As we highlighted the possibility on Monday, gold took a big plunge below the psychologically-important and support level of $1300 per ounce yesterday. The breakdown triggered further follow-up technical selling, causing gold to fall for a time below $1270 per ounce.
The dollar has staged a broad-based rally today, which caused the GBP/USD to tumble to a new 31-year low and the EUR/USD momentarily dipped below its 200-day moving average once again.
The metronomic price action for gold is continuing to play out once again on the daily chart, with the rally of late September starting to wane once again, as the precious metal descends once more to test the all important technical support area in the $1308 per ounce region in early trading.
News that the UK manufacturing activity in September hit its highest level since June 2014 has provided a welcome relief for sterling.
As summer transitions into Autumn, there seems to be little change in the sentiment for gold, which continues to remain rangebound on the daily chart, still transfixed within the Brexit candle of late June.
Following the recent improvement in UK data, the Bank of England was widely expected to sound a little more upbeat about the economic outlook with virtually no one forecasting any further easing of monetary policy.
Apart from Apple’s expected launch of the new iPhone, today’s other big event is the Bank of Canada’s rate decision, due at 15:00 BST (10:00 ET). Along with the consensus forecasts, we do not expect the BOC to make any changes to its policy.
The pound took a pounding in the lead up to and aftermath of the June 23 EU referendum. But in recent weeks, it has staged a remarkable recovery, even though the Bank of England has decided to cut interest rates to near zero and restarted QE.
The recent improvement in UK data has seen many investors and analysts, ourselves included, ask a rhetorical question with a hint of sarcasm “Brexit, what Brexit?” Traders have apparently reduced their net short positions from record high levels as they realised the fallout in the immediate aftermath of Brexit was not as bad as many had feared. Granted, not all the economic pointers have been great but on the whole
The GBPUSD ended higher last week on the back of surprisingly stronger-than-expected UK economic data and as the dollar eased along with expectations about an imminent rate hike in the US.
