Against the backdrop of the coronavirus cases topping 5 million cases and two-week of US fiscal wrangling, US President Donald Trump signed four executive orders on Saturday, partly restoring enhanced unemployment payments the Americans affected by the coronavirus pandemic.

Additional details

“The orders would provide an extra $400 per week in unemployment payments, less than the $600 per week passed earlier in the crisis. 

The orders would suspend the collection of payroll taxes till December, with people earning upto $100,000/ annum.

Orders would also stop evictions from rental housing that has federal financial backing and extend zero percent interest on federally financed student loans.”

Trump said: “I’m not saying they’re not going to come back and negotiate. Hopefully, we can do something with them at a later date.”    

This comes after the White House officials and congressional Democrats ended nearly two weeks of talks over the fiscal aid on Friday, with the two sides still about $2 trillion apart.

  • Gold’s record-breaking rally could resume on a sustained move above $2050.
  • RSI on 4H chart stays in the bullish territory, pointing to the upside.
  • XAU bulls to buy the dips around $2010 in the week ahead?

The overbought conditions and price-Relative Strength Index (RSI) bearish divergence on gold’s (XAU/USD) daily chart prompted a sharp $60 correction from record highs of $2075 on Friday.

The yellow metal managed to recover from the two-day lows of $2015 but settled the week below the psychological $2050 level. This could warrant come caution for the bulls in the week ahead.

However, the Relative Strength Index (RSI) on the four-hour (4H) chart remains tilted to the upside above the midline at 54 levels, keeping the buyers hopeful.

The uptrend is likely to regain traction should the bulls fight back control over the upward-sloping 21-Simple Moving Average (SMA) at $2040.

Above that level, the $2050 level will test the bulls’ commitment. The next resistance awaits at $2065 levels, as the life-time highs and beyond remain on the buyers’ radars.

Alternatively, if the rebound loses steam, the rising trendline support at $2010 could be put to test. A breach of the latter will validate the rising channel formation calling for the extension of Friday’s corrective declines.

The bullish 50-SMA at $1998 could offer immediate support while closing below the 100-SMA at $1933 could possibly dim prospects for fresh upside.

Gold: XAU/USD 4-hour chart

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Gold: XAU/USD additional levels to watch

 

 

Luo Huining, Head of China’s Liaison Office in Hong Kong, said in a statement on Saturday, “the unscrupulous intentions of the US politicians to support the anti-China chaos in Hong Kong have been revealed, and their clowning actions are really ridiculous.”

Additional quotes

“Intimidation and threats cannot frighten the Chinese people.”

“US sanctions on him indicated he was doing what he “should be doing for my country and Hong Kong.”

Meanwhile, a Hong Kong government spokesman said:  The sanctions were “shameless and despicable” and represented “blatant and barbaric” interference in China’s internal affairs.

“We will not be intimidated,” he said.

Separately, a spokesman for Hong Kong’s Securities and Futures Commission, financial markets watchdog, noted: “Many global firms have prior experience of properly assessing and responding to specific US sanctions to the extent they may affect any of their clients and related activities.”

The responses come in from Hong Kong and China after the US imposed sanctions on Hong Kong Chief Executive Carrie Lam and other top officials, accusing them of playing a hand in curtailing political freedoms in HK.

Market implications

Friday’s risk-off market mood could very well extend into weekly Asian opening on Monday, as concerns over the US-China escalation will remain in play ahead of the trade talks scheduled between the two countries next Saturday, August 15.  

The US dollar will extend its recovery momentum across the board while the US stock futures could come under heavy selling pressure.

The US dollar index settled Friday at 93.40, adding 0.65% on a daily basis while the S&P 500 futures closed modestly flat around 3350 levels. Meanwhile, Gold corrected sharply to finish at $2035.

  • Dollar comeback poured cold water on gold’s record-breaking rally.
  • US-China woes, US stimulus deadlock and upbeat NFP boosted the USD.
  • The focus stays on US-China trade talks amid light US docket next week.

Gold (XAU/USD) bulls remained in the charge the past week and went onto hit a strong of fresh all-time highs above the $2050 mark.

The spot, however, paused the surge and corrected sharply by 2% on Friday to settle the week below the latter. Despite the corrective pullback, the yellow metal booked a ninth straight weekly gain, the longest winning streak on a weekly basis.  

The non-yielding gold extended its bullish momentum and clocked fresh life-time highs at $2075 last week, mainly driven by the record low US inflation-adjusted real Treasury yields. The lower Treasury yields indicated faltering US economic recovery and knocked-off the US dollar to fresh two-year lows across its main competitors.

Meanwhile, disappointing employment sub-indices of the ISM Manufacturing and Services PMIs combined with downbeat ADP jobs data pointed to slowing labor market recovery in the US amid coronavirus crisis, exacerbating the pain in the greenback.

Heading into Friday, the tide turned against the USD bears amid a resurgence of the safe-haven demand, as the US-China tech war escalated after US President Donald Trump signed orders banning the Chinese tech apps.

Collaborating with the dollar’s comeback was the report that the US is considering sanctions on the Hong Kong leader Carrie Lam, which accelerated the declines in gold. Also, US fiscal wrangling and above-forecasts US NFP data bolstered the dollar bulls.

In the week ahead, the spotlight will remain on the US-China trade talks, in the face of souring diplomatic ties and worsening virus situation worldwide. The light US calendar will keep the focus shifted towards the broader risk trends and dollar dynamics.

Gold: XAU/USD Key levels to watch

 

 

  • NZD/USD is the worst-performing major on Friday down 1.27%.
  • The price has broken a key trendline and support zone on the 4-hour chart.

NZD/USD 4-hour chart

There has been a key reversal on the daily NZD/USD chart and zooming in on the 4-hour you can see why. The price had been struggling for most of the session but when the non-farm payroll data was released things got from back to worse and the pair fell further. 

Looking at the chart below, the price has test the red resistance line at 0.6594. More importantly, the black trendline has broken to the downside. The next support on the way down could be just below 0.6520. The price has also made the low high but now all that is left to confirm the trend change is the lower low wave. 

The indicators have turned bearish too. The MACD histogram is now red and the signal lines have crossed over to the downside. The Relative Strength Index is very close to the oversold level but has not yet printed below 30.

Next week the market will get the latest RBNZ rate decision. They might be concerned about the strength of the NZD even though it has fallen today. There is not expected to be any movement on rates but there may be an adjustment to QE. 

NZD/USD Technical Analysis

Additional levels

 

  • XAG/USD remains close to 7-year high $29.85 from Thursday.
  • Profit-taking no surprise as the metal is up nearly 23% in August.
  • Gold remains close to record highs of $2075.

Investors bank weekend profits

Silver XAG/USD paused for breath Friday as stock markets continued their onward march after a reassuring Nonfarm Payrolls number.  At the time of writing, XAG/USD was trading $28.10 down over 8% from a seven-year high seen overnight Thursday into Friday trade.

Bullish argument still holds

The prospects still look good for silver according to analysts, with the metal still a long way from record highs while gold (XAU/USD) breaks new records.  Silver also benefits heavily from zero to negative interest rates. During the financial crisis, silver rallied over 300% from January 2009 to April 2011.  Weak dollar and safe haven play also underpin the metal.

Technical levels

$26.21 is the previous week high from July 28 and below that $24.00 saw a lot of time and volume.  On the upside the target remains the January 2013 high of $32.47 and then $35 from May 2012 and $37.49 2012 year high.

 

  • USD/JPY is trading 0.36% higher on Friday after positive US data.
  • The price has now stalled at an important trendline to watch for next week.

USD/JPY 1-hour chart

USD/JPY is up a fair amount from the lows of 104.18 it hit on 31st July. Now the pair looks like it has made a reversal pattern on the hourly chart. This is in part thanks to the non-farm payroll data in the US which beat analyst expectations. The drama is not over as the market is still pausing for breath to see if the US government can get the lastest fiscal stimulus bill over the line by tonight.

Looking closer at the chart and the key feature is the blue trendline. The price has currently stalled at the level and it should be watched on the Sunday night (London hours) open. If the level does break the bulls may look to target the purple horizontal line at 106.36 which was a firm resistance at the beginning of the week on 3rd August. In terms of support the price might lean on the orange trendline which connects the two key wave lows. Beyond that, the red horizontal line at 105.33 has been used twice recently to good effect.

The indicators are looking more bullish now. The Relative Strength Index has hit the positive overbought levels and although a short term pullback may be on the cards, longer-term it could be a good sign. The MACD histogram is firmly green and the signal lines are above the mid-point. Overall, the price may continue to move higher next week but the first hurdle will be the blue aforementioned trendline. 

USD/JPY Technical Analysis

Additional levels