The week continued being volatile yesterday following a number of impactful events affecting market sentiment.
For one, Trump indicated that a trade deal with China is very likely now, driving flows into equities and away from safe havens.
In Europe on the other hand, the European Commission granted another extension request for Brexit, removing recent gains from gold.
Meanwhile, traders’ expectations for another Fed cut are increasing.
Equities Hit Record Highs Following Trump Comments
On Tuesday night Trump said that “Washington was ahead of schedule to sign a very big portion” of a potential trade deal with China.
Stocks were upbeat on hopes for trade progress and also on the back of renewed Fed sentiment. The CME FedWatch tool shows market participants expect another cut with a 95% probability.
In addition, markets moved higher on good US earnings reports and are expected to be volatile for the rest of the week.
SPX Breaks All-Time High, More Room to Upside
With a number of risk-positive events pushing equities up the SPX marked a fresh ATH yesterday at 3041.
Although expectations remain upbeat, prices are near an exhaustion level that could mark the competition of minute correction c with an ending diagonal near 3048.
Brexit Risks Recede But Uncertainty Looms
Johnson accepted the EU’s granted extension yesterday in a bid to push for a general election in December. This allowed markets to take a breather on at least one of the lingering Brexit risk components.
UK’s MPs rejected BoJo’s bid, however. This left the pound somewhat mixed despite the extension news which should have provided some good gains.
Pound Expected to Remain Mixed, Looking Bearish Short-term
GBPUSD responded to both bearish and bullish headlines, initially driven up but then discounted most gains following the ‘election’ snapback.
Trading within intermediate wave (3) and having potentially ended minute 5 we can now focus on whether the current structure leads to a zigzag correction near 1.27.
Politics Drive Markets Away from Safe-Havens
It was a good week for gold up until Trump’s trade comments. The good news surrounding a potential trade deal drove gold back down below the 1500 handle. With added pressures from Brexit, even partial, resolution the yellow metal could remain bearish in the short-term.
XAUUSD Triangle Hints to Further Declines
The last spike to the upside allowed bulls to take profits and start selling to perhaps completing the corrective minor wave 4.
With prices under the round level and after the throwback to 1515, markets could now push the commodity near 1440. This would be where the complex correction could finally complete.