Senior Trader Update 2nd May 2017

Good morning everyone.
 
The entire precious metals complex was driven lower on Monday, commencing during Far Eastern trading when news began to filter through that the US Congress had reached a bipartisan agreement to keep the government open through until the 1st of October by increasing the ‘debt ceiling’ (having only agreed last Friday to funding for a week). Included amongst all the horsetrading were increased funding for the military and border security, a rejection of funding for a wall on the U.S.- Mexico border (with $1.5 billion allocated towards investment in new technology and upgrades to existing infrastructure to make the border more secure).
 
The US dollar immediately surged on the back of this news and precious metals values (particularly in AUD) were consequently driven lower.
 
With much of Europe absent due to May Day / Labour Day holidays, the reduction in liquidity meant that there was little by way of support to arrest the decline.
 
From the US overnight, equities remained buoyant in the face of a slew of seemingly disappointing economic data releases, thereby keeping precious metals under pressure right though until the close. Data included;
 
·         A significant upward revision to Feb Construction Spending (potentially influencing Q1 GDP revisions). U.S. Construction Spending (Mar) -0.2% (vs +0.4% expected & vs Feb positive revised +1.8% (was +0.8%)).
·         U.S. Manufacturing ISM (Apr) 54.8 (vs 56.5 expected & vs 57.2 in Mar)
·         U.S. Personal Income (Mar) +0.2% (vs +0.3% expected & vs +0.3% Feb negative revised).
 
All economic data releases however will take a back seat to the two major economic events this week;
·         The meeting of the US Federal Reserve’s FOMC on Tuesday & Wednesday (with a monetary policy statement at its conclusion which is expected to leave rates on hold but the wording of which will receive significant scrutiny from investors)
 
·         The Bureau of Labor Statistics monthly release of Non-Farm Payrolls / Employment data on Friday.
 
Geopolitical / geostrategic concerns remain but have receded somewhat for the moment.
 
From a technical perspective, yesterday’s price action registered an ugly (from a bullish perspective) bearish engulfing candlestick with potential areas of support now emerging at the Fibonacci retracements of the AUD 1578 to 1712.75 move. Respectively these are; AUD 1661.25 (38.2%), 1645.30 (50.0%) & 1629.40 (61.8%). The 200 Day Moving Average at AUD 1656.20 will also be a closely watched, potentially critical demarcation point. In XAU / USD terms, gold dropped deeper within the triangular congestion and the main support areas to watch will be the 200 Day Moving Average at USD 1251.00 and trendline support at USD 1241.00.
 
The Gold / Silver ratio continued higher to 74.72 as silver was dealt with more harshly comparative to gold on the day.
 
Good luck.
 
Kind regards,
Andre