END OF AN ERA AS MERKEL STEPS DOWN AS CDU CHAIR

The euro was little moved against the US dollar after Germany’s Angela Merkel stepped aside as the leader of the Christian democrats. She has held the post for more than 18 years. The decision to step down came after her party lost in the German state of Hesse in an election held on Sunday. In a statement, she said that she will not stand for re-election in the party’s December meeting. This move marks the beginning of the end for Angela Merkel’s era. The likely successor will be the person who will win the party’s nomination in December. However, this is not guaranteed as the country has seen an increase in populism which means that the next leader could be far away from Merkel’s globalism policies.

Global stocks jumped today as investors started focusing on the future. Europe’s Stoxx and Germany’s DAX indices gained by 1.24% and 2% respectively. The biggest gainers were automobile companies that reacted positively to the news that China was considering a 50% reduction in automobile tariffs in a bid to spur growth in the sector. In the US, futures pointed to major gains with the Dow and the S&P gaining by 160 and 25 points respectively. The biggest laggard was IBM which announced that it would acquire open source company, Red Hat. Many investors believe that IBM will overpay for the company.

After last week’s gains, gold’s price declined today as the value of the dollar index rose. It also fell because of the stability that happened in the market today. This week, traders will focus on gold for two reasons. Firstly, they will focus on it because of important data announcements due. On Wednesday, ADP will release the private payrolls data which will be followed by the official government data on Friday. Further, the Bank of Japan and the BOE will release their interest rate decision. Secondly, they will focus on gold as they consider market risks.

EUR/USD

On September 27, the EUR/USD pair started a sharp decline. Since then, it has declined from a high of 1.1816 and on Friday, it reached a low of 1.1335. Today, it moved up to an intraday high of 1.1420. Today’s high was along the 14-day EMA. There is a likelihood that the upward movement is a false breakout. This means that the pair could resume the downward trend to test the important support of 1.1300.

XAU/USD

The price of gold fell slightly today as the dollar index rose. This ended a rally that has seen gold touch a multi-monthly high of 1243. However, the price of gold is still lower from where it was in April this year. On the daily chart below, the current price of gold is slightly below the 23.6% Fibonacci Retracement level. In the short-term, there is a likelihood that the XAU/USD pair will touch the 1260 level which is also the 50% Fibonacci Retracement level.

GBP/USD

The GBP/USD rose slightly from Friday’s low of 1.2775. Today, it reached a high of 1.2852. The double EMA shows that the pair could continue to move down. The RSI is currently at 29, which is slightly above from where it was earlier today. Therefore, there is a likelihood that the pair will resume the downward trend. This will likely see it decline to a low of 1.2665.