October 14th 2021: Dollar Index Approaching Daily Support; EUR/USD Upside Vulnerable

Charts: Trading View

EUR/USD:

(Italics: previous analysis)

Weekly timeframe:

Recent trading reveals buyers regaining some consciousness out of prime support at $1.1473-1.1583. Follow-through buying is on the table, potentially fuelled on the back of long-term sell-stops tripped beneath lows at $1.1612 (2020).

In the event buyers fail to agree higher prices, south of current support shines the technical spotlight on a 61.8% Fibonacci retracement at $1.1281, organised above a 1.618% Fibonacci projection from $1.1228.

Daily timeframe:

A handful of pips ahead of Fibonacci support between $1.1420 and $1.1522, EUR/USD bulls entered an offensive phase Wednesday, motivated by softer US Treasury yields and a lower dollar. Of technical note is the aforementioned Fibonacci support glued to the lower side of the weekly timeframe’s prime support.

Resistance demands attention at $1.1614, with a break unmasking Quasimodo support-turned resistance at $1.1689.

Out of the relative strength index (RSI), the value recently pulled in hidden divergence from within oversold territory. The 50.00 centreline is now a watched level; movement north of the latter signals positive momentum.

H4 timeframe:

Wednesday’s bullish narrative lifted the currency pair above $1.1563 and, in recent hours, above channel resistance, extended from the high $1.1846. Violating the aforementioned levels centres attention on resistance from $1.1622—fixed a few pips above daily resistance at $1.1614.

Medium-term sentiment facing southbound since June, however, could weigh on further upside. With that, $1.1622 serves as a base sellers might emerge from if brought into the fight.

H1 timeframe:

Refreshing weekly peaks at $1.1593—after rupturing Monday’s session top at $1.1587—draws focus to $1.16. Addressing this psychological level could bring about a whipsaw to neighbouring Quasimodo resistance at $1.1605, plotted together with an 88.6% Fibonacci retracement at $1.1603 and a 1.618% Fibonacci projection from $1.1604.

Traders are also urged to pencil in the possibility of a spike to daily and H4 resistances, seated above the noted H1 resistances at $1.1614 and $1.1622, respectively.

Observed Technical Levels:

Between $1.1622 and $1.16 represents key resistance, taken from daily, H4 and H1 timeframes. Price respecting this area suggests a shortfall of bullish interest out of weekly prime support at $1.1473-1.1583. Overthrowing the said resistance, on the other hand, indicates strength to the upside.

AUD/USD:

(Italics: previous analysis)

Weekly timeframe:

Buyers are beginning to emerge from prime support at $0.6968-0.7242. Prime resistance at $0.7849-0.7599 is a reasonable target, though failure to preserve gains opens up support at $0.6673.

Trend studies on the weekly scale show we’ve been higher since early 2020. Consequently, the response from $0.6968-0.7242 might be the start of a dip-buying attempt to join the current trend.

Daily timeframe:

The Australian dollar extended its bullish presence Wednesday, closing in on weekly tops at $0.7385.

Decorating the chart with additional upside has prime resistance at $0.7506-0.7474 in sight. Immediately above here, Quasimodo support-turned resistance is at $0.7621, which happens to join closely with the 200-day simple moving average at $0.7571, a 61.8% Fibonacci retracement at $0.7585 and a 100% Fibonacci projection at $0.7551.

Latest out of the relative strength index (RSI) reveals the value journeyed above the 50.00 centreline, informing traders that average gains exceed average losses: momentum to the upside.

H4 timeframe:

Leaving support at $0.7317 unopposed, AUD/USD is zeroing in on Quasimodo resistance at $0.7394 (enclosed within a 1.618% Fibonacci expansion at $0.7386 and a 1.272% Fibonacci projection at $0.7398).

Overthrowing noted resistance shifts focus to Quasimodo resistance parked at $0.7441.

H1 timeframe:

For those who read Wednesday’s technical briefing you may recall the following (italics):

In similar fashion to yesterday’s analysis, we know price on the weekly timeframe is coming from prime support at $0.6968-0.7242, in addition to the daily timeframe exhibiting scope to approach resistance at $0.7506-0.7474.

This, once again, positions H1 support at $0.7339 [since removed] as a base buyers could show from, along with H1 prime support at $0.7320-0.7327—H4 support is visible beneath the aforementioned area at $0.7317.

As evident from the chart, H1 prime support at $0.6968-0.7242 made its way into the spotlight heading into US trading hours, a move enticing healthy bullish force. Overturning weekly tops at $0.7385 brings $0.74 in focus, which resides just above H4 resistances between $0.7398 and $0.7386.

Observed Technical Levels:

Attention is on $0.74 on the H1 scale, and H4 resistance between $0.7398 and $0.7386. However, sellers are likely to seek additional confirmation before committing, as weekly and daily timeframes show an absence of resistance until $0.7506-0.7474 on the daily timeframe.

USD/JPY:

(Italics: previous analysis)

Weekly timeframe:

Supply at ¥113.81-112.22 remains under considerable pressure, with neighbouring resistance arranged at ¥114.38. Clearing the aforementioned supply may raise some eyebrows, in view of the area capping downside since April 2019.

Sellers taking the wheel directs flow to familiar demand at ¥108.40-109.41—arranged north of descending resistance-turned support, taken from the high ¥118.61.

In terms of the immediate trend, we’ve been advancing since the beginning of this year.

Daily timeframe:

The Japanese yen welcomed some demand on Wednesday, lifted on rising bond prices and a broadly soft USD. Fading fresh 2021 peaks at ¥113.81, USD/JPY bears are seen making an entrance within the walls of prime resistance at ¥113.93-113.07, an area clipped to the upper boundary of weekly supply.

Area above current supply shows weekly resistance from ¥114.38 working with two 1.272% Fibonacci projections on the daily scale at ¥114.12 and ¥114.48.

From the relative strength index (RSI), following support emerging from 56.85 early last week, the indicator’s value is exploring overbought space. However, with the trend facing northbound this year, overbought signals should be viewed in this context.

H4 timeframe:

For those who read Wednesday’s technical briefing you may recall the following points (italics):

Recognising active weekly and daily supply zones, H4 activity is shaking hands with channel resistance, extended from the high ¥112.05, as well as a 100% Fibonacci projection at ¥113.74 and a 1.618% Fibonacci expansion at ¥113.90.

A retracement from the aforesaid resistances, shines the spotlight on support at ¥112.63, dovetailing closely with channel support, drawn from the low ¥109.12.

As you can see, sellers did indeed make a show from channel resistance, which, as underlined above, could have the currency pair make its way to support at ¥112.63.

H1 timeframe:

Recent downside pressure from resistance at ¥113.71 generated a double-top formation at ¥113.79, drawn with a neckline from ¥113.35 that was recently breached. The pattern’s profit objective—measured by taking the distance between the highest peak within the configuration and the neckline and extending this value from the breakout point—sits within the decision point at ¥112.87-113.03, an area also encasing the psychological level ¥113.

Observed Technical Levels:

Knowing we have active weekly and daily supply, together with H4 reacting from channel resistance, extended from the high ¥112.05 and H1 recently puncturing a double-top pattern’s neckline at ¥113.35, USD/JPY could drop in on the H1 decision point at ¥112.87-113.03.

GBP/USD:

(Italics: previous analysis)

Weekly timeframe:

Supply-turned demand at $1.3629-1.3456 continues to emphasise a distressed atmosphere after having its lower limits clipped at the end of September. In spite of the recent recovery, it’s important to note price also closed below a double-top pattern’s ($1.4241) neckline at $1.3669, signalling bears are looking to take charge.

The double-top pattern’s profit objective—measured by taking the distance between the highest peak to the neckline and extending this value lower from the breakout point—sits around $1.3093. Conservative pattern sellers are likely to pursue a candle close beneath $1.3629-1.3456 before pulling the trigger.

Daily timeframe:

The $1.3736-1.3659 decision point remains an important area in this market. Respecting the aforementioned decision point helps confirm bearish intent within the weekly timeframe’s supply-turned demand at $1.3629-1.3456, and reinforces the idea of a successful double-top pattern.

Trendline resistance, taken from the high $1.4250, and the 200-day simple moving average at $1.3840 are seen above the current decision point; below is the $1.3412 low (29th September), with subsequent selling highlighting a Fibonacci cluster (support) around $1.3164.

From the relative strength index (RSI), the indicator’s value is attempting to voyage above the 50.00 centreline. Clearing the latter informs market participants momentum is to the upside: average gains exceed average losses.

H4 timeframe:

Support from $1.3570 is proving troublesome to overcome on the H4 scale, directing flow to an ascending resistance, projected from the low $1.3572. Seizing the said level guides resistance at $1.3750-1.3721 into the light, along with a nearby 100% Fibonacci projection at $1.3784.

H1 timeframe:

US hours on Wednesday witnessed price whipsaw through ‘London’ lows at $1.3602 and test the mettle of $1.36. Albeit extending to a low of $1.3588, GBP/USD bulls subsequently demonstrated healthy interest to the upside, which, in recent action, led price to resistance at $1.3658 and an ascending resistance, drawn from the low $1.3544.

Clearance of $1.3658 exposes $1.37 and Quasimodo resistance tucked 10 pips above at $1.3710.

Observed Technical Levels:

The daily timeframe’s decision point at $1.3736-1.3659, uniting with H1 resistance at $1.3658 and ascending resistances on the H1 and H4, delivers robust resistance to work with.

Alternatively, splitting current H4 and H1 resistances may draw in bearish curiosity from $1.37 and Quasimodo resistance at $1.3710 on the H1, both of which are within the noted daily decision point.

DISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

USD/CAD Exchange Rate Prediction – The Dollar Eases Despite Rising Yields

The USD/CAD slipped on Thursday despite stronger U.S. Treasury yields. This change comes ahead of Friday’s employment report from the Department of Labor. A larger than expected decline in jobless claims buoyed U.S. Treasury yields but this did not impact the greenback.

Technical Analysis

The dollar eased against Loonie, holding near support at an upward sloping trend line that comes in near 1.2550. Resistance seen near the 50-day moving average at 1.2622. The 10-day moving average is poised to cross below the 50-day moving average which means that a short-term down trend is in place. Short-term momentum has turned negative the fast stochastic generated a crossover sell signal. Prices are oversold as the fast stochastic is printing a reading of 3 below the oversold trigger level of 20 which could foreshadow a correction, Medium-term momentum has turned negative the MACD (moving average convergence divergence) index generated a crossover sell signal. The MACD histogram is printing in negative territory with a lower trajectory which points to a lower exchange rate.

Claims Decline More than Expected

According to the U.S. Labor Department, U.S jobless claims declined to 326,000 for the week ended October 2, below the 345,000 expected and a drop from the previous week’s 364,000. However, the four-week moving average edged higher to 344,000. Continuing claims, which run a week behind and total those who have filed for at least two weeks of benefits, also posted a healthy decline, dropping 97,000 to 2.71 million.

Precious Metals Weakness Led by Silver

Precious metals continue to struggle with rising bond yields a stronger dollar and bouncing stocks further reducing demand for diversification. While gold earlier in the week showed signs of resisting the latest rise in US Treasury yields, both metals succumbed to fresh selling yesterday as the dollar broke higher to reach a one-year high.

Reasons for the current dollar strength may ultimately also support gold from a safe-haven perspective, but for now with both metals on the defensive, speculators see no reason to get involved on the long side until the charts tell them otherwise.

  • Fed chair Powell and his counterparts at the ECB, BOJ and BOE all see rising inflation rates around the world as temporary and mostly driven by supply bottlenecks.
  • The Fed is likely to begin scaling back asset purchases in November while the timing of the first-rate hike has been forward to late 2022.
  • In the US, President Biden is struggling to find support for his economic plan while the debt ceiling can have been kicked down the road to December 3
  • China’s factory activity contracted in September as the electricity crunch and fight against pollution has slowed the economy at a time of heightened concerns driven by the Evergrande debt crisis.

These and other recent developments have all joined forces to support the dollar and yield, with silver the hardest hit. After breaking below key support at $22 yesterday it continued lower to reach $21.41, a level last seen some 14 months ago. This move resulted in the gold-silver ratio rising above 80 (ounces of silver to one ounce of gold) for the first time since last November.

With close to half of the overall silver demand coming from industrial applications, the current worries about a Chinese slowdown, has hurt the white metal more than gold as investors look for hedges against rising price pressures seen almost everywhere, most recently in the surging cost of energy. So, in short, a higher gold-silver ratio is the markets way to express worries about inflation and China growth.

Gold is not only a metal which tends to respond to movements in the dollar and yields, both of which continue to be price negative. It is also used by fund managers as a hedge or diversifier against risks across financial assets, but with financial assets and market valuations near all-time highs, this demand has faded and become a recent source of selling.

Investors believing the current market confidence and subdued inflation outlook, signaled through the bond market to be misplaced, the cost of buying insurance against it continues to get cheaper with gold presently trading near the lower end of its year-long range.

Over the coming weeks we will watch yield developments closely with rising yields potentially raising renewed uncertainty across other asset classes, such as interest rate-sensitive growth stocks. Also, the continued surge in the cost of most energy sources may ultimately support our non-transitory views on inflation.

Ole Hansen, Head of Commodity Strategy at Saxo Bank.

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This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of Saxo Bank Group through RSS feeds on FX Empire

European Equities: Consumer Sentiment and Central Bank Chatter in Focus

Economic Calendar

Tuesday, 28th September

GfK German Consumer Climate (Oct)

Wednesday, 29th September

Spanish HICP (YoY) (Sep) Prelim

Thursday, 30th September

French Consumer Spending (MoM) (Aug)

German Unemployment Change (Sep)

German Unemployment Rate (Sep)

Italian CPI (MoM) (Sep) Prelim

Eurozone Unemployment Rate (Aug)

German CPI (MoM) (Sep) Prelim

Friday, 1st October

German Retail Sales (MoM) (Aug)

Spanish Manufacturing PMI (Sep)

Italian Manufacturing PMI (Sep)

French Manufacturing PMI (Sep) Final

German Manufacturing PMI (Sep) Final

Eurozone Manufacturing PMI (Sep) Final

Eurozone CPI (YoY) (Sep) Prelim

The Majors

It was a mixed start to the week for the European majors on Monday.

The EuroStoxx600 fell by 0.09%, while the CAC40 and the DAX30 ended the day with gains of 0.19% and 0.27% respectively.

There were no major stats from the Eurozone to provide the majors with direction on the day.

For the DAX30, the upside came off the back of the Federal Election result, with the Social Democrats winning.

Economic data from the U.S also delivered support, though concerns over Evergrande continued to peg the majors back.

The Stats

There were no major stats from the Eurozone to provide the majors with direction on the day.

From the U.S

Economic data included durable goods and core durable goods orders.

In August, durable goods orders increased by 1.8%, with core durable goods orders up 0.2%. Durable goods orders had risen by 0.5% in July, with core durable goods orders up by 0.8%.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Monday. Daimler rallied by 2.07% to lead the way, with BMW and Continental both ending the day up by 1.71% respectively. Volkswagen rose by a more modest 1.24%.

It was a bullish day for the banks. Deutsche Bank and Commerzbank saw gains of 2.63% and 3.11% respectively.

From the CAC, it was a bullish day for the banks. BNP Paribas and Soc Gen rose by 3.10% and by 3.17% respectively, with Credit Agricole rallying by 3.51.

It was also a bullish day for the French auto sector. Stellantis NV and Renault ended the day up by 1.04% and by 2.54% respectively.

Air France-KLM rallied by 5.61%, with Airbus SE rising by 1.59%.

On the VIX Index

A run of 4 consecutive days in the red came to an end for the VIX on Monday.

Partially reversing a 4.72% decline on Friday, the VIX rose by 5.69% to end the day at 18.76.

The Dow rose by 0.21%, while the NASDAQ and S&P500 ended the day down by 0.52% and by 0.28% respectively.

VIX 280921 Daily Chart

The Day Ahead

It’s a relatively quiet day ahead on the Eurozone’s economic calendar.

German consumer sentiment figures for September will be in focus early in the European session. With plenty of market sensitivity to business and consumer confidence, expect the numbers to influence.

From the U.S, consumer confidence figures for September will also provide direction late in the European session.

On the monetary policy front, ECB President Lagarde and FED Chair Powell are scheduled to speak, however. Expect any forward guidance on monetary policy to mute the effects the economic data on the majors.

The Futures

In the futures markets, at the time of writing, the Dow Mini was down by 8 points.

For a look at all of today’s economic events, check out our economic calendar.

This Commodity Supercycle Could Be One For The Record Books. Here’s Why?

As we near the final quarter of 2021, this Commodity Supercycle shows no signs of slowing down with everything from the metals, energies to agriculture markets setting new record highs almost weekly,

So far this month, Aluminium prices have soared to 13-year highs. Nickel prices hit 7-year highs and Uranium prices surged to a decade high – surpassing a record 6-year high, set only a week before.

The bullish momentum also split over into other commodities with Natural Gas rallying to a 7-year high. Sugar prices hitting 4-year highs and Lithium prices climbing to an all-time record high.

But the best performing commodity, so far this year, is Crude Oil.

Crude Oil prices have quadrupled this year and are setting new record highs almost every month.

There are plenty of reasons why commodities are on the move, but the key driver is rapidly surging global inflation, tightening supply, logistical bottlenecks and booming demand across many highly essential commodities as a result of the COVID-19 pandemic.

Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions:

For a look at all of today’s economic events, check out our economic calendar.

Silver Price Prediction – Prices Rise Following Fed Decision

Silver prices surged higher in the wake of the Fed decision as the dollar eased and U.S. yields continued to grind downward. The Fed kept interest rates on hold, which put pressure on the greenback. The Fed also said if the recovery in the United States continued to remain on track, they would consider removing some accommodation. The risk-off trade took as stocks rallied for a second consecutive trading session, allowing silver prices to gain traction as the dollar finally eased.  Gold prices rebounded for a third straight trading session allowing silver prices to gain a toe hold.

[fx-broker slug=fxtm]

Technical analysis

Silver prices surged higher, poised to test resistance near the 10-day moving average at $23.23 Target support is seen near the September lows at 22.03. Short-term momentum has reversed and turned positive as the fast stochastic generated a crossover buy signal. Prices are oversold as the fast stochastic is printing a reading of 36, below the oversold trigger level of 18, which reflects accelerating positive momentum.

Housing Sales Fell

According to the National Association of Realtors, sales of previously owned dropped by 2% in August to an annualized rate of 5.88 million units. Sales were 1.5% lower than August 2020 for the first annual decline in 14 months. The supply of homes for sale fell 1.5% month to month to 1.29 million at the end of August. Compared with August 2020, inventory is down 13. At the current sales pace there was a 2.6-month supply. Tight supply pushed the median price of an existing home sold in August to $356,700, an increase of 14.9% from August of 2020.

GBP/USD Price Forecast – British Pound Gets Hit on Tuesday

The British pound initially tried to rally just a bit during the course of the trading session on Tuesday but gave back the gains to break through the 50 day EMA and go looking towards the 200 day EMA. All things been equal, this is a market that could very well go looking towards the 1.37 level underneath, especially at the 200 day EMA as it sits just above there. With this being the case, the market is likely to continue seeing a lot of noisy behavior, and the fact that we have fallen from here suggests that we may have to test that bottom again. That double bottom recently has been important more than once, so breaking down below the 1.36 level opens up floodgate of selling from what I can see.

GBP/USD Video 08.09.21

To the upside, if we can break back above the 1.39 level, then the market is free to go looking towards 1.40 handle above which is a major area of resistance. Break above there would of course open up even more momentum going higher, but right now I do not think that is very likely to happen. In fact, it is almost as if we need to test the 200 day EMA at the very least, perhaps even lower.

Yields in America were rising during the trading session as well, so that makes the US dollar bit more attractive, as people plowing into bonds for yield will also have a certain amount of influence. With all things being equal, this is a market that is trying to decide what the next big move is, and once it happens it will probably be rather drastic.

For a look at all of today’s economic events, check out our economic calendar.

USD/CAD Exchange Rate Prediction – The Dollar Drops Through Key Support

USD/CAD tumbled on Thursday ahead of Friday’s jobs report. The dollar lost ground against most major currencies. The exchange rate broke through key support levels.  There were two economic items of note, including jobless claims and factory orders. U.S. jobless claims hit their lowest level since the beginning of the pandemic.

Technical Analysis

The USD/CAD dropped on Thursday piercing through support near the 50-day moving average at 1.2535. Resistance is seen near the 10-day moving average at 1.2659. Target support is the August lows at 1.2475. Short-term momentum has turned negative the fast stochastic generated a crossover sell signal. Medium-term upward momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This situation occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line).

Factory Orders Rise

Factory orders rose in July, while business spending on equipment remained strong, signs that manufacturing was holding up despite persistent supply constraints and spending rotating back to services from goods. The Commerce Department said that factory orders increased 0.4% in July after advancing 1.5% in June. Expectations were for order gaining 0.3%.

Best Buy’s Q2 Earnings to Rise over 10%; Target Price $130

The Richfield, Minnesota consumer electronics retailer Best Buy is expected to report its second-quarter earnings of $1.89 per share, which represents year-over-year growth of over 10% from $1.71 per share seen in the same period a year ago.

In the last four consecutive quarters, on average, the company has delivered an earnings surprise of over 36%. The consumer electronics retailer would post year-over-year revenue growth of over 17% to $11.6 billion.

According to ZACKS Research, full-year earnings to be at $8.53 per share and revenue of $49.56 billion, rising +7.84% and +4.86% year-over-year, respectively.

Best Buy shares have gained over 10% so far this year. The stocks ended 0.59% lower at $110.1 on Wednesday.

“We believe the company remains fundamentally undervalued and there could be room for gains in the stock going forward. Specifically, there is a 60% chance of a rise for BBY stock over the next month (twenty-one trading days) based on our machine learning analysis of trends in the stock price over the last ten years,” noted analysts at Trefis.

Analyst Comments

Best Buy (BBY) is a best-in-class retailer led by a capable management team, and we are positive on the longer-term opportunity for the business and stock. BBY’s leading position in a healthy category and strength in key Retail fundamentals including merchandising, labour management, supply chain and omnichannel underpin our view,” noted Simeon Gutman, equity analyst at Morgan Stanley.

“We think BBY can sustain >5% EBIT margins after pulling forward its margin target by 5 years during the COVID-19 pandemic. This is reliant on generating SG&A efficiencies, which we believe are possible given BBY’s strong track record in this arena.”

Best Buy Stock Price Forecast

Sixteen analysts who offered stock ratings for Best Buy in the last three months forecast the average price in 12 months of $130.75 with a high forecast of $150.00 and a low forecast of $109.00.

The average price target represents an 18.76% change from the last price of $110.10. From those 16 analysts, nine rated “Buy”, six rated “Hold” while one rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $120 with a high of $152 under a bull scenario and $86 under the worst-case scenario. The firm gave an “Equal-weight” rating on consumer electronics retailer’s stock.

Several other analysts have also updated their stock outlook. BofA Global Research raised the price objective to $145 from $132. Raymond James lifted the price objective to $135 from $130. Guggenheim upped the target price to $135 from $130.

Check out FX Empire’s earnings calendar

What’s Next For Gold Is Always About The US Dollar

Not coincidentally, but in direct reflection of the dollar’s loss in purchasing power, the price of gold has multiplied one hundredfold from $20.67 oz to $2060 oz as of August 2020.

The chart below shows the ever-increasing price of gold over the past century…

GOLD PRICE LINKED TO US DOLLAR

When President Nixon suspended convertibility of the US dollar into gold in 1971, his action ushered in a decade-long period of US dollar weakness and rejection.

The effects of inflation created over the previous four decades, initially in an attempt to extricate us from the economic depression of the thirties, then to fund the country’s expenses relative to its involvement in WWII, etc., came roaring to life in the form of higher prices for all goods and services.

The rapid rise in the prices for goods and services in the United States was a reflection of the loss in purchasing power of the US dollar. Consequently, the dollar price of gold moved considerably higher and peaked intraday in January 1980 at $843 oz. The average monthly price for gold in January 1980 was $677 oz, which is reflected on the chart above.

The 1970s were a catch-up period for the price of gold relative to the US dollar’s loss in purchasing power. The $677 price for gold indicated that the US dollar had declined by nearly ninety-seven percent at that point since the origin of the Federal Reserve.

After that, the Fed found religion and managed to temporarily halt the dollar’s decline. A new period of prosperity and economic growth buoyed the dollar.

The effects of inflation were surprisingly mild for the next two decades. A stronger dollar showed up in lower gold prices. By 1999, the gold price had fallen to $252 oz., a decline of seventy percent.

Beginning in 2001, the US dollar began a significant decline on world markets lasting until 2008. During that time the price of gold rose from $256 oz to as high as $1023 oz.

A secondary low for the US dollar occurred in 2011. This was closely concurrent with a peak in gold’s price at $1896 oz.

Again, as in the period following gold’s price peak in 1980, the US dollar began a multi-year period of strength and stability. The muted effects of inflation between 2011 and 2016 resulted in a lower gold price.

The price of gold declined from $1896 oz. to $1049 oz. during that period, a loss of forty-five percent.

The price of gold since then has risen to $2060 oz. and subsequently declined back to $1675 oz. Meanwhile, the US dollar has neither gotten much weaker nor strengthened to any measurable degree.

INFLATION-ADJUSTED GOLD PRICES

The chart below illustrates the link between gold’s price and the US dollar. It is similar to the previous chart except that the one below allows for the effects of inflation.

There are five major turning points for gold’s price that are reflected on the chart. All five turning points (1933, 1971, 1980, 2000, 2011) coincided with changes in the US dollar.

Gold is priced in US dollars and since the US dollar is in a state of perpetual decline, the US dollar price of gold will continue to rise over time, as is shown in the first chart.

There are periodic changes in US dollar valuations and these changes can last for years (1980-2000; 2011-2016). During such periods the price of gold can and does decline considerably.

Gold’s value is not determined by world events, political turmoil, or industrial demand. The only thing that you need to know in order to understand and appreciate gold for what it is, is to know and understand what is happening to the US dollar.

The US dollar is in a constant state of deterioration, punctuated with periods of temporary strength and stability. The dollar price of gold reflects the deterioration by moving higher over time, usually after the fact.

Gold is not forward-looking. The higher price of gold in dollars is a reflection of the loss in purchasing power that has already occurred.

GOLD – WHAT TO EXPECT NEXT

As far as gold is concerned, the only thing that will take its price higher is further lasting deterioration in the actual purchasing power of the US dollar.

  • If you think that a collapse in the US dollar is imminent, and that runaway inflation is just around the corner, then load up on gold. But don’t expect to get rich if you are correct. At best, all you can expect is to maintain your current level of purchasing power for whatever wealth you have already accumulated.
  • If we have a period of relative tranquility and economic prosperity with mild inflation effects, then gold’s price could languish or decline for many years.
  • A financial collapse with credit defaults would likely usher in a long-lasting economic depression and deflation. The deflation would result in price declines for all assets of anywhere from 60-90 percent or more. And, yes, that includes gold.

CONCLUSION

The value of gold is constant. Its price changes according to changes in actual purchasing power of the US dollar.

Higher gold prices usually come after longer periods of time when the cumulative effects of previous inflation become more apparent.

If you want to know and understand what is happening to gold’s price, then you need to know and understand what is happening to the US dollar.

Changes in the price of gold do not tell us anything about gold; they tell us what has happened to the US dollar.

(also see Gold Price – $700 or $7000)

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED!

Weekly Technical Market Insight: 12th – 16th July 2021

Charts: Trading View

US Dollar Index (Daily Timeframe):

Dollar movement, according to the US dollar index (ticker: DXY), kicked off Tuesday exhibiting a bullish vibe, clocking three-month peaks of 92.85. Action soured heading into the second half of the week, nevertheless, wrapping up the session at a minor disadvantage.

The DXY is still comfortable north of the widely watched 200-day simple moving average, circling 91.40ish. Interestingly, this dynamic value dovetails with support from 90.64-91.40, an area arranged on top of demand from 90.32-90.70. Upstream reveals possible resistance at the 93.44 31st March high, established under Quasimodo resistance from 93.90.

In terms of trend, 2020 was largely bearish, withdrawing from March tops of 102.99 to as far south as 89.21 in early January this year. After realising support at 89.34 (a level displaying historical significance), this has somewhat motivated a bullish defence this year (+2.6 percent year to date), reclaiming a portion of 2020’s 7 percent deterioration.

Those who read the previous Weekly Technical Market Insight may recall the following (italics):

Longer term, although many analysts may deviate here, a USD trend reversal to the upside is validated above the 94.74 25th September (2020) high (blue arrow). By the same token, beyond the 89.21 6th January low (red arrow) chart studies suggest an extension to the current downtrend. Of late, though, USD upside has been favoured. A break of the 93.44 31st March high, knowing the greenback trades north of the 200-day simple moving average, adds weight to a longer-term bullish presence developing.

The relative strength index (RSI) reveals bearish divergence, with the indicator ending the week testing the 60.00ish range, ahead of support at 55.67. Bearish divergence highlights that while price touched fresh highs, upside momentum—the speed—has slowed. This is typically observed as a sign that buyers could step aside.

  • As aired in last week’s insight, a retracement to support at 90.64-91.40 and neighbouring 200-day simple moving average is certainly not out of the question before buyers attempt to make an appearance.

EUR/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Closing the book on the month of June witnessed EUR/USD—in the shape of a near-full-bodied bearish candle—touch gloves with familiar support at $1.1857-1.1352 and erase 3.0 percent. A bullish revival shines the spotlight on 2021 peaks at $1.2349; additional enthusiasm welcomes ascending resistance (prior support [$1.1641]).

July currently trades 0.2 percent higher.

Based on trend studies, a primary uptrend has been underway since price broke the $1.1714 high (Aug 2015) in July 2017. Furthermore, price penetrated major trendline resistance, taken from the high $1.6038, in July 2020.

Daily timeframe:

Amid upbeat risk sentiment, EUR/USD staged a recovery at the back end of the week, with enough passion to reclaim position above Quasimodo support at $1.1836. Further outperformance, therefore, could be on the cards this week, targeting the 200-day simple moving average around $1.2000.

Territory below $1.1836 shifts interest to another Quasimodo formation at $1.1688.

With regards to trend, we have been somewhat rudderless since the beginning of the year, despite healthy upside during 2020.

What we’re receiving from the relative strength index (RSI) as of now is an exit from oversold space (bullish cue), and the indicator’s value bound for the lower side of the 50.00 centreline. Crossing above the latter helps add weight to upside action this week.

H4 timeframe:

After demand at $1.1794-1.1822 had its lower edge clipped Thursday—movement likely filling (and trapping) breakout interest and also tapping a number of $1.1794-1.1822 longs out of the market—subsequent action observed buying close the week shaking hands with Quasimodo resistance at $1.1880.

Toppling $1.1880 places emphasis on two additional Quasimodo resistances at $1.1970 and $1.1956, closely followed by supply at $1.2006-1.1983.

H1 timeframe:

Latest from the H1 chart shows the 100-period simple moving average around $1.1835 delivered support on Friday, allowing buyers to gather enough steam to clear out remaining offers and reach a high of $1.1881.

Demand-turned supply at $1.1895-1.1911 is back in the frame. Technical confluence is seen at the $1.19 round number, a 61.8% Fib retracement also at $1.19 (green), and a 100% Fib projection at $1.1914 as well as a 200% BC Fib extension at $1.1913 (orange). Harmonic traders will note the 100% Fib projection denotes a traditional AB=CD pullback.

The picture from the relative strength index (RSI) shows Friday’s rebound from the 100-period simple moving average was supported by indicator support from 47.44. The RSI finished the week hovering within touching distance of overbought and resistance at 78.97.

Observed levels:

Long term:

Having noted daily price reigniting interest at Quasimodo support from $1.1836, and monthly action crossing swords with the upper side of support at $1.1857-1.1352, moves to the 200-day simple moving average around $1.2000 could materialise this week.

Short term:

Although H4 Quasimodo resistance calls for attention at $1.1880, H1 suggests a breach of this level to test H1 demand-turned supply at $1.1895-1.1911 and associated confluence (additional resistance).

But given higher timeframes propose higher levels, a sizeable reaction from either of the aforesaid H1 or H4 areas is questionable. Consequently, elbowing above $1.19 this week perhaps unlocks the door to another H4 Quasimodo resistance at $1.1956, action breakout buyers are likely to be drawn to.

AUD/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

June’s 3.0 percent decline landed price in reach of support at $0.7394 last week. Additional downside pressure brings demand at $0.7029-0.6664 to light (prior supply).

Forging support over the coming months places trendline resistance (prior support – $0.4776 low) and supply from $0.8303-0.8082 in sight.

July is currently down 0.1 percent.

Trend studies (despite the trendline resistance [$1.0582] breach in July 2020) show the primary downtrend (since mid-2011) remains in play until breaking $0.8135 (January high 2018).

Daily timeframe:

Supply-turned demand at $0.7453-0.7384—an area housing key Fib ratios, including a 100% projection at $0.7418 and a 1.272% Fib extension at $0.7424—put in an appearance in the second half of last week. Friday’s muscular response points to a test of the 200-day simple moving average at $0.7573, a dynamic value sheltered south of resistance from $0.7626.

In terms of trend, 2020 was a respectable year for AUD/USD, though 2021 is on the back foot.

From the relative strength index (RSI), the indicator continues to emphasise a position of bullish divergence, revealing downside momentum is lacking.

H4 timeframe:

Following Friday unearthing support, made up of a 100% Fib projection at $0.7427 and a 1.13% BC Fib extension at $0.7423, the currency pair settled the week within shouting distance of resistance at $0.7508, accompanied by a 50.00% retracement at $0.7505.

Should $0.7508 stand down, this sets the stage for a run back to Quasimodo resistance at $0.7599 (parked under another Quasimodo resistance from $0.7621).

H1 timeframe:

Technically, the pair settled the week a touch off the 100-period simple moving average at $0.7486, with $0.75 above. These are obvious levels and, therefore, may generate trading activity in the early hours of the week.

Brushing aside $0.75 directs the radar towards resistance at $0.7546, with interest above highlighting supply at $0.7585-0.7566. Below the current SMA, 0.74 is visible.

Momentum studies, guided by the relative strength index (RSI), show H1 action is approaching overbought conditions, a range possessing resistance at 78.26.

Observed levels:

Long term:

The monthly timeframe’s near-test of support from $0.7394, coupled with the daily timeframe’s test of supply-turned demand at $0.7453-0.7384 and connected Fib studies, seats buyers in a positive position this week, aiming at least for the 200-day simple moving average at $0.7573.

Short term:

Against the backdrop of higher timeframes, the $0.75 figure and H4 resistance at $0.7508 garnering attention early week is possible. However, appreciating that the bigger picture forecasts a buyers’ market, a $0.7508 breach may have buyers take aim at H1 resistance from $0.7546, followed by H1 supply at $0.7585-0.7566.

USD/JPY:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Following January’s bullish engulfing candle, March concluded up by 3.9 percent and cut through descending resistance, etched from the high ¥118.66.

Although April finished lower by 1.3 percent and snapped the three-month winning streak, May (+0.2 percent) held the breached descending resistance and echoed support in June, higher by 1.4 percent.

July trades 0.9 percent in the red.

Daily timeframe:

Although pencilling in its worst losing session in 2021 on Thursday, USD/JPY recovered some lost ground Friday amidst a recovery in US Treasury yields. Continued support shows a test of trendline support-turned resistance (taken from the low 102.59) could come about this week, possibly spearing into resistance at ¥111.88-111.20. The week’s trendline support breach, technically speaking, was also reasonably noteworthy.

Territory north of ¥111.88-111.20 has supply at ¥112.68-112.20.

Trend studies reveal the pair has been trending higher since the beginning of the year.

In terms of the relative strength index (RSI), the indicator dropped through the lower wall of an ascending channel between 58.82 and 47.51 last week and tested waters south of the 50.00 centreline.

H4 timeframe:

Fibonacci studies carved out support late last week between ¥109.48 and ¥109.70. Interest from the area elevated the currency pair to challenge trendline support-turned resistance, taken from the low ¥107.48.

Upriver, another trendline support-turned resistance formation is seen, taken from the low ¥108.56, closely tracked by resistance from ¥110.48.

H1 timeframe:

May and June demonstrated a noticeable upside bias (visible from the H4), yet July has so far been on the ropes.

Friday’s 0.3 percent pullback, shaped through an ascending channel (drawn from ¥109.53/109.87), witnessed the unit reclaim ¥110 plus and redirect interest to trendline resistance, extended from YTD peaks of around ¥111.66.

Additional resistance resides at ¥110.43, teaming up with a minor Fib retracement cluster around ¥110.33 (38.2%/61.8%) and the 100-period simple moving average at ¥110.39.

Thursday’s downside, predictably, hauled the relative strength index (RSI) in oversold waters. The indicator subsequently engaged support at 18.76 and saw Friday fashion a 50.00 centreline cross to test a peak of 60.00. While this can reveal a strengthening up move, price movement faces clear resistance (see above). For that reason, many traders are perhaps sceptical of the recent centreline activity.

Observed levels:

Long term:

Last week’s convincing trendline support breach on the daily timeframe, drawn from the low ¥102.59, places a question mark on present conviction above the monthly timeframe’s descending resistance-turned support, taken from the high ¥118.66.

Short term:

H1 resistance between ¥110.43 and ¥110.33, together with neighbouring H1 trendline resistance, is clear.

Join this with H4 resistance at ¥110.48 and H4 trendline support-turned resistance (UPPER line), extended from the low ¥108.56, alongside the recent trendline support breach on the daily scale, further underperformance could be in store this week.

Therefore, bears may make a show between ¥110.48 and ¥110.33ish.

GBP/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Since February, GBP/USD has echoed an indecisive environment south of $1.4377: April high 2018. This follows December’s (2020) trendline resistance breach, taken from the high $2.1161, which could serve as support if retested.

July is currently up 0.5 percent.

Primary trend structure has faced lower since early 2008, unbroken (as of current price) until $1.4377 gives way.

Daily timeframe:

Sterling rose 0.9 percent against a broadly softer US dollar Friday. GBP/USD pencilling in its best day since 21st June likely fuels curiosity around resistance at $1.4003 this week—a level displaying commitment since March of this year. This, of course, leaves behind Quasimodo support at $1.3609 (connected with a 38.2% Fib retracement at $1.3641 and the 200-period simple moving average, circling $1.3663).

The relative strength index (RSI), following earlier bullish divergence (a technique traders employ to forewarn of a slowdown in momentum), is now in the vicinity of the 50.00 centreline. Venturing above the latter helps confirm Friday’s move.

H4 timeframe:

Quasimodo support from $1.3761, as you can see, has served well so far in July. Friday’s one-sided move north unseated last Tuesday’s high of $1.3899, arguing a climb to supply at $1.3986-1.3958 is perhaps in the air this week. Note that a resistance zone is also present above at $1.4027-1.3998.

H1 timeframe:

Friday settled the week a touch north of $1.39, a move possibly filling breakout stop entry orders as well as protective stops from those short the round number. Stationed above is Quasimodo resistance at $1.3910, together with a 100% Fib projection at 1.3909: an AB=CD harmonic pattern that brings a 1.13% Fib extension to the table at $1.3918.

Additional levels of interest are resistance at $1.3935 as well as a support level coming in at $1.3834, should sellers make an entrance.

The relative strength index (RSI) recorded its highest peak of 77.00 since mid-May on Friday, indicating overbought settings. Thus, traders will be watching this indicator closely for the value to exit the overbought range, a move typically supporting a bearish picture.

Observed levels:

Long term:

Daily resistance at $1.4003 is a key level on higher timeframes, according to the current technical landscape. Though in the event sellers take control, the spotlight will be directed to daily Quasimodo support at $1.3609.

Short term:

While H1 shows a particularly interesting Quasimodo formation at $1.3910, sharing chart space with an AB=CD bearish formation, both the H4 and daily timeframes exhibit scope to navigate higher this week. The next upside target on the H4 is seen at supply from $1.3986-1.3958.

With the above in mind, although H1 may respond from $1.3910ish, selling is likely to be light as buyers look to run for higher timeframe resistances.

DISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

Prelim Private Sector PMIs for May Weigh on the EUR

Economic data from the Eurozone was on the busier side this morning with prelim private sector PMIs for May in focus.

France

According to prelim figures, the manufacturing PMI rose from 58.9 to 59.2, with the services PMI rising from 50.3 to 56.6.

Economists had forecast a manufacturing PMI of 58.5 and a services PMI of 53.0.

Germany

The manufacturing PMI fell from 66.2 to 64.0 while the services PMI increased from 49.9 to 52.8.

Economists had forecast a manufacturing PMI of 65.9 and a services PMI of 52.0.

The Eurozone

In May, the manufacturing PMI slipped from 62.9 to 62.8, while the services PMI increased from 50.5 to a 35-month high 55.1. Economists had forecast PMIs of 62.5 and 52.3 respectively.

Supported by the pickup in service sector activity, the composite PMI increased from 53.8 to a 39-month high 56.9. Economists had forecast an increase to 55.1.

According to the Markit survey,

  • The rate of expansion across the private sector hit the highest for over 3-years.
  • New order inflows surged at a pace not seen for almost 15-years.
  • Business optimism continued to hit new highs.
  • Price gauges rose further, however, as demand continued to outstrip supply for many goods and services.

Market Impact

Ahead of the numbers the EUR had risen to a pre-stat and current day high $1.22398 before falling to a pre-stat low $1.22213.

In response to today’s stats, the EUR rose from $1.22255 to a post-stat high $1.22360 before sliding to a post-stat and current day low $1.22099.

At the time of writing, the EUR was down by 0.05% to $1.22211.

EURUSD 210521 Hourly Chart

Next Up

ECB President Lagarde and prelim private sector PMIs from the U.S.

Gold Forecast – Soaring Inflation and a Collapsing Dollar to Fuel Gold’s Next Big Advance 

Companies were unable to fill entry-level positions as they compete with Federal unemployment benefits. Not working apparently still pays better than working for some Americans.

Companies continue to cite higher input costs and inflationary worries across all sectors of the economy. The next round of CPI (consumer price index) numbers comes out Wednesday.

SPIKING INFLATION

Note below the parabolic rise in lumber prices. Lumber per 110,000 board feet has rocketed from $259.80 in 2020 to $1,686.00. This is adding tremendous pressure to residential construction expenses.

Graphical user interface, chartDescription automatically generated
Source: Bloomberg

BIDDING WARS

Higher building costs, low housing inventory, and record low interest rates have created a perfect storm for skyrocketing housing prices. In some areas, housing has jumped 15% to 20% during the pandemic. I hear stories of bidding wars and prospective buyers offering anywhere from $50,000 to $100,000 over the asking price to secure a property.

Feeding these absurd price increases is unprecedented money printing. Below is a chart of the year-over-year change in the M2 money supply. In February 2021, it hit a record 27%.

Graphical user interface, chartDescription automatically generated
Source: Bloomberg

In my opinion, the inflation genie is out of the bottle, and there is little the Fed can do to stop it. As companies increase prices, consumers will become conditioned. Eventually, the psychological aspect of higher inflation and a collapsing dollar will prompt individuals to buy items today for fear of higher prices later. This is something we have not seen since the 1970s.

RAMPANT SPECULATION

Eventually, the speculation we currently see in cryptocurrencies will move to precious metals (hard assets). Last week, Dogecoin exceeded the market cap of General Motors. Unbelievable!

Dogecoin was literally created as a joke in 2013 – it has ZERO use but speculation. A few days ago, while I was getting an oil change, I overheard employees speculating how they were about to get rich off Dogecoin and how they would instantly quit their jobs. These are the types of conversations you overhear near a top.

Historically speaking, precious metals are hands-down the best long-term inflation hedge, especially silver.

TECHNICAL OUTLOK

US DOLLAR

After a brief bounce, the dollar reversed lower after testing the 50-day EMA. Prices closed below the short-term trendline, and we could be on the verge of a major breakdown. Dropping below the January low (89.17) could trigger a collapse back to the 80 levels by August.

GOLD

Gold broke decisively above the $1800 level, and prices are poised for a sharp advance as the dollar collapses to fresh lows. Initially, we expected a retest of the $2000 level, but prices could surge to new highs if the dollar slips to 80 as forecasted. The 40-day cycle bottomed precisely with our outlook.

SILVER

Silver Prices are rising slowly out of the 8-month cup-with-handle formation. I’d like to see the uptrend begin to accelerate over the coming weeks and mount another assault on the $30.00 price level. Ultimately, I’m looking for a breakout above $30.00 and a run to multi-year highs before the next intermediate cycle peaks sometime in August.

Chart

Description automatically generated

Expect increased volatility as we determine the fallout over the recent cyberattack on the U.S. oil pipeline.

A much higher than expected CPI number could light a fire under precious metals.

AG Thorson is a registered CMT and expert in technical analysis. He believes we are in the final stages of a global debt super-cycle. For more information, please visit here.

Ultimate Fintech Awards 2021: The Race Is On

The published results will provide traders with a high standard of brokers for their region, language, platform, instruments or partnership requirements.

So what stage are we at now and when will we know the winners? Let’s look at how the awards race is shaping up.

Award Dates

The awards began in February 2021 and will run until June 2021 when the winners will be announced on June 10. Winners will be granted a coveted place on The Ultimate Fintech Leaders List, accessible globally to traders, partners and institutions.

If you haven’t already nominated your broker, there’s still time as voting continues throughout April and May. Nominate your broker for up to 5 award categories here.

How Does It Work?

Nomination Round – During the Nominations period, each brand can apply in up to 5 award categories. You will be asked to submit short explanations covering your eligibility for the preferred categories.

Voting Round – Subscribed and logged in users will be able to cast one vote only so make your vote count! Each subscription is carefully vetted and approved by Ultimate Fintech to ensure authenticity and validity.

TIP – If you want to encourage traders to vote for you, why not add a post to your social media channel?

Award Categories

Which award do you want displayed on your company website and social media? The Ultimate Fintech Awards give brokers the opportunity to show they have been recognised by an established organisation and voted by real traders.

There are a range of awards to be won in specific categories of Global Awards, Regional Awards and Country Awards.

You can also showcase your specialist local prowess with awards like Most Trusted Broker Philippines 🇵🇭, Most Trusted Broker Argentina 🇦🇷 or Best Customer Support Hong Kong 🇭🇰. This level of localisation is proven for boosting acquisition and retention in key FX markets.

The Ultimate Fintech Leaders List will be the industry index of winners. A holy grail for traders looking for the most reputable brokers in the world. Awards also are a great way to showcase your brand, platform, services and customer support.

Nominations are now open so don’t delay, get your broker nominated and join the awards race!

 

March 16th 2021: DXY Lower Ahead of Key Central Bank Meetings

Note—Charts provided by Trading View

EUR/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited though serves as guidance to potential longer-term moves)

March, as you can see, remains toying with the upper side of 1.1857/1.1352 demand, with the month currently lower by 1.2 percent.

Price action traders will have noted this demand test, and likely view this as a bullish signal.

Any decisive rebound from the aforesaid demand shifts attention back to the possibility of fresh 2021 peaks and a test of ascending resistance (prior support – 1.1641).

In terms of trend, the primary uptrend has been in play since price broke the 1.1714 high (Aug 2015) in July 2017.

Daily timeframe:

Leaving the 38.2% Fib level at 1.2021 unchallenged, price appears poised to revisit support at 1.1887, a level fixed nearby a 127.2% Fib projection at 1.1843, a 100% Fib extension at 1.1855, and a 200-day simple moving average at 1.1831.

The RSI oscillator, as you can see, continues to navigate terrain south of the 50.00 centreline. Above 50.00, however, resistance is found at 60.30, while to the downside, oversold territory calls for attention.

H4 timeframe:

The technical framework on the H4 scale is interesting.

In terms of resistance, traders are still likely eyeballing 1.2027, should buyers muster enough strength to overthrow last Thursday’s peak at 1.1989.

For support, however, the H4 chart’s spotlight remains firmly fixed between 1.1818 and 1.1860 (Quasimodo support at 1.1818, 161.8% Fib projection at 1.1835, and a 100% extension at 1.1860).

H1 timeframe:

As evident from the H1 chart, volatility thinned heading into London’s session Monday, shaking hands with the 100-period simple moving average and a modest Fib cluster from a 61.8% Fib level at 1.1916 and a 50.00% retracement at 1.1913.

Also calling for consideration is 1.19 support and neighbouring demand at 1.1881/1.1865, along with 1.1950 resistance.

Interestingly, the RSI breached trendline resistance and recently retested the broken line as support. The indicator’s value is currently within touching distance of 50.00.

Observed levels:

In the absence of a bullish presence off the H1 Fib cluster, 1.19 could make an entrance today, with a possible dip to demand at 1.1881/1.1865. Buyers could be drawn to the aforesaid demand, having seen the area share a close connection with daily support noted above at 1.1887.

AUD/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited though serves as guidance to potential longer-term moves)

February finished considerably off best levels, establishing what many candlestick fans call a shooting star pattern—a bearish signal found at peaks. What’s also interesting was February’s movement came within striking distance of trendline resistance (prior support – 0.4776), sheltered under supply from 0.8303/0.8082. Should sellers regain consciousness, demand at 0.7029/0.6664 is in view (prior supply).

March, as you can probably see, trades higher by 0.7 percent, and remains within February’s range.

In the context of trend (despite the trendline resistance [1.0582] breach in July 2020), the primary downtrend (since mid-2011) remains in play until breaking 0.8135 (January high [2018]).

Daily timeframe:

The Australian dollar managed to eke out minor gains against the US dollar on Monday, moulding what many traders may interpret to be a hammer candle—a bullish candlestick formation best found at troughs.

Technical action on the daily chart unearths a trendline support-turned resistance, taken from the low 0.5506.

February’s low at 0.7563 also deserves attention as a logical support target should sellers adopt more of a dominant position, with subsequent downside taking aim at demand from 0.7453/0.7384 (previous supply).

Traders who follow RSI movement will note the value to be testing the mettle of the 50.00 centreline, following lows formed at 42.00 earlier last week.

H4 timeframe:

Supply from 0.7811/0.7770 and ascending resistance (drawn from the low 0.7563), and demand coming in at 0.7696/0.7715, remain areas of focus on the H4 chart.

Recent hours witnessed demand welcome price action and propel the currency pair to within striking distance of the aforesaid supply.

Beyond supply, we have demand-turned supply coming in at 0.7848/0.7867—housing a 61.8% Fib level at 0.7859—whereas below current demand, another demand is seen at 0.7601/0.7627.

H1 timeframe:

Coming within a whisker of testing 0.77 bids heading into the US session Monday (closely shadowed by a 61.8% Fib level at 0.7689), formed by way of a near-perfect hammer pattern (bullish signal), AUD/USD bulls dethroned the 100-period simple moving average around 0.7743 and appears on course to revisit 0.78 (supply prior to this level, according to chart structure, seems relatively thin [consumed]) and neighbouring supply at 0.7818/0.7807.

With reference to the RSI oscillator, we can see the line broke through trendline resistance and is on track to perhaps cross swords with another trendline resistance plotted nearby.

Observed levels:

Partly modified from previous analysis –

Longer term, the monthly and daily charts suggest sellers are likely to remain behind the wheel until February 2nd low at 0.7563 enters view on the daily scale. However, before sellers make a show, a retest of daily trendline resistance could be on the cards.

Shorter term, it appears buyers could make a stand north of the 100-period SMA on the H1 today, targeting H4 supply priced in at 0.7811/0.7770. Whether or not the unit reaches the 0.78 figure on the H1 is difficult to estimate (located within the upper range of H4 supply).

USD/JPY:

Monthly timeframe:

(Technical change on this timeframe is often limited though serves as guidance to potential longer-term moves)

Following January’s bullish engulfing candle and further outperformance in February, March closes in (up by 2.5 percent) on descending resistance, etched from the high 118.66.

To the downside, support inhabits 101.70.

Daily timeframe:

Partly modified from previous analysis –

Latest movement out of the daily chart watched price action come within two pips of testing Quasimodo resistance from 109.38, before withdrawing and eroding the majority of daily gains. Of particular note is the Quasimodo formation joins hands with the monthly timeframe’s descending resistance.

Price action traders are likely to be watching the aforementioned Quasimodo. However, recognising supply resides at 110.94/110.29, stops above the Quasimodo head (blue arrow—109.85) could be taken.

Areas of note to the downside are support at 107.64—a previous Quasimodo resistance—and supply-turned demand at 107.58/106.85.

With respect to trend, 2021 has firmly pointed to the upside.

Based on the RSI oscillator, the value continues to explore overbought space, hovering a touch beneath resistance at 83.02.

H4 timeframe:

Quasimodo resistance at 109.16 did a reasonably stellar job holding back buyers on Monday, a horizontal level placed below supply drawn from 109.59/109.37 (holds daily Quasimodo resistance at 109.38).

Any downside attempt could have sellers address demand coming in at 108.31/108.50, followed by support at 108.09 and fresh demand parked at 107.81/108.01.

H1 timeframe:

The bullish flag pattern (109.16/108.90) highlighted in Monday’s technical briefing, as you can see, had its upper side breached on Monday. This was followed up with a subsequent retest, aided by 109 psychological support.

According to the pattern’s rules of engagement, the take-profit objective (yellow) is set just south of the 110 figure (109.90).

With respect to the RSI oscillator, on the other hand, we can see the value testing trendline support-turned resistance, but remains circling above the 50.00 centreline.

Observed levels:

Partly modified from previous analysis –

Longer term, with daily Quasimodo resistance at 109.38 and the monthly timeframe’s descending resistance joining hands, this area may welcome selling if tested. However, before sellers put in an appearance, a whipsaw to daily supply at 110.94/110.29 could take shape.

The immediate trend facing north since the beginning of the year may help lift breakout buyers above the bullish flag on the H1 timeframe. However, buyers still have their work cut out for them with H4 supply from 109.59/109.37, together with merging daily Quasimodo resistance at 109.38 and the monthly descending resistance, in close proximity.

GBP/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited though serves as guidance to potential longer-term moves)

The pendulum, as you can see, swung in favour of buyers following December’s 2.5 percent advance—movement that stirred major trendline resistance (2.1161).

February followed through to the upside (1.7 percent) and refreshed 2021 highs at 1.4241, levels not seen since 2018. March, on the other hand, has so far been lacklustre, down by 0.2 percent as of current price.

Despite the trendline breach, primary trend structure has faced lower since early 2008, unbroken (as of current price) until 1.4376 gives way—April high, 2018.

Daily timeframe:

Partly modified from previous analysis –

Thanks to GBP/USD registering a second successive session in the red on Monday, we’re now within close proximity of trendline support, drawn from the low 1.1409, closely shadowed by support coming in at 1.3755.

Quasimodo resistance drawn from 1.4250 is also worth a shout, should buyers enter the scene, while territory beneath 1.3755 elbows Quasimodo support at 1.3609 in the line of fire.

The trend, clearly visible on this scale, has faced higher since early 2020.

The RSI indicator remains buoyed by support between 46.21 and 49.16, with the value seen holding above 50.00.

H4 timeframe:

After testing space beneath Quasimodo resistance at 1.4007 (aligns with a 50.00% retracement) last week, Monday extended its corrective slide to within a pip of 1.3852 support.

Beyond 1.4007, resistance appears thin until the 1.42ish point; beneath 1.3852, demand at 1.3761/1.3789 is seen, followed by another layer of demand at 1.3730/1.3749.

H1 timeframe:

Confirmed by RSI bullish divergence, US trading Monday had price bump heads with clear-cut support at 1.3861—note this level’s recent history holding as both resistance and support at the beginning of March—and retest the lower side of the 1.39 figure.

In the event buyers take on 1.39, and clear the 100-period simple moving average around 1.3923 and tops located just beneath 1.3950, the widely watched 1.40 figure could make a show. Sellers governing control, on the other hand, shines the technical spotlight on 1.38 and Quasimodo support at 1.3786.

Observed levels:

Monthly price remains optimistic above trendline resistance, though before buyers strive for fresh 2021 tops, we may see daily trendline support make an entry, and possibly support at 1.3755.

What the above could mean is we whipsaw through H1 support at 1.3861 (tripping stops) and test H4 support at 1.3852 and nearby daily trendline support. Assuming this comes to fruition, this may be movement we see buyers find interest in.

DISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

U.S Dollar Roller-Coaster Pattern Makes Currency Trading Tough

Recent price actions suggest the greenback pared losses that earlier occurred at the first trading session of the week after hitting multi-year lows against the British pound sterling and the Australian dollar.

Currency traders are definitely having a rough ride in 2021 with the world’s most powerful defying expectations in extending its anticipated decline — at least for now. At the time of writing this report, the U.S dollar index used to gauge the strength of the greenback against major global currencies that include the Euro, British pound sterling, Swedish Krona, Japanese yen was trading at 90.400 index points.

However, recent price actions anticipate more pullbacks in the coming hours, though it had earlier reversed two pullbacks in a row as the greenback continues to derive strength from higher U.S Treasury yields.

Currency traders are now focusing on the bigger picture at the world’s largest economy has all eyes will be on Federal Reserve Chairman Jerome Powell’s speech to Congress in the coming days. The leader of the U.S monetary policy team is expected to echo remarks that they remain resolute in using whatever monetary ammunition at their disposal in supporting the $2o trillion economies.

That being said, global investors will also look for any signal revealing whether the world’s most powerful central bank leader is troubled by steeper long-term borrowing costs after the real rates on long bonds rose above zero for the first time in 8 months

Forecasting the dollar’s direction becomes a tough bet to make as some currency traders are seeing a light at the end of the tunnel, but the tunnel looks more like an uneasy ride. Despite the significant success made since the outbreak of the COVID-19 concerns about new, potentially more tough COVID-19 variants persist.

For a look at all of today’s economic events, check out our economic calendar.

Gold Price Prediction – Prices Form Doji Day Rejecting Lower Levels

Gold prices rebounded on Monday, forming a doji day and rejecting trend line support following Friday’s decline. This comes as the U.S. 10-year yield moved higher and the dollar rose, generating headwinds for the yellow metal. The House of Representatives is moving forward with a second impeachment of Donald Trump. Trump stewed over the weekend as Twitter and Facebook removed his accounts.

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Technical analysis

Gold prices rebounded, forming a doji day, which is a consolidating where the open and close are at the same level, which is a sign of indecision. Resistance, which is former support, is seen near the 50-day moving average near 1,868. Support is seen near an upward sloping trend line that comes in near 1,815.  The 10-day moving average crossed above the 50-day moving average, which means a medium-term uptrend is now in place.  Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal. Medium-term momentum has turned negative as the MACD (moving average convergence divergence) line generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line). The MACD histogram is printing in the red with a downward sloping trajectory which points to lower prices.

House Democrats Introduce Articles of Impeachment

Democrats in the House of Representatives introduced an article of impeachment against President Trump, accusing him of inciting an insurrection. The House will vote Tuesday on a measure calling for Vice President Pence to use the 25th amendment to remove Trump from office within 24 hours before beginning impeachment proceedings.

Metals/Miners Shifting Gears – Are You Ready For What’s Next? Part II

In the first part of our research, we highlighted our broad market super-cycle trend analysis.  This analysis suggests the global markets are shifting away from a stock market appreciation phase into a depreciation phase.  This shift will likely prompt a new commodities sector appreciation phase to begin fairly quickly.

If you remember how Gold started to move higher in 2003~04 after reaching low price levels in 2001?  My research team and I believe a 9 to 9.5 year appreciation/depreciation cycle takes place in stocks and commodities, and the relationship between the two is inverted.  For example, the bottom in Gold which took place in 2001 also aligned with the end of a US stock market appreciation cycle that started in 1992.  The rally in Gold after 2001 was directly inverted to the new depreciation cycle in the US stock market at that time.  Let’s review these past long-term Appreciation/Depreciation cycles:

Long-Term Appreciation/Depreciation Cycle Phases
Cycle Year Start Stock Market US Dollar Precious Metals
1983 Depreciation Depreciation Appreciation
1992 Appreciation Appreciation Depreciation
2001 Depreciation Depreciation Appreciation
2010 Appreciation Appreciation Depreciation
2019 Depreciation Depreciation Appreciation
2027 (proposed) Appreciation Appreciation Depreciation

If our research is correct, the current Depreciation phase has just started and we are experiencing an “excess phase” (blow-off) top formation in the US and Global stock markets.  This longer-term cycle phase chart (below) helps to illustrate how these cycles work.  Even though some of you may be able to find areas on this chart where the US Stock market did not decline within a depreciation phase, watch how the US Dollar and Gold reacted throughout these phases as well.  It is critical to understand that each of these assets can, and often do, engage in counter-trend phases (at times) when shifts in phase dynamics are more evident.  For example, the peak in the US stock market in 2000 was an example of how the US stock market reacted to a pending phase shift before Gold and the US Dollar began to react efficiently to this phase shift.

Notice how we’ve also drawn the current and next phase of the markets highlighting target ranges out to 2036 and beyond. We suggest taking a minute to read some of our earlier research posts related to these cycle phases so you can better understand how to prepare for the big trends.

Junior Gold Miners Should Rally In Legs – Targeting $95 or higher

Our research team believes the end of the current stock market excess phase will happen sometime in early-to-mid 2021.  The end of this phase will usher in a new phase of capital deployment where investors seek out undervalued assets and hedge risk in the global markets.  Just like what happened after the bottom of the global markets after the 2009-10 credit market crash, it took nearly 2+ years for the markets (including precious metals) to come to the realization that a new stock market appreciation phase had setup.  This took place from 2012 to 2013.  After that shift in thinking took place, investors moved capital into the US stock market and away from hedge assets which resulted in a very strong upward price trend reaching the peak levels we see today.

Our researchers believe the appreciation phase ended in 2019 and we are currently experiencing the same type of “excess phase” (blow-off top) that took place in precious metals in 2012~2013.  The end phase rotation of assets chasing a potentially weakening trend in the global stock market.  When and IF this excess phase ends, commodities and precious metals should really begin to skyrocket higher.

Junior miners, seen in this GDXJ chart below, should begin to move higher in advancing legs.  We’ve drawn these legs on the chart (below) as arrows – showing you how price may advance in the future.  Each advancing leg will “reset” after a brief pause/pullback, then another advancing leg will begin.  Remember, this is a longer-term appreciation phase in commodities and metals that should last through 2026~2027 (or longer).

Junior Silver Miners Should Also Rally In Legs

Junior Silver Miners, SILJ, should begin to advance to levels near $21, then stall for a few days/weeks, then attempt to advance to levels above $28~$30 if our research is correct.  This advance in the Junior Silver miners will not likely peak near $30 though. This rally in metals, miners, and other commodities may last well beyond 2026~27 based on our research.  This type of trend could really turn into a life-changing appreciation/depreciation phase for traders.

It is important that you understand the longer-term cycles that are unfolding and how these cycles present very real opportunities for traders and investors alike.  We deliver these free research articles to highlight our skills and technology solutions which help you stay ahead of market trends.  Our long-term cycle analysis can help long-term investors stay ahead of the pack, and give traders an edge by identifyingthe Best Assets Now to hold and trade. Visit www.TheTechnicalTraders.com to learn how we can help you protect and grow your investment and trading accounts.

Chris Vermeulen
Chief Market Strategist
www.TheTechnicalTraders.com

 

EOS, Stellar’s Lumen, and Tron’s TRX – Daily Analysis – December 7th, 2020

EOS

EOS fell by 0.28% on Sunday. Partially reversing a 5.84% rally from Saturday, EOS ended the week down by 1.04% to $3.0001.

A bullish start to the day saw EOS rise to an early morning intraday high $3.0401 before hitting reverse.

Falling short of the first major resistance level at $3.0809, EOS slid to an early afternoon intraday low $2.9042.

Steering clear of the first major support level at $2.8806, EOS moved back through to $3.00 levels to reduce the deficit on the day.

At the time of writing, EOS was down by 0.78% to $2.9768. A mixed start to the day saw EOS rise to an early morning high $3.0079 before falling to a low $2.9669.

EOS left the major support and resistance levels untested early on.

EOSUSD 071220 Hourly Chart

For the day ahead

EOS would need to move back through the $2.9815 pivot level to support a run at the first major resistance level at $3.0587.

Support from the broader market would be needed, however, for EOS to break out from Sunday’s high $3.0401.

Barring an extended crypto rally, the first major resistance level would likely cap any upside. In the event of an extended rally, EOS could test resistance at $3.15 before any pullback. The second major resistance level sits at $3.1174.

Failure to move back through the pivot level at $2.9815 would bring the first major support level at $2.9228 into play.

Barring an extended sell-off, however, EOS should steer of sub-$2.90 levels. The second major support level sits at $2.8456.

Looking at the Technical Indicators

First Major Support Level: $2.9228

First Major resistance Level: $3.0587

23.6% FIB Retracement Level: $6.52

38% FIB Retracement Level: $9.68

62% FIB Retracement Level: $14.77

Stellar’s Lumen

Stellar’s Lumen rose by 2.28% on Sunday. Following on from a 6.54% rally on Saturday, Stellar’s Lumen ended the week down by 9.48% to $0.17602.

A bullish start to the day saw Stellar’s Lumen rise to an early morning intraday high $0.18041 before hitting reverse.

Stellar’s Lumen broke through the first major resistance level at $0.1793 before sliding to an early afternoon intraday low $0.1672.

Steering clear of the first major support level at $0.1619, Stellar’s Lumen bounced back to $0.176 levels before easing back. A late rally reversed losses from the early afternoon.

At the time of writing, Stellar’s Lumen was down by 1.63% to $0.17304. A mixed start to the day saw Stellar’s Lumen rise to an early morning high $0.17642 before falling to a low $0.17203.

Stellar’s Lumen left the major support and resistance levels untested early on.

XLMUSD 071220 Hourly Chart

For the day ahead

Stellar’s Lumen would need to move back through the $0.17451 pivot level to support a run at the first major resistance level at $0.18182.

Support from the broader market would be needed, however, for Stellar’s Lumen to break out from Sunday’s high $0.18041.

Barring an extended crypto rally, the first major resistance level would likely cap any upside.

In the event of another breakout, Stellar’s Lumen could test resistance at $0.19 before any pullback. The second major resistance level sits at $0.18772.

Failure to move back through the pivot level at $0.17451 would bring the first major support level at $0.16860 into play.

Barring an extended crypto sell-off, however, Stellar’s Lumen should steer clear of sub-$0.16 levels. The second major support level at $0.16129 should limit any downside.

Looking at the Technical Indicators

First Major Support Level: $0.16860

First Major Resistance Level: $0.18182

23.6% FIB Retracement Level: $0.09280

38% FIB Retracement Level: $0.1333

62% FIB Retracement Level: $0.1989

Tron’s TRX

Tron’s TRX rose by 1.13% on Sunday. Following on from a 3.39% gain on Saturday, Tron’s TRX ended the week up by 0.20% to $0.030815.

It was a mixed start to the day. Tron’s TRX rose to an early morning high $0.03115 before hitting reverse.

Falling short of the first major resistance level at $0.03122, Tron’s TRX slid to a mid-day intraday low $0.02996.

Steering clear of the first major support level at $0.02938, Tron’s TRX found support from the 23.6% FIB of $0.0291 going into the afternoon.

Tron’s TRX rallied to a final hour intraday high $0.03123 before easing back. Breaking back through to $0.030 levels, the first major resistance level at $0.03122 pinned Tron’s TRX back late in the day.

At the time of writing, Tron’s TRX was down by 0.71% to $0.03060. A mixed start to the day saw Tron’s TRX rise to an early morning high $0.03109 before falling to a low $0.03053.

Tron’s TRX left the major support and resistance levels untested early on.

TRXUSD 071220 Hourly Chart

For the Day Ahead

Tron’s TRX would need to move back through the $0.03067 pivot level to support a run at the first major resistance level at $0.03138.

Support from the broader market would be needed, however, for Tron’s TRX to break out from Sunday’s high $0.03123.

Barring an extended crypto rally, the first major resistance level would likely cap any upside.

In the event of another breakout, resistance at $0.032 would likely come into play. The second major resistance level sits at $0.03194.

Failure to move back through the $0.03067 pivot level would bring the first major support level at $0.03011 into play.

Barring an extended sell-off on the day, Tron’s TRX should steer clear of the second major support level at $0.02940 and the 23.6% FIB of 0.0291.

Looking at the Technical Indicators

First Major Support Level: $0.03011

First Major Resistance Level: $0.03138

23.6% FIB Retracement Level: $0.0291

38.2% FIB Retracement Level: $0.0428

62% FIB Retracement Level: $0.0648

Please let us know what you think in the comments below

Thanks, Bob

Gold Price Prediction – Prices Rise Despite Rising Yields as the Greenback Falls

Gold prices moved higher on Wednesday, as the dollar tumbled and yields moved higher. The move in the greenback seemed surprising given the rally in US yields. Riskier assets were mixed. Gold volatility has eased and is currently hovering near the 21% level. Stronger than expected UK CPI helped buoy gold. September’s CPI increased to 0.7% year-over-year from 0.5% in August. Mortgage applications in the US fell which was not expected.

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Technical analysis

Gold prices moved higher and tested resistance is seen near the 50-day moving average at 1,925, but was not able to eclipse this level. Short term support is seen near the 10-day moving average at 1,908. Short-term momentum has whipsawed and turned positive after recently turning negative as the fast stochastic generated a crossover buy signal on the upper end of the neutral range. Medium-term momentum remains neutral to positive as the MACD histogram prints in the black with an upward sloping trajectory that points to a slow trend higher.

Mortgage Applications Fall

Total mortgage application volume to fall 0.6% last week compared with the previous week, according to the Mortgage Bankers Association’s index. Applications to purchase a home fell 2% for the week, the fourth straight week of declines. Purchase demand is down nearly 7% compared with four weeks ago. Volume, however, is still 26% higher than one year ago.