While the past month has largely seen continuation of trends across both currencies and metals markets, September is currently setting up to become a possible turning point for several trading assets, including the S&P 500 in the US, gold, and the US dollar.
Breakout in the S&P 500
Over the course of August, we have seen the US stock market, represented here by the S&P 500 index, make a new all-time high while still trading within the upwards trending channel we first drew up back in July.
The S&P is right now trading near the top of that channel, indicating that a reversal down again is likely to happen sometime early this month. If it does reverse, the first support level would be the level from the previous market top from back in January at around 2,880.
Reversal in gold
While the stock market has been setting new all-time highs, the primary hedge against uncertainty in the market – gold – has traded lower and lower.
However, the trend turned when gold broke out of the downward channel it has been trading in for the past two months, surging nearly 4% since its bottom in mid-August.
If gold can break through the resistance at the 1,215 level, the chart would look bullish for medium-term swing traders, with a possible run up to the 1,300 level.
New Zealand dollar
When we looked at the New Zealand dollar/US dollar currency pair last month, we pointed out that the weekly chart indicated that a reversal up for the kiwi dollar might be coming. However, the support level did not hold and we instead got a strong breakout to the downside for the kiwi, as can be seen in the weekly chart below.
Zooming in to the daily timeframe, however, we can see that although the price has come back slightly, we are now in a downtrend, confirmed by the blue downward trend line. Until the price can break up through the trend line, this bearish trend should be expected to continue.
USD/AUD approaching resistance
Traded against the Aussie dollar, the US dollar is also still showing its strength, as it has done since the end of January this year. The pair still has some room to run, but resistance to the upside is getting closer at around the 1.3950 level, which has been a major turning point in this market twice before.
For now, there is no obvious way to trade this market with a reasonable reward:risk ratio. Traders who are following the USD/AUD should instead wait for time until we get some clear signs of whether this market will break through the major resistance and continue upwards, or if the greenback will make a reversal to the downside.
Anotherexciting thing to watch in the coming month will be how several of the emerging market currencies will perform against the US dollar. As has been widely reported in the news, the Turkish lira has come under extreme pressure thanks to both domestic factors such as a refusal to raise interest rates, as well as outside factors like sanctions imposed by the US on Turkey.
As a result of the crash in the Turkish currency, traders are now asking themselves how this might affect other currencies, with the South African rand and the Brazilian real both feeling the pressure already. And with Brexit getting closer, we may even see some action in the British pound again. In other words, there are certainly lots of interesting events to keep an eye on this month. Trade safely and make sure to watch the economic news calendar so you stay away from the most volatile periods!