Avramis Despotis founder & CEO of Tradepedia on CNBCPosted on Monday, September 30 2019 at 1:36 pm GMT+0000
Discussing the technical outlook for Gold, S&P 500, Dollar index, EURUSD and GBPUSD
Gold (Long Term):
Technically, a Bullish reversal pattern had been activated with the breach of 1380, and the market reached the first target at 1520-1550, so the gold may retreat towards 1400 and then eventually continue its bullish trend, targeting the historic highs. Certainly this move was motivated by the trade war that eruptes and then subsides and the fact that there are economies that are not performing well and central banks cutting interest rates, the Fed is cutting rates, ECB is considering cutting rates. There are many factors driving people towards safe havens like gold.
Gold (Medium Term):
Taking the fundamentals into consideration, Trump softened his tone towards China, which means stock markets should rise and gold may retreat and is clearly heading to form a Bearish reversal pattern. If prices dip below 1480, it will target 1440 and then 1380 before resuming its long-term bullish trend.
Traders may start buying around 1450-1440 and target long term rallies.
S&P 500 Index:
The market is in a consolidation mode revealing the prevailing uncertainty. As I said before there is Trump impeachment threat, interest rates cuts, recession and Brexit and these issues have created the uncertainty we see in the market. So we cannot predict the future direction of the market, but what we can safely say is that if prices cross the 3030 level they can easily reach 3180. Alternatively, if we remain in a sideways trading mode and if prices break 2900 they may reach 2800. There is no clear direction for the S&P 500 so traders are advised to remain on the sidelines for now.
Since the US Federal Reserve is expected to cut interest rates, the dollar should weaken and the dollar index should fall, but instead, as we see it seems to be doing the opposite. The USD is strengthening and the index is in an uptrend and will remain so as long as it remains above 97.50. I expect it to reach 100.30.
The Euro is clearly bearish and is expected to target 1.08 and then 1.065. But we prefer to see it touching 1.08 to see how it will react in the period that follows.
Last but not least, the sterling activated a good Bearish reversal pattern and reached 1.2250, and it is bouncing back a bit now. We are at 1.231 and this is a good opportunity to sell and target 1.2150. This depends, of course, on Brexit developments. The market seems to be expecting some kind of deal or extension at the end of the month so we don’t see a sharp drop in sterling and everyone is waiting to see what happens but the market is technically in a downtrend and participants may be underestimating a no-deal brexit probability at the end of October. If you want to do something, sell any rally because sterling will fall.