US markets sell-off as dollar rallies higher

Thursday, July 31, 2014

US markets slipped lower today, extending yesterday’s declines as cracks began to emerge in near term support levels. Markets reacted badly to the news that initial jobless claims increased week-on-week after last week’s reading saw claims drop to a fourteen year low. Although the increase wasn’t significant, with claims 2,000 above expectations of 300K during the week ending 26th July, investors were concerned that the broader increase from the previous week’s revised figure of 279K was enough to prompt a sell-off. A weaker than expected Chicago PMI added further catalyst to the sell-off and with geopolitical tensions flaring up towards the end of the week we could see risk assets sell-off further tomorrow.

With equity markets across the US and Europe selling off substantially throughout the session, we would have expected investors to take sanctuary in gold. However, even the perceived safety of the yellow metal wasn’t enough to support prices and we saw spot prices sell-off for the fourth straight session today with further declines only halted by the 200 day MA around $1,285.50/oz. Prices have shed over 4% since July’s peak around $1,345/oz.

Market participants instead sought safety in the US dollar which rallied higher today as intraday moves in the dollar index tested the area above 81.50 before pulling back slightly. The DXY has closed higher in all but one of the last nine sessions and has rallied almost 2.3% throughout July as sanctions against Russia spark capital flight into safer assets.  

Initial jobless claims rebound higher after hitting a 14 year low

INJCJC Index US Initial Jobless 2014 07 31 15 59 33

DXY rallies higher on safe haven demand

DXY Curncy DOLLAR INDEX SPOT 2014 07 31 16 14 25

Topics: Gold, DXY
More from: Kash Kamal