Gold crumbled on news that the Fed were being more hawkish than expected, hitting a low of $1327. The market will now face the prospect of looking at the more hawkish stance of the Fed and ultimately price action in the USD, while geo-political issues will be another factor. Looking at the daily chart and the MACD has broken below the signal line suggesting momentum is lower, with traders eyeing support at $1312 (the 38.2% retracement of the $1182 to $1392 rally)
The macro community have been long USD’s against the CAD for a while, however while the USD has recently been sold against the EUR or GBP, USD/CAD has held firm. This was highly positive and now the USD is back in vogue we are seeing a strong break out. The clearly defined inverse head and shoulders pattern on the weekly chart target the 1.19 and while it will take some time to get there this is a pair that should be a good long term buy.
The market is eyeing the March 10 low of 6325 and a break of this level would clearly be a bearish development. News flow from China continues to favour bearish positions and despite extremely cheap valuations the market just isn’t prepared to buy equity. There is a clear lack of trust from investors that this is a region worth investing in, however fundamentally there will be a time this year that we do see a rapid rise in this index. Perhaps that comes on a further deprecation in the CNY (Yuan), which could promote further outflows and cause the PBOC to cut the reserve ratios that banks have to hold as capital. Still, until price action becomes more favourable rallies should be sold into and the trend respected.