European markets are focused on the upcoming ECB meeting later this week and a few member of the ECB committee will also be setting the stage ahead of the meeting outcome. The expectations are immensely high that the final results of this meeting will be something which will at least meet the market expectations if not exceed. The ECB president, Mario Draghi has promised over and over that the bank has enough ammunition to fight the current war but the reality is this that he has fought more war by using his words rather than any powder and traders are becoming frustrated. In order to fortify some risk appetite, the president must not only use his words but also put his mouth where the money. The economic data is in dire condition as know and now the question is what will take place going ahead.
The US NFP was astounding commendable and as robust as it could be. The data was all about the future Fed move and the data released has confirmed that the Fed are not off beat with their strategy. The US ISM manufacturing data )released earlier this week) was the major element which kept some traders wary about the Fed decision with a consistent drop in the durable and factory orders, but audibly they have picked up steam and it appears that the area of Sub 50 reading for the ISM manufacturing may be coming to an end when we will get the next reading. Nonetheless, today’s reading had spurred colossal amount of volatility in the market as expected.
The precious metal which has been trading higher is under some selling pressure. Nonetheless, after breaking the bullish symmetrical triangle pattern, with a target of 1318 level is a little under threat after the data. If we look at the weekly trend for the Gold, it has broken it downward channel towards the upside and taken out the resistance line and this is an immensely bullish signal for the price.
Looking further, now the main focus will be towards the Fed upcoming meeting in a few weeks time and how they are going to play with the growth revision forecast. This will be the key element which traders will benchmark and this will also lay down the path for a further rate hike. The unemployment rate has fallen but the element which is making a noise of the average hourly earnings which has dropped in a negative territory.
Disclosure & Disclaimer: The above is for informational purposes only and NOT to be construed as specific trading advice. responsibility for trade decisions is solely with the reader.
by Naeem Aslam