant previously forecasting $13.7 billion. Q2 gross margins are estimated to be 64%, so anything above this level will naturally help profitability, although the Q3 numbers are probably more important with traders expecting a 50 basis point improvement (to 62.5%). Technically the stock is overbought with the nine-day at 80 and we will need to see a strong earnings print to keep the momentum going.

GBP/JPY

Sterling has plenty of reasons for traders to own it, however I am starting to become more cautious on the currency as the markets are pricing in a lot of good news and rate hike expectations are elevated. A daily close below 173.15 (the 38.2% retracement of the recent rally) would bearish.

AUD/USD

The pair continues to oscillate around the 94 handle and traders will be focusing heavily on today’s RBA minutes at 11:30 AEST. Any detailed views on the strength of the currency will be the main focus and traders will be searching for clues around future rate cuts. A move through 0.9322 (the 61.8% retracement of the May to July rally and June 18 low) would suggest a more bearish trend.

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