US Retail Sales could fuel recession fears again – will Gold profit?
Economic Events: February 18-20, 2019
Source: Economic Events Calendar February 18 – February 22, 2019 - Admiral Markets' Forex Calendar
DAX30 CFD
After the past week of trading, the overall picture for the DAX30 CFD did not darken. Instead, the DAX30 CFD traded back above 11,000 points and stabilised there.
Nevertheless, with last Thursday's unexpectedly disappointing US retail sales data coming in at -1.2% for December, marking the biggest drop since September 2009, the first signs of risk off among market participants was found in equity markets since recession fears began to arise again.
From a technical perspective, the question for the upcoming week will be whether further bearish momentum will push the DAX30 CFD below the current February lows of around 11,860 points.
If so, further losses are likely, with the DAX30 CFD finding an initial target around the 2018 lows of 10,280 points. If the bulls can regain control, and continue the astounding performance shown last Friday, a push above 11,400 points could be coming and induce further bullish momentum up to 11,550/600 points.
Source: Admiral Markets MT5 with MT5-SE Add-on DAX30 CFD daily chart (between November 3, 2017, to February 15, 2019). Accessed: February 15, 2019, at 10:00pm GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.
In 2014, the value of the DAX30 CFD increased by 2.65%, in 2015, it increased by 9.56%, in 2016, it increased by 6.87%, in 2017, it increased by 12.51%, in 2018, it fell by 18.26%, meaning that after five years, it was up by 10.5%. Check out Admiral Markets' most competitive conditions on the DAX30 CFD and start trading on the DAX30 CFD with a low 0.8 point spread offering during the main Xetra trading hours!
US Dollar
The US dollar reconquered the technically relevant level of around 96.70 in the first half of last week. While this break, from a technical perspective, levels the path towards the 2018 yearly highs of around 97.70, last Thursday's disappointing US retail sales data coming in at -1.2% for December - making this the biggest drop since September 2009 - clearly took the momentum from the bull's side.
Though we are only looking at one month's data, US retail sales can be considered to represent the backbone of the US economy. Amid rising recession fears over the last months, this reading could initiate another period of weakness for the US dollar, driven by capital outflows from the world's largest economy.
Before the picture for the US dollar starts to darken, a break below 95.00 points needs to be brought in its way. But the near-future seems to favour the short-side for the dollar, and a significant push below 97.00 points seems likely.
Source: Barchart - U.S Dollar Index - Weekly Nearest OHLC Chart (between January 2016, to January 2019). Accessed: February 15, at 10:00pm GMT
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Euro
The EUR/USD continued to move ever lower over the last week of trading, reaching new yearly lows and only just falling short of a re-test of the region around 2018 yearly lows of 1.1200.
With the combination of the sceptical outlook for the US dollar in the section above, and the economic calendar not only being thin for the US dollar but also for the Eurozone (despite the EZ Consumer Confidence Flash and some EZ PMIs on Thursday), a break below 1.1200 in the upcoming days seems unlikely.
Even if, for whatever reason, the EUR/USD breaks below 1.1200, the thin market environment could trigger a dynamic and sharp move down to 1.1000. Nevertheless, between 1.1200 and 1.1600 the EUR/USD stays neutral on a daily time frame:
Source: Admiral Markets MT5 with MT5-SE Add-on EUR/USD Daily chart (between November 25, 2017, to February 15, 2019). Accessed: February 15, 2019, at 10:00pm GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.
In 2014, the value of the EUR/USD fell by 11.9%, in 2015, it fell by 10.2%, in 2016, it fell by 3.2%, in 2017, it increased by 13.92%, 2018, it fell by 4.4%, meaning that after five years, it was down by 16.5%.
CAD
Once again, the economic calendar is quite thin for the Canadian dollar in the upcoming days, despite a speech from BoC Governor Poloz last Thursday, and Canadian retail sales on Friday. But, the picture for the currency still looks very interesting from a technical perspective.
As pointed out in our weekly market outlook last Monday, the rhetoric from Bank of Canada Deputy Governor Timothy Lane pointed to a more dovish stance for the BoC, especially after it declared plans to intervene in markets if necessary, in response to the past sharp movement of the CAD exchange rate.
From a technical perspective, chances still seem high that USD/CAD will go for a test, probably trying to reconquer 1.3370/3400 in the coming week. If a break back above that level succeeds, further gains up to 1.3670/3700 are to be favoured.
Source: Admiral Markets MT5 with MT5-SE Add-on USD/CAD Daily chart (between November 15, 2017, to February 15, 2019). Accessed: February 15, 2019, at 10:00pm GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.
In 2014, the value of the USD/CAD increased by 9.4%, in 2015, it increased by 19.1%, in 2016, it fell by 2.9%, in 2017, it fell by 6.4%, in 2018, it increased by 8.4%, meaning that after five years, it was up by 28.4%.
Gold
The picture for Gold stays bullish, not only from a technical perspective - but after the US retail sales data last week last Thursday, from a fundamental perspective as well.
After Gold initiated a significant break above 1,300 USD/ounce after the FED declared a more flexible in approach to the balance sheet runoff, the current stabilisation of 10-year US Treasury note yields and the US dollar let Gold correct down into the region of its breakout two weeks ago.
However, the overall picture for the precious metal remains positive from a fundamental perspective, despite the balance sheet runoff flexibility, ongoing tensions between the US and China in terms of trade, US retail sales data fuelling recession fears among market participants, and rising scepticism around the dollar. Long engagements against 1,295/299 still seem interesting, especially since the technical picture in Gold on a daily time frame can be considered long given that Gold trades above 1,275/277 USD/ounce.
In general, a test of the 2017/2018 highs around 1,360remains an option in the coming days.
Source: Admiral Markets MT5 with MT5-SE Add-on Gold Daily chart (between November 15, 2017, to February 15, 2019). Accessed: February 15, 2019, at 10:00pm GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.
In 2014, the value of Gold fell by 1.7%, in 2015, it fell by 10.4%, in 2016 it increased by 8.1%, in 2017 it increased by 13.1%, in 2018, it fell by 1.6%, meaning that after five years, it was up by 6.4%.
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