By Andy Berendieiev, FX Analyst and Institutional Sales Manager at Juno Markets.
Volatility is back to the foreign exchange market as traders and investors struggle to find a direction of capital flows. Economic reports across different regions add fuel to the fire of uncertainty.
Last Friday’s report showed a worse-than-expected drop of US Retail Sales in April (-16.4% vs -12.0% expected and -8.3% previously), while Core Retail Sales (excluding food and energy) plunged -17.2% vs -8.6% expected.
As a result, Gold soared to 8-year high at $1750 per ounce.
In the scope of increasing concerns about potentially underestimated negative impact of the coronacrisis for global economic growth, FX speculators rushed to buy safe-haven assets last week. The yellow metal kept soaring on Monday open, reaching the weekly top at $1764 per ounce. However, technically overbought conditions triggered the profit-taking speculative flow, resulting in a rebound toward daily support level at around $1724 per ounce.
Although this week’s economic calendar is full of essential events, most of the FX investors and traders will be focusing on FOMC Meeting Minutes to be released late Wednesday. The key question for the global financial markets nowadays is how far the Federal Reserve can go in terms of pumping additional liquidity into the financial sector. The US Fed Chairman Jerome Powell mentioned in his speech late Tuesday that the regulator is ready to act if needed in the scope of preventing the economy from collapsing. On the other hand, rumors about potentially negative interest rates are still overestimated.
My FX trading experience during the financial crisis in 2008/9 tells me that we’re facing very similar market conditions nowadays. Such an enormously-high volatility creates an obvious uptrend for the price of Gold, according to long-term charts.
Some beginner traders might consider shorting XAU/USD on peaks as most of the timeframes are technically overbought. But I would not stand against such a strong wind as that could lead to a painful experience.
Several Juno Markets’ custom technical indicators below confirm my suggestions, as well as show potentially lucrative entry levels in terms of the buy-lows trading strategy.
FX traders interested to benefit on effective technical tools to find potentially lucrative entry levels are welcome to join Juno Markets Telegram Channel to know more:
Please stay safe,
Please stay well,
Let the profit be with you!