In the past few days the lack of effectiveness of monetary and fiscal stimulus worldwide made investors to move away from shares towards safe-haven assets like bonds, yens and U.S. dollars.
That defensive attitude among investors could continue in the long-term. The fact that the stock markets have not reacted particularly enthusiastic to the recent loosening of monetary policy worldwide is very good indicator for rising risk averse among market participants. The Fed has extended Operation Twist and in recent minutes of its discussions regarding future monetary policy, indicated that it will extend the loosen policy only if US growth slows further. In the same time the European Central Bank, the Bank of England and the central banks of China, Korea and Denmark have also loosened their monetary policy stand.
It would not be surprising if this is the starting point for increasing doubts among investors about the effectiveness of the monetary stimulus. However, on technical level, there is still a chance that the stock markets could gain further in the coming weeks, but a steep drop should be expected thereafter.
EMU concerns should also bring more safe-haven flows in the near future. The yields on 10-year German and US government bonds are expected to reach 1% and 1.2%, respectively, while EUR/USD spot rate could drop further to 1.18 and even to 1.15.
On the commodity markets, the gold is going to post second weekly decline on the back of a strong U.S. dollar. However, weak gross domestic product figures from the world’s second largest economy turned out to be in favor for the precious metal, despite the ongoing pressures from the Fed’s uncertain policy actions and Europe’s debt crisis, which both support the dollar.
Early this morning China announced that its growth slowed for sixth quarter as trade and manufacturing pulled the brakes, adding pressures on the central bank to boost stimulus further in order to support growth in the second half of the year. The GDP for the second quarter slowed to 7.6%, a three year low compared with 8.1% expansion during the first quarter, while analysts’ expectations were of 7.7%.
In the coming weeks the gold price is expected to remain in the range between 1525 and 1650, receiving support as safe haven and declining amid strong dollar.
Binary EUR/USD options declined further reaching new two-year low at 1.2166. The long-term picture remains negative with main target on the psychological 1.20. First support for the coming days is exactly the mentioned level, which gives enough spaces for binary investors to profit from the expected downside movement. On the opposite direction first resistance is seen around 1.23, followed by 1.24 and the June’s top at 1.2747.
Binary GBP/USD options fell below 1.55, but are still above the long-term positive trend line. First support is seen at 1.54, followed by 1.53 and 1.5235. Considering the key support around 1.54, which coincides with the long-term positive trend line, binary investors should expect reverse towards 1.56. Break above the latter will move the target to 1.5750, which coincides with the 200-day SMA.
Binary USD/JPY remains in very short range around 79.50. For the next week first resistance above 80.00 is seen at 80.50, followed by 81.85. Break above the latter will move the target towards the 2012 top at 84.17. On the opposite direction below the 200-day SMA (79.00) support is expected around 77.70. For now the range trading is between 80.10 and 79.15, which are 50.0% and 61.8%, respectively Fibonacci retracements of the 76.05-84.17 gain. Break way from one of the borders should be considered as signal for sharper movements.
The Australian dollar fell below 1.0200 after it reached new two-months high at 1.0329. The overall picture is still negative, but only break below the parity level will be considered as an end to the recent positive correction. On the upside first resistance is the expected around the 200-day SMA at 1.0270, followed by the recent top at 1.0329 and 1.0369, which is 61.8% fibo retracement of the 1.0856-0.9581 drop. On the opposite direction break below the parity level will move the target towards the 2012 bottom at 0.9581.
Binary gold extends its consolidation around 1600. Investors could increase profits from trading the 1550-1650 range. On the upside first resistance is seen at 1635, followed by 1670. Conversely first support is expected around 1550, followed by the crucial 1525. The overall picture is negative so positive moves towards 1630 could be good opportunity to profit from following downside reverse.
The index extended its correction below 1360 after it had reached new two-months high 1374.80. In the coming days further decline is expected to receive strong support near the psychological 1300, considering that the 200-day SMA is at 1306. Break below it will move the index towards 1250 with support seen at 1266. On the upside break above the recent high at 1374.80 will move the target on the multi-year top at 1422.
The information in this analysis is collected from different sources and should serve for informative purposes only. The author shall not be held responsible for the validity of the presented information. No part of this analysis recommends the purchase or sale of a currency pair or any other financial instrument.