- 55% of all SWFX open positions are short, as the sentiment became bearish on Monday
- Prices reached above the 1,365 level on Wednesday morning
- Gold has set a northward direction
- Economic events to watch over the next 24 hours: US ADP Employment Change (July); US PMI Services (July); US ISM Non-Manf. Composite (July)
Britain's construction PMI index faced its steepest downturn in seven years in July, suggesting that output in the construction industry dropped considerably, since the economy is at risk of recession after June's Brexit vote. According to the PMI survey, the Markit purchasing managers' index for the sector slipped to 45.9 during the last month, down slightly from June's reading and below 50, which indicates contraction. Economists, in turn had expected the index to reach around 43.8 mark in July. This report follows Monday's survey which released a sharp downturn in factory activity. Today, or on Wednesday, the PMI survey for the services industry will be also published. However, there were also some positive points such as the fact that the negative numbers in construction output was little-changed from June's seven-year low. Moreover some reports showed that demand patterns had been more resilient than forecasted despite the gloomy business outlook. Immediately after the release of the report, Pound strengthened notably. The GBP/USD was trading at 1.3215 from around 1.3197 ahead of the release of the data.
The Reserve Bank of Australia cut its interest rate by 25 basis points to an all-time low of 1.50% on Tuesday, amid signs of slowing economy. This is the second easing during this year which is supposed to defend the economy from creeping deflation as well as restrain a too-strong Aussie. Meanwhile, the following decision was widely expected by economists, with 36 out of 47 analysts surveyed by Reuters predicted a rate cut. However, according to the RBA statement, the recent increase of the Australian dollar could "complicate" efforts to adjust the economy. Moreover, the country is trying to readjust the focus from commodity products which play important role in the country's export, since commodities suffered heavily from declining prices and low demand. In the meantime, the Australian dollar plunged as much as $0.7495 due to the stated above decision, compared with $0.7544 just before the RBA released its statement. Nevertheless, it managed to recover quickly trading around $0.7545. Concerning economic data, building approvals slipped 2.9% on a monthly basis. In addition, Australia's trade deficit equals $2.4 billion, following figure is much wider than analysts' expectations. Moreover, the exports went down 1% in June from May, while the value of imports, reached 2.0%.
Upcoming fundamentals: US indicators and employment
At 12:15 GMT on Wednesday US ADP Employment Change is set to be published, and Dukascopy team will be live, as it happens, to monitor the market reaction. At 13:45 GMT US PMI Services index will be out for July. Last but not least, the currency exchange rate will be affected by the release of the ISM Non-Manf. Composite index for July.
Gold struggles with resistance at 1,366
Daily chart: The yellow metal surged on Tuesday from 1,353.69 to 1,362.77, and the metal was volatile between the support level provided by the monthly PP at 1,345.31 and the first weekly resistance at 1,366.07. The resistance made the commodity move lower at the end of day's trading session, and gold continues to struggle with it on Wednesday, as the metal was trading at 1,364.47 by 5:15 GMT. Daily aggregate technical indicators forecast a surge for the commodity today, due to that it is most likely that gold will soon break the resistance.Daily chart
Hourly chart: The hourly chart shows that the yellow metal was surging from early morning on Tuesday, as it took off at 5:00 GMT from the level of 1,349.32 and skyrocketed to 1,367.19 at 15:00 GMT. Afterwards, the metal fell back below that level, as the resistance put up by the weekly R1 managed to move it lower. Since then gold has been fluctuating near the level of 1,363, as it is set to move upwards and test the resistance level once again. However, by 2:00 GMT on Wednesday the weekly R1 was joined by the upper Bollinger band, providing additional strength.
Hourly chart
SWFX traders increase bearish stance
Meanwhile, OANDA Bank clients are bullish with respect to the bullion, precisely in 58.12%. In the meantime, SAXO bank clients are less bullish on the yellow metal, as 54.49% of positions are long.