Two trades to watch: Gold, FTSE

Gold falls ahead of US core PCE data. FTSE edges higher after strong gains on Wall Street.

Gold 3

Gold falls ahead of US core PCE data

Gold prices are falling for a second straight session on Friday, taking out some key supports as investors continue digesting yesterday’s stronger-than-expected GDP growth and as attention turns to US core PCE, the Fed’s preferred gauge of inflation.

US GDP rose by 2.9% in Q4 annualized, down from 3.2% but still ahead of forecasts of 2.6%. The fading recession hopes have boosted the USD, pulling on gold prices ahead of today’s inflation print.

US core PCE is forecast to cool further to 4.4% YoY in December, down from 4.7% in November. Easing inflation pressures could boost bets of a smaller rate hike from the Federal Reserve and could even bolster the case for a Fed rate hike pause at the end of Q1.

It’s worth keeping in mind that investors could refrain from taking on large positions ahead of the Federal Reserve interest rate decision next week.

Where next for Gold prices?

Gold has managed a series of higher highs this week. However, each one has been a minor break higher above the previous high, suggesting that traders could be taking profits quickly in a heavily long market before a pullback, which is what we are witnessing today.

The RSI has come out of overbought territory, and sellers could look for a fall below 1911 the weekly low and rising trendline resistance to create a lower low. A break below here could bring 1900 the round number, into play,

On the flip side, buyers will look for a rise above 1949, the weekly high to extend the bullish run towards 1966, the March high.

 

gold chart

FTSE edges higher after strong gains on Wall Street

The FTSE is set to open modestly higher after a strong close in the US. Wall Street found support from impressive Tesla earnings, and receding recession fears after stronger than-forecast US Q4 GDP data.

The UK economic calendar is quiet today, with attention firmly on the US to drive risk sentiment ahead of the BoE interest rate decision next week. The UK central bank is widely expected to raise rates to 4%.

UK earnings are in short supply, with just Paragon Bank set to update the market, after a bumper day of releases yesterday.

Separately UK finance minister Jeremy Hunt is set to set out reforms to boost growth, but he has said that he will stick to tax rises.

Where next for the FTSE?

After running into resistance at 7880, the price has eased lower. A move below 7800, combined with a bearish crossover on the MACD, keeps sellers hopeful of further downside.

Sellers could look for a fall below 7710 to create a lower low and extend the selloff towards 7680, the April high and 7650 the multi-month rising trendline support.

On the flipside, buyers could look for a rise over 7810 the weekly high, with a rise above here brings 7880 back into focus.

 

ftse chart

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