Article / 30 September 2015 at 14:44 GMT

FX Board: Gold folds, riskies frisky

Head of FX Strategy / Saxo Bank
Denmark
  • USD firming versus EUR/CHF/JPY, losing against most others
  • Sterling puts up a fight, commodity dollars strengthen
  • Recovery of risk appetite is felt in weaker gold prices
Gold bullion
 When risk appetite grows, hunger for gold decreases. Photo: iStock

By John J Hardy

Spot gold suffered another blow on Wednesday as risk appetite returned, and the US dollar was mixed while commodity dollars strengthened.

Key FX developments today

  • The USD was mixed, pulling higher against the struggling euro and Swiss franc, and marginally higher against the yen, but losing ground in most other pairs as the market piled into the riskier currencies on the general boost to risk sentiment. 
  • Sterling is finally putting up a fight as the initial probes through the head and shoulders neckline in GBPUSD did not catalyse further losses and the EURGBP rally suddenly turned tail on the improvement in risk sentiment. For the latter of these, we'll likely need a full-scale comeback in risky assets to push the action sufficiently lower to suggest to give the bears a technical "all-clear" sign.
  • Gold was weak again on the improving risk sentiment and our Trend indicator is showing a cross-over back to a negative trend on today's close if we stay lower today. The attention on XAUUSD will heat up if we start pushing the 1100/1080 zone for whether we can post new lows for the cycle toward 1000 or beyond.
  • The market is eyeing the Japanese Tankan survey out tonight, Draghi out speaking tomorrow and of course the US employment report on Friday, which may finally dynamite the USD out of the recent, tight trading ranges in most of the USD majors

EURUSD

Our trending indicator has flipped back to negative for the EURUSD — if the pair closes near current levels or lower on the day, which doesn't mean much here within the range. But it continues to trade below the local 1.1275/1.1300 resistance, and the move back lower neutralises the recent attempt to pull above the 10-day EMA/21-day SMA. From here, a break of the 1.1100 area could trigger a significant leg down if the US payrolls data this Friday is USD supportive.

Trending indicator has flipped to negative for EURUSD
EURUSD
Source: Saxo Bank
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EURJPY

JPY crosses will be nervous around tonight's third-quarter Tankan survey results as there is another Bank of Japan meeting next week, and the market wonders if the BoJ has its finger on the trigger for more easing. Technically, the downside case locally remains intact after another rejection of a rally at the 135.00 area and 200-day moving average.

Downside case still intact
EURJPY
Source: Saxo Bank

XAUUSD (spot gold)

Spot gold has suffered another blow today on the improvement in risk appetite and the move below the $1,121/oz area. From here, the 1,100/1,080 zone is the critical focus for opening up a test of new multi-year lows.

Look to the 1,100/1,080 zone area for an opening to a test of new multi-year lows
XAUUSD
Source: Saxo Bank 

— Edited by John Acher

John J Hardy is head of FX strategy at Saxo Bank
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FX Board for Wednesday, September 30, 2015

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