Two trades to watch: FTSE, Gold

FTSE rises, retail sales slip less than forecast

 

The FTSE is pointing to a firmer open, outperforming its European peers and tracking gains from the US overnight.

UK retail sales fell by less than expected in June, helped by solid spending across the Queen’s Jubilee weekend. Sales fell -0.1% MoM, up from -0.5% fall in May. Forecasts had been for a -0.3% decline.

Food sales rose, offsetting a decline in fuel sales as prices at the pumps proved too much for motorists to stomach. With inflation set to continue squeezing household budgets, sales are likely to remain weak for the foreseeable future.

Looking ahead, UK PMI data is expected to show that activity in the service and manufacturing sectors has slowed. The services PMI is expected at 53, down from 54.3, and the manufacturing PMI at 52, down from 52.8. The level 50 separates expansion from contraction.

Where next for the FTSE?

 

The FTSE once again ran into resistance at 7350, the June 28 high, before easing lower and finding support from the 20 sma yesterday at 7210. The price is caught between these two levels. The RSI keeps buyers hopeful of further upside, although buyers will need to break through tough resistance at 7350 to create a higher and retake the 200 sma at 7380 and bring 7500 into focus.

Sellers will look for a move below the 20 sma at 7210 ahead of support at 7090 and 7000 round number.

 

Gold set  for first weekly gain after 5 weeks of declines

 

Gold is pausing for breath after booking strong gains yesterday, rebounding from a 16-month low of $1681.

Yesterday’s rally was driven by oversold conditions on the RSI, and a revival of growth fears after the ECB hiked rates by a larger than expected 50 basis points and worse than expected US jobless claims. The number of Americans signing up for unemployment benefits rose to an 8-month high.

Today the stronger USD is keeping gold prices in check. Attention is now turning to PMI data which is expected to show that business activity in the US grew at a slower pace in July. The composite PMI is expected to tick lower to 51.7, down from 52.7.  Weaker than forecast growth could fuel recession fears further.

Where next for Gold prices?

 

Gold prices fell to 1681, falling into oversold territory, which helped the price rebound. The long lower wick on the candle suggests there wasn’t much acceptance at this lower level.

Buyers will need to rise above resistance at 1724, the October low, to extend the recovery towards the 20 sma at 1752 and the July 7 high.

Sellers could focus on the still bearish RSI and the fact that the price continues to trade below the 20 & 200 sma. Sellers will need to break below 1680 to extend the bearish trend.