Gold, JPY spiked against the USD during today’s Asian session, as Iran attacked US forces in Iraq, in retaliation for the assassination of Soleimani. The strike included firing of more than a dozen ballistic missiles from its territory against at least two US facilities in Iraq, according to media. US President Trump tweeted that “All is well”, also stating that an assessment of damages and casualties was taking place and that he would be making a statement later today. The retaliation is considered as rather weak, yet political analysts tend to note that it may only be a start of a series actions on the Iranian side for retaliation. The Iranian foreign minister tweeted that Iran’s actions were in self-defence and that it does not seek escalation or war yet will defend itself. Markets seemed to have had a heightening of stress levels for an hour or so, as gold, oil and JPY strengthened reflecting the flight to safe havens and increased worries about oil prices. The market reaction seems to have been restrained so far, yet we expect market participants to be closely monitoring developments as they happen. If the situation remains confined, we could see the market slowly bypassing it, yet should there be further escalation, we could see safe havens and oil rallying. XAU prices jumped during today’s Asian session, breaking at some point even the 1605 (R1) resistance level, only to retreat later on, yet remained above the 1585 (S1) resistance line, now turned to support. We maintain a bullish outlook for the precious metals prices as long as they remain above the upward trendline incepted since the 2nd of January. On the flip side, after today’s spike a correction lower could be in the cards. The RSI indicator in the 4-hour chart is once again above the reading of 70, which on the one hand confirms the bull’s dominance yet on the other, may imply a rather overcrowded long position for the precious metal. Should the bulls maintain control over gold’s prices, we could see them once again rising and breaking the 1605 (R1) resistance line, aiming for the 1620 (R2) resistance level. Should the bears take over, we could see gold’s price action moving south, breaking the 1585 (S1) support line and aim for the 1565 (S2) support level.
…while the Aussie weakens further…
The Aussie was very volatile yesterday as it continued its drop yet during today’s Asian session seems to have stabilized somewhat against the USD. Analysts tend to underscore that the Australian dollar may have weakened by the intensification of the uncertainty, surrounding the US-Iran conflict. At the same time though the rise of gold’s prices could be providing some support for the AUD, as it is a major export earner for Australia. The same applies for the surge in oil prices, as Australia is major exporter on LNG, which may also benefit from the rise in oil prices. Never the less we expect the Aussie to remain under pressure and financial releases over the next few days from Australia as well as China could provide further guidance for the Aussie’s direction. Please bear in mind that Australia is still in the midst of an extensive bushfire crisis currently. AUD/USD dropped yesterday and during today’s Asian session stabilised below the 0.6875 (R1) support line, now turned to resistance. As the pair’s price action seems to have broken the bearish momentum, we switch our bearish outlook for the pair, in favour of a sideways movement. Please note that the RSI indicator in the 4 hour chart, reached 30, implying a rather overcrowded short position for the pair. Should the pair come under the selling interest of the market, we could see it breaking the 0.6850 (S1) support line aiming for lower grounds. Should the pair’s long positions be favoured by the market, we could see it breaking the 0.6875 (R1) resistance line and aim for the 0.6905 (R2) resistance level.
Other economic highlights today and early tomorrow
Today during the European session, we get Germany’s industrial orders for November, and UK’s Halifax house prices for December. In the American session, we get the US ADP employment figure as well as the EIA crude oil inventories figure.
XAU/USD 4 Hour
Support: 1585 (S1), 1565 (S2), 1547 (S3)
Resistance: 1605 (R1), 1620 (R2), 1635 (R3)
AUD/USD 4 Hour
Support: 0.6850 (S1), 0.6820 (S2), 0.6790 (S3)
Resistance: 0.6875 (R1), 0.6905 (R2), 0.6930 (R3)
