Two trades to watch: FTSE, Gold

FTSE falls as economic growth stalls. Gold edges lower ahead of US CPI data.

Charts (6)

FTSE falls as economic growth stalls

The FTSE is moving lower after a weak handover from Wall Street and Asia.

UK GDP MoM in October came in at 0.1%, well down from 0.6% in September and below forecasts of 0.4% growth.

Industrial production and manufacturing grew by less than expected, at 1.4% and 1.3% respectively

Risk off dominates amid renewed concerns over COVID as growth showed signs of slowing even before the tighter COVID restrictions were brought in, which doesn’t bode well for the coming winter months.

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Where next for the FTSE?

The FTSE ran into resistance at 7380 on it runup from the late November low. The price is easing lower. However, it remains above the rising trending line and the 50 & 200 sma on the 4-hour chart.

The MACD points to further losses, however it would take a move  below 7200 the 50 sma to negate the nest term up trend and move below 6971 for sellers to gain traction.

With the uptrend still intact this still looks like a buy the dips set up, resistance at 7380 ahead of 7400 the post pandemic high.

FTSE chart

Gold edges lower ahead of US CPI data

Gold is edging mildly lower, as the US Dollar strengthens, ahead of US CPI inflation data. Expectations are for CPI to jump to 6.8%, its highest level in almost 40 years. Core CPI is expected to rise to 4.9%, it is already at a 30 year high.

With inflation above the Fed’s target 2% and accelerating, another elevated reading could prompt the Fed to accelerate the tapering of its bond purchases at the Fed meeting next week and ultimately raise interest rates sooner. This would be bad news for non-yielding gold.

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Where next for gold prices?

Gold extended gains from its December low, running into resistance at 1793. The price has been falling lower since, break below its week old rising trendline and below its 50 sma on the 4 hour chart.

The RSI is support of further losses whilst it remains out of oversold territory.

Sellers will look for a move below support at 1772 the weekly low, to open the door towards 1761/59 the December/November low.

Any recovery needs to retake the 50 sma at 1780 and the rising trendline resistance at 1785. It would take a move over 1793 for bulls to gain traction.

Gold chart

 

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