Senior Trader Daily Commentary 19 May 2017

Good morning everyone and Happy Friday!
 
Confusion on the US political scene transmitted across to financial market volatility yesterday as early US dollar and equity market weakness drove precious metals values higher, before a reversal in the Dollar and stocks pushed the precious metals complex lower by the close of trading in New York.
 
Following on from Wednesday’s market action when comments from the recently departed FBI Director James Comey implied that President Trump had made an attempt to obstruct an investigation into former National Security Advisor Mike Flynn, which had the effect of spooking investor risk appetite on fears of eventual impeachment proceedings against the US President and sending them in search of safe haven assets, footage emerged overnight of Mr Comey testifying under oath on May 3rd that obstructions to FBI investigations “never happened”.
 
Specifically, in testimony under oath in front of the Senate Judiciary Committee Mr Comey stated in relation to a question asking whether he had ever been pressured to terminate an investigation for political purposes that:
 
“Not in my experience. Because it would be a big deal to tell the FBI to stop doing something like that -- without an appropriate purpose.
I mean where oftentimes they give us opinions that we don't see a case there and so you ought to stop investing resources in it. But I'm talking about a situation where we were told to stop something for a political reason, that would be a very big deal.
It's not happened in my experience.”
 
" it would be a big deal to tell the FBI to stop doing something like that -- without an appropriate purpose... I'm talking about a situation where we were told to stop something for a political reason, that would be a very big deal... It's not happened in my experience."
 
In other words, the former FBI’s Director’s May 3rd testimony appears to call B.S. on his own allegations from Wednesday. The result was a reversal in investor sentiment back towards risk assets as the probability of impeachment proceedings receded (but for how long?) and attention was shifted back towards an almost certain US Federal Reserve interest rate hike in June. The US dollar recovered some lost ground against all major currencies and stock indexes bounced out of recent lows delivering precious metals their first negative day in recent sessions.

All the confusion has clouded the technical picture somewhat with a significant retracement of Wednesday’s bullish engulfing candlesticks yesterday dropping values into a “no man’s land” in which case, “when in doubt, stay out” might be the most prudent course for the moment for those actively trading gold short-term. Those long term holders need not worry about the short-term whipsaw, and look for opportunities to accumilate on weakness.
 
The strong USD/JPY & XAU/USD (inverse) correlation remains intact.
 
Have a great weekend.
 
Regards,
Andre