FTSE set for softer start as oil prices tumble. Gold plunges post NFP, US CPI in focus this week.

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FTSE set for a softer start as oil prices tumble 

The FTSE along with other European indices is set to start the week on the back foot after China and Australia imposed further mobility restrictions as the COVID delta variant spreads. 

Oil prices have tumbled sharply on the new Chinese restrictions, which is expected to drag on heavy weight oil majors (OIL). Metal prices are also lower. 

There is no major UK data due today, UK Q2 GDP numbers are due later in the week. 

Where next for FTSE? 

After picking up from its mid July lo of 6815 the FTSE ran into resistance at 7140 which capped gains across August so far.  Whilst the index moved firmly above its 50 sma on the 4 hour chart a series of doji candles marked indecision. The bearish MACD is supportive of further downside. 

The FTSE is currently testing its ascending trendline support, horizontal support and round number at 7100. A break below this level could see the 50 sma tested at 7080 before a move towards 7025 the 100 sma and onto 6970. 

On the flip side, should the support hold, the FTSE could aim for 7140 August high before 7176 the July high.  

Gold plunges post NFP 

Gold prices experienced a mini flash crash overnight, falling to 1764 the April low before rebounding back over 1700 (GLD). 

The sell off in gold came following better than expected US jobs data which prompting bets that the Fed would withdraw stimulus sooner, denting demand for non-yielding gold. 

After the NFP saw 943k jobs created in July and unemployment decline to 5.4% Fed fund futures steepened and at least one 25 bps rate hike is now priced in for 2022. 

There is a growing expectation that the Fed will announce the tapering of asset purchases at the Jackson Hole forum later this month. 

US CPI data will be a key focus this week. 

Where next for Gold? 

After repeated failures to break above 1833 the price rolled over breaking below the multi week ascending trendline and the 200 sma. The 50 sma is moving below the 200 sma forming as death cross and a strong bearish signal. 

A break below the June low at $1750 has set the stage for further losses. Any push higher is likely to be considered a selling opportunity. It would take a move above $1788 to negate the down trend. 

On the downside, sellers will be looking for a break below $1725 mid April low to confirm the negative outlook. A move below this level could open the door to $1700 round number and on to $1678.