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Gold Falls Off A Cliff As Risk On Sentiment Resumes Markets have started the week on relatively thin trade, but this does not mean there has not been considerable volatility across all of the major financial assets so far. Volatility, driven primarily by risk on sentiment, looks set to continue today as a host of major fundamental releases hit the press. Here is what to look out for, and how to set up against it. Stocks The majority of the US stock markets opened and closed higher on Monday, as the aforementioned risk on sentiment fuelled bullish behavior throughout. The S&P 500 closed up nearly 1%, while the Dow exceeded 1% and the NASDAQ hit the level. Highs in the S&P another level to watch around 1987. If this level holds, but for one towards the 2000 handle as today’s markets mature. US retail sales data is scheduled for release later this afternoon, and a better-than-expected figure would make this target an almost certainty. Consensus forecasts the month over month figure at 0.6%, a doubling of the previous figure of 0.3%, so look for an on target release to strengthen towards aforementioned in term resistance. A better-than-expected release would likely offer up a four hour daily close above 2000, and suggest further bullish momentum as we head into the middle of the week. Currencies The two major pairs to keep an eye on today at the cable (GBP USD) and the EURUSD. Bank of England Gov Mark Carney is set to take the stage at market open today; any speech will offer insight into the likely future actions and the Bank of England as far as near-term interest rates are concerned. The property market is heating up in the UK, and many analysts are calling for an interest rate hike so as to mitigate the effects of any long-term property bubble bursting. Look for a hawkish tone (one that suggests a near-term hike is on the cards) in Carney’s speech to strengthen the cable after yesterday’s decline, with an initial upside target around 1.71250. Conversely, a dovish tone may compound yesterday’s current bearish momentum, and drive the pair towards in term support at 1.7050. Looking to the Euro, both the aforementioned US retail sales figure and the release of the German ZEW economic sentiment have the potential to influence the EURUSD. Look for a concurrent bias (i.e. a better-than-expected European release and a lower than expected US release or the reverse) to determine the short to medium term direction in the pair, with the former example likely to boost the EURUSD towards in term resistance at 1.3660 and the latter likely to weaken the power through in term support at 1.3588. Commodities Gold was yesterday’s big loser, as fears over the situation in Iraq, Syria and Israel seem to have slipped from the market’s attention, along with the suggestion that one of the biggest banks in Portugal may be setting up to default on a large portion of its debt. The market ignoring these situations has led to a rapid decline on the price of gold, which was driven above last two weeks as a result of the aforementioned geopolitical and military tension. Expect the bearish momentum to continue today, with an initial correction towards the 1315 region likely to be rejected, offering up to 1300 handle as an initial downside target. Oil gained slightly during yesterday’s session, but was far from regaining the value lost throughout the majority of last week. With 8 out of 11 of the previous sessions concluding in a decline for the fuel, it’s highly unlikely that oil will gain today. A better-than-expected US retail sales release major temporarily strengthen the fuel, but as the day draws to a close and the week matures look for further decline towards support at 99 flat. Daily Market analysis