So the snap election called by Theresa may is turning out to be a disaster and right now, she is basically scrabbling and negotiating with other small parties to keep the Conservative Party in power. The consequences of this mean disruption of Brexit negotiations and uncertainty-which is not good or positive for investors. Investors tend to keep off the markets until new and sold information is received to either support or break down the Pound in this case. It will be interesting to see what the new government formed through negotiations will think of Brexit talks and the way forward particularly when it comes to concessions demanded by the EU. Talking of the EU, after the first round of parliamentary elections held on Sunday, Macron party is set to secure majority seat in the French parliament and could further support the Euro after the 2.5% shrink of the GBP which had a contagion effect. There was no big reaction to this as it was widely expected but despite this, the Euro opened lower. In my opinion, the Euro will depreciate further especially now that we have live FOMC meeting this week where there is big expectation of a rate hike. If it does happen, I don’t expect volatility not unless Yellen remains positive of Growth figures, inflation and employment-which was way lower last month despite record lows unemployment rates.
It is for this reason that I will trade Gold and look to sell until there is a buy signal in the daily chart. It is clear from the weekly chart that there is a double tops with an inverted hammer which was formed as the markets closed last week. Price action topped at $1295/ ounce before tumbling to the current price levels. Bears are in charge as indicated by increasing bear momentum and a sell signal printed by stochastics.
Strategy for this is simple. Fed Rate hike support commodity prices and you can check out the shaded areas and compare it to the previous periods of QE where gold took the brunt of low interest rates and bond and asset purchases. This period of rate tightening does the reverse and therefore the immediate level of support at $1200-$1220 will be a good zone to buy but in the mean time, the bears are in charge so we sell as follows:
Stop Loss: 1275
Take Profit: 1240
Have a good trading day