30-OCT-2018, TUESDAY

1) Nikkei 225 Still Far From True Recovery as Trump Revives Sentiment
2) Gold Prices Locked in Place as US Dollar, Treasury Yields Diverge
3) NZD/USD Price Outlook: Kiwi Carries Breakout Potential

1) Nikkei 225 Still Far From True Recovery as Trump Revives Sentiment

Despite a pullback on Wall Street which was triggered by a revival in US China trade war fears, Asia Pacific benchmark stock indexes traded higher. This time, it was for the exact opposite reason. During an interview with Fox News, US President Donald Trump said that he sees a ‘great deal’ with China. This helped cool some of those earlier worries and market mood materially improved.

After gapping lower, Japan’s Nikkei 225 soared as much as two percent heading into Tuesday’s close. This placed the index on pace for its best performance in a day since October 16th which was about two weeks ago. There were similar behaviors in other bourses with China’s Shanghai Composite rallying about 0.72%. We also saw the ASX 200 climb about 1.12%.

The corrective gains in the Nikkei 225 still leave it short of breaking above a descending resistance line from September. For a bullish reversal, I would not only like to see a push above that but also with confirmation. As such, resistance appears to be around 21,851 which is around the August low. Meanwhile resumption of the dominant downtrend has 20,950 lined up as support before exposing the current 2018 low at 20,347.

2) Gold Prices Locked in Place as US Dollar, Treasury Yields Diverge

Trade war escalation fears shaped commodity price action Monday. Gold prices weakened as the US Dollar found renewed support from haven-seeking flows. The metal’s losses were capped by a parallel drop in bond yields however, underscoring that its roles as anti-fiat and non-interest-bearing alternatives are operating at cross-purposes in the current environment.

Gold seems likely to remain noncommittal against this backdrop if the Greenback and Treasury yields continue to diverge. Re-coupling reflecting firming Fed rate hike bets in a risk-on scenario would almost certainly send the metal sharply lower, but it is probably a stretch to expect such a shift in prevailing cross-market relationships can happen overnight.

Gold prices inching back from resistance in the 1235.24-41.64 area, with negative RSI divergence suggesting that a near-term top may be taking shape. A daily close below initial support in the 1211.05-14.30 region opens the door for another challenge of the September 28 low at 1180.86. Alternatively, renewed upside momentum that brings prices through resistance sees the next key barrier in the 1260.80-66.44 zone.

3) NZD/USD Price Outlook: Kiwi Carries Breakout Potential

The New Zealand Dollar has continued to trade just below multi-month slope resistance with the initial October opening-range in focus heading into the close. Here are the updated targets and invalidation levels that matter on the NZD/USD charts. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.

Despite the volatility, NZD/USD continues to trade within the confines of the October opening-range and we’ll be looking for the break to offer further guidance on our medium-term directional bias. Critical daily support rests at 6453/65 – a region defined by the 2015 low-week close, the yearly low-day close and the 78.6% retracement of the October advance. A topside breach of the descending pitchfork is needed to suggest a more significant low is in place.