Gold and Wall Street 30

Markets across the board are holding their positions from yesterday as we await the US Senate vote on the Coronavirus Stimulus Bill. Senate Majority Leader Mitch McConnell has proclaimed a deal between the Democrats and the Republicans to get the Bill passed. The market had been pricing in a deal since Monday and the US Federal Reserve launch unprecedented measures to support the economy that day also. The one, two combination of monetary and fiscal measures led to a significant rally in markets over the last two days with a strong constant move occurring from early in the Asian session on Tuesday. However that move has petered out somewhat and futures remain in consolidation ahead of the European open. The message from Senator McConnell said that the “measures will send direct cheques to households” to help them through this difficult time. He added that the Bill “will deliver historic relief to mainstream America” and they are hoping to pass the legislation later today. Senate Minority Leader Chuck Schumer said that this was “not a moment of celebration, but of necessity”. He said that the Bill will provide over $130 billion in aid to hospitals and includes $150 billion in aid to state and local governments. He said that there would be strict oversight in the Bill for loans made to companies. The Bill in its entirety contains more than $2T to counter the economic fallout from the virus. The US President Donald Trump had told Fox News that he “would love to have the country opened up and just raring to go by Easter” but in a call with Wall St executives he has said that the lockdown may yet be extended beyond that date. The number of cases in the US is rapidly rising with the WHO saying that it is seeing a “very large acceleration” in coronavirus infections in the United States which had the potential of becoming the new epicentre. Over the past 24 hours, 85% of new cases were from Europe and the United States, WHO spokeswoman Margaret Harris told reporters. Of those, 40% were from the United States. She added that, “they (the United States) have a very large outbreak and an outbreak that is increasing in intensity,” she added. New York City has now seen more than 12,000 confirmed cases and almost 100 deaths in the outbreak. Mayor Bill de Blasio warned New York was just at "the beginning" of dealing with the pandemic as soldiers from the National Guard began converting a convention centre into a facility with hospital beds. Markets are focussing on the economic measures being taken but there is a strong chance that the human toll forces markets lower again. Gold has pulled back to the 1610.00 area while the Japanese 225 closed up over 8%. This followed the biggest gain on the Wall St 30 Index since 1933 when the markets closed higher by 11% yesterday.

German Final Ifo Business Climate data is expected to rise to 87.9 from 87.7 previously. In the afternoon, US Durable Goods Orders are expected to fall to -1.0% from -0.2%. Core Durable Goods Orders are expected to fall to -0.4% from 0.8%.

Gold

The Gold chart indicates that price is testing the 1640.00 level as resistance after the move up from the 1455.00 low. The chart shows how the price has rallied to test above 1600.00 as stimulus measures were announced on Monday. The price has moved up to the 1635.00 level yesterday, with the 1600.00 and the 1560.00 and 1550.00 levels as support. A breakout above the resistance at 1650.00 targets the 1660.00/1675.00 area and may seek to engage the 1690.00 level, which may open the way for a test on the 16950.00 level followed by the 1700.00 and 1703.00.

The 1600.00 area may be used as support in the short term on the chart. However a loss of the lower support at 1557.00, may allow a test on the new higher low at 1455.00 and then the 1400.00 area. A continued move to test the 1400.00 round number may indicate a more significant pullback to test the falling trend lines and open up the 1400.00 region. Price consolidated in this area with support at 1380.00 for much of last summer before breaking out. The 1360.00 area may also be used as support in the event of a deeper selloff.

Wall Street 30 Index

The Wall Street 30 Index fell back from a fresh all time high of 29586.00 last month as the index de-risked on coronavirus outbreak fears. The market has suffered massive selloffs with the index falling through key supports and entering bear market territory. Price is currently trading at 20987.00 with support at 20415.00. A loss of this support may open the way for a test on 20000.00/19900.00 followed by 19500.00. The 19000.00 area may be supportive below this followed by 18700.00. A break below this area may see a move into the support of the 18300.00. Below this a loss of the 18000.00 area may instigate a deeper selloff to test 17500.00.

A break back higher may push price to re-engage the 21370.00 area and allow price push up and test 22000.00. Beyond this the 23100.00 area may be used ahead of 23500.00 and the previous support at 23600.00. Resistance for the index has now potentially formed at the 24000.00 level and a break back above this level may open the path for a test on the 24700.00. A failure to get above the 25000.00 area may push the index into the 23500.00 area. A break higher from there, may seek to reengage the 26300.00 area and the lower high at 27100.00.

Phillip Konchar

Core Spreads

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