Top 3 charts of the week: US2000, USDNOK, Gold

Summary:

  • US small-cap index surged almost 20% from the latest low

  • USDNOK with potential head and shoulders pattern

  • Gold pulls back towards the upward price channel

The beginning of the year on Wall Street was exceptionally good. All major US stock indices rebounded significantly with Russell2000 (US2000) leading the advance. The small-cap index gained almost 20% since the bottom achieved on the Boxing Day. Somewhat more dovish stance of the Federal Reserve played a key role as small companies are often significantly indebted and therefore any rate hike is enough to spoil the sentiment. As the concerns abated the index easily broke above 50-session moving average and recouped almost a half of the decline started in September. Potential escalation of the trade conflict remains the key risk factor for equity markets right now.

Source: xStation5

The past couple of days on the FX market were marked by the US dollar regaining ground. In turn USDNOK found itself on an interesting price levels. The Norwegian economy is to high degree dependant on the oil industry (although not as much as it used to be) therefore if the oil prices continue to rise the Norwegian currency may follow higher. Moreover, the latest data pack from the Scandinavian country showed price growth remaining robust what boosted odds that Norges Bank will deliver a rate hike during the meeting in March. From the technical point of view we are experiencing forming of the potential head and shoulders pattern. In case the current upward move is halted in the vicinity of 50% Fibo level than a break below 8.45 handle could herald a pullback to as low as 8.25.

Source: xStation5

Last but not the least, let’s take a look at the gold chart. Gold was subject to some hectic price moves during the past couple of days. However, a drop in the US yields as well as shrinking risk appetite helped precious metal recover. From the technical point of view, price pulled back to the upper limit of the previously broken upward price channel. On the chart below one can see that the correlation between US 10-year bonds and gold was very strong as of late. Having said that, there is still some room for gold prices to extend decline. Channel formed with 50-period moving averages can be named as the first support level to watch. The US PMI indices scheduled for release later this week should be watched carefully by investors as any strengthening of the USD could depress gold prices further.

Source: xStation5

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