Wednesday, February 26, 2014

Aussie double whammy | Gold is vulnerable

The Australian dollar against the US dollar (AUDUSD) is at an important support level after shying away from its 200 Day Simple Moving Average over the last few days. Fundamental Analysis data for this pair yesterday and overnight gave us reports in each of the economies concerned that would tend to push this pair down. In the US, a greater than expected New Homes sales report will tend to strengthen the Greenback, as it bodes well for the FOMC decision to continue to taper Quantitative Easing (QE), which is a US dollar positive.

In Australia overnight (GMT), that country’s Private Capital Expenditure (“private” means non-government, not just domestic), report was very disappointing. This is interpreted there as raising the possibility that the Reserve Bank might be tempted, albeit much against its will, to reduce the cash rate – a negative for the Aussie.

Gold is vulnerable

That positive U.S New Homes report also gave a push downwards to gold. The precious metal has been surging upward of late, mainly on the dearth of good economic news out of the USA, which many blame on the very severe weather that has hit a substantial part of the country, but which is also a transient phenomenon.

Now there are also suggestions that the crisis in Ukraine, which could lead to a bond default there, has also increased the attraction of gold as a safe haven. Whatever the cause of the run up, gold is now just below an important resistance, at the $1355 per troy oz. level. The potential for further good news from Stateside, for example a Non Farm Payrolls report in the 200k region next Friday would, at the very least, caution against buying gold at these prices. 

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