It was a good week to be long AUD/USD, and while this could have been a function of position adjustment (given the high level of short positions here), the pair managed to end a run of ten consecutive weekly losses. On Friday the pair rallied above 0.9000, but failed to hold this level and fell to close just below the 21-day moving average and October downtrend at 0.8949 to 0.8952. It’s also interesting to see the correlation breakdown between AUD/USD and EUR/USD, with EUR/USD finding good sellers last week.
After trading sideways for a few weeks there are signs the pair could revert its downtrend and test the recent lows of 1.0734. All short to medium-term moving averages are headed lower, while the MACD on the daily is flattening out and we could see the MACD fall below the signal line. This would generate a sell signal for me and while this indicator has a history of false signals, in such a strong downtrend the reliability here increases.
Spot gold completed a bullish weekly reversal last week off oversold levels. The gold bulls will be hoping for a closing break of $1250 (the 38.2% retracement of the October to December sell-off) this week. Short-term momentum suggests further upside could be seen and it will be interesting to see how gold fares if we get a strong US ISM services and factory orders print tonight (02:00 AEDT). Spot gold seems to have diverged a touch from the USD, especially after EUR/USD lost ground last week and closed through some strong support levels. With GSCI and Dow Jones commodity indices rebalancing today, we know that over 1 million ounces have to be bought for the re-weighting. Will gold continue to find buyers once the re-weighting has finished? That is a key question, especially with the US payrolls in focus this week.
Short-term momentum is clearly to the downside and selling rallies is preferred. Global growth is improving which is supportive, however with new supply coming on-line, you can see why the price action is looking bearish right now. The 200-day moving was broken last week at 96.60 although the average is trading clearly sideways, highlighting the flat long-term trend.