US data continues to slow

25 August, 2017

US markets continue to be lacklustre at present, as US data continues to disappoint and the Trump effect has certainly started to wear off in the current market climate. This was further compounded today by US existing home sales m/m coming in weaker than expected at 5.44M (5.55M exp) which came as a surprise as the summer season is normally the peak for home sales in the US. This for me is also a sign that US consumers are not so confident to upgrade and change homes as well with all the uncertainty at present. The only positive data that was seen in the end was initial jobless claims which came in at 234K (238k exp), so a slight improvement but a jump over last week's figure of 232k. Regardless of the data and the current market fears I believe the market is getting semi excited over Jackson Hole which is due out shortly and this has led to buying of the USD, but how long can it last.

So with the market in a lurch and US data being lacklustre I still feel that hedging and safe haven currencies are likely to continue to play a large part. For me one of the key hedging instruments thus far has been gold. It has consistently risen over the past few months on the back of Trump and the US economy and is now approaching strong resistance at 1295. Each resulting daily candle has a higher low on the wick, and I believe that bullish moment could be very well building under gold's movements. Adding to this, is the 20 day moving average which has been acting as dynamic support and is quickly rising to the resistance region - this could in turn squeeze traders above 1295 all together. If we did see a solid rejection at 1295 and the 20 day moving average broken then all assumptions would be pushed aside and support at 1258 would quite rightly be the best possible target for gold bears taking a swipe.

Adding further to the headaches of the world economy is the pound and Brexit, which continues to lack direction at the best of times and taunts the European markets on a daily basis. While the UK economy saw GDP in line with expectations today it also saw that business investment y/y was flat at 0%. A tell tale sign of uncertainty and one that will have ripple effects across the UK economy!

GBPUSD traders have been looking for any signs to jump higher, but so far it has not come at all and the bears are making moves. After the fall through yesterday the market has jumped higher to test the waters and previous support at 1.2844 has now acted as resistance and stopped any bullish movement in its tracks. I am expecting the potential of further falls down to 1.2733 as the market continues to be bearish in the face of so much uncertainty. 


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