Senior Trader Daily Update 23 June 2017

Good morning everyone and happy Friday.

Tales of the feted Japanese swordsman Miyamoto Musashi (1584 – 1645) often recount how the Ronin had the ability to defeat reputable foes using just a wooden stick. The relevance of this to financial markets and gold is that, in these days of algorithmically driven moves and sophisticated software that place an abundance of technical analysis tools at the disposal of investors, the elegant simplicity of the humble trendline proved the most effective, much like Musashi’s effectiveness with just a simple wooden stick.
 
The longer a trendline (uptrend or downtrend) has been in place, the more respect should be afforded to it. And thus it was for gold in both AUD & USD terms over the past couple of trading sessions, as the metal held trendline support to perfection and staged significant rebounds, suggesting that investors can feel (with a high degree of confidence) that the lows might now be in place.
 
Price action in the US Dollar Index was mixed yesterday, while US equities closed near their intraday lows. There appears to be increasing scepticism amongst investors regarding the US Federal Reserve’s recent hawkish commentaries and the likelihood of another interest rate increase at the September meeting, which may have also fed into support across the precious metal complex.
 
Technically, the major uptrend support lines that commenced in mid-December last year remain crucial demarcation points for gold bulls in both AUD and USD terms and the fact that they have been tested and held firm on two occasions now since they commenced, underscores this.
 
In XAU/AUD, major trendline support sits at AUD 1636 today and the encouraging price action of recent days suggests that some mean-reversion back towards the conjunction of the 21 & 55 Day moving averages at AUD 1682 may be seen from here.
 
The major trendline support in XAU/USD is today located at USD 1244.50 with the 200 Day moving average at USD 1235.50 and it seems probable that gold will find support in that region and resistance between the 21 and 55 day moving averages between USD 1260-1265.
 
Good luck and enjoy your weekend.
 
Regards,
Andre