Senior Trader Update 18 MAY 2017

Good morning everyone,
 
“Markets can remain irrational longer than you can remain solvent” (John Maynard Keynes).
 
It pains me having to draw inspiration from the British economist but given what’s been witnessed across the financial markets over the past 24 hours, Keynes’ observation is apposite.
 
Without venturing into overtly political territory, the unprecedented white-anting of the Trump Administration via leaks, conjecture, speculation and arguably some outright falsehoods disseminated by various ‘media’ outlets provided to them by ‘anonymous’ sources in an attempt to link President Trump (and anyone connected with him) with nefarious dealings with ‘The Russians’ (as a path to impeachment), turned into a frenzy yesterday and spooked the markets as investors fled US stocks and the Dollar and sought refuge in perceived safe havens like precious metals. Additional fuel was provided by the fact that precious metals markets were significantly less long than they were a month ago.
 
That pretty much captures the nature of Wednesday’s move in a nutshell.
 
Technically, XAU/USD posted a monster bullish engulfing candlestick on the Daily chart yesterday, bursting through minor trendline resistance and bringing the psychological ‘big figure’ at AUD 1700 as well as the mid-April resistance at the AUD 1710/1715 level back into play. Dips are likely to be bought. A huge bullish candlestick was also posted in XAU/USD and having eventually cleared resistance at USD 1245, the way now opens back towards USD 1280.
 
With gold rallying more appreciably than silver, the Gold/Silver ratio reversed the entirety of its slide lower over the previous couple of days.
 
The intraday (inverse) correlation between the USD/JPY & XAU/USD remained strong however it was clear that it was ‘headline risk’ that drove all markets yesterday and should continue to do so in the interim.
 
Good luck.
 
Regards,
Andre