DOGE to Target a Return to $0.090 on US Stats and NASDAQ Index Moves

Key Insights:

  • Dogecoin (DOGE) and shiba inu coin (SHIB) rose for a second consecutive session on Tuesday, the longest min- break since November 1.
  • Investor sentiment continued to improve following the launch of the Binance recovery fund, with US economic indicators also providing a boost.
  • However, the technical indicators remain bearish, with the EMAs signaling further downside.

On Tuesday, dogecoin (DOGE) rose by 1.52%. Following a 1.18% gain from Monday, DOGE ended the day at $0.0871. Notably, DOGE ended the day at sub-$0.10 for the eighth consecutive session.

A mixed start to the day saw DOGE fall to an early morning low of $0.0847. Steering clear of the First Major Support Level (S1) at $0.0796, DOGE rose to a mid-afternoon high of $0.0894. However, falling short of the First Major Resistance Level (R1) at $0.0917, DOGE eased back to end the day at $0.0871.

Shiba inu coin (SHIB) rose by 1.76% on Tuesday. Following a 0.78% gain on Monday, SHIB ended the day at $0.00000924.

Tracking the broader market, SHIB fell to an early morning low of $0.00000989. Steering clear of the First Major Support Level (S1) at $0.00000861, SHIB rose to a mid-afternoon high of $0.00000956. SHIB broke through the First Major Resistance Level (R1) at $0.00000947 before a pullback to end the day at $0.00000924.

Following the Binance recovery fund launch, contagion fear continued to ease through the morning. US economic indicators provided further support in the early afternoon. Softer US wholesale inflation figures fueled bets of a December Fed pivot, supporting the NASDAQ Composite Index and the crypto market.

However, increased concerns over Twitter’s future limited the upside for the meme coins. Last week, Elon Musk warned that he could not rule out bankruptcy. Key staff have left, and Musk postponed Tuesday’s Twitter relaunch to November 29.

Concerns over content have led to numerous advertisers suspending business with Twitter. Ads reportedly contribute circa 90% of Twitter’s revenue. The sharp decline in revenue reduces the likelihood of a sharp increase in DOGE adoption.

News of FTX-linked Liquid freezing withdrawals added to the bearish mood later in the day. However, with the Binance recovery fund in place, DOGE and SHIB avoided negative territory.

Dogecoin (DOGE) Price Action

At the time of writing, DOGE was up 0.57% to $0.0876. A mixed start to the day saw DOGE fall to an early low of $0.0860 before rising to a high of $0.0881.

DOGE finds support.
DOGEUSD 161122 Daily Chart

Technical Indicators

DOGE needs to avoid the $0.0871 pivot to target the First Major Resistance Level (R1) at $0.0894 and the Tuesday high of $0.0894. A return to $0.0900 would signal a bullish afternoon session. However, US economic indicators and the crypto news wires need to be crypto-friendly to support a breakout session.

In the event of an extended afternoon breakout session, the bulls could take a run at the Second Major Resistance Level (R2) at $0.0918 and $0.0950. The Third Major Resistance Level (R3) sits at $0.0965.

A fall through the pivot ($0.0871) would bring the First Major Support Level (S1) at $0.0847 into play. However, barring an extended sell-off, DOGE should avoid the Second Major Support Level (S2) at $0.0824.

The Third Major Support Level (S3) sits at $0.0777.

DOGE resistance levels in play above the pivot.
DOGEUSD 161122 Hourly Chart

The EMAs sent a bearish signal, with DOGE sitting below the 200-day EMA, currently at $0.0894. The 50-day EMA pulled back from the 100-day EMA, with the 100-day EMA narrowing to the 200-day EMA. The price signals were bearish.

A move through the 200-day EMA ($0.0894) and R1 ($0.0894) would bring the 50-day EMA ($0.0913) and R2 ($0.0918) into play. However, failure to move through the 200-day EMA ($0.0894) and R1 would bring S1 ($0.0847) into view.

EMAs bearish.
DOGEUSD 161122 4 Hourly Chart

Shiba Inu Coin (SHIB) Price Action

At the time of writing, SHIB was up 1.08% to $0.00000934. A mixed start to the day saw SHIB fall to an early low of $0.00000916 before rising to a high of $0.00000938.

SHIB on the move.
SHIBUSD 161122 Daily Chart

Technical Indicators

SHIB needs to avoid the $0.00000926 pivot to target the First Major Resistance Level (R1) at $0.00000954 and the Tuesday high of $0.00000956. A return to $0.00000950 would signal a bullish afternoon session. However, any contagion news would test buyer appetite.

In case of an extended rally, SHIB would likely test the Second Major Resistance Level (R2) at $0.00000984 and resistance at $0.0000100. The Third Major Resistance Level (R3) sits at $0.00001042.

A fall through the pivot would bring the First Major Support Level (S1) at $0.00000896 into play. Barring another extended sell-off, SHIB should avoid sub-$0.00000890 and the Second Major Support Level (S2) at $0.00000868.

The Third Major Support Level (S3) sits at $0.00000810.

SHIB resistance levels in play above the pivot.
SHIBUSD 161122 Hourly Chart

The EMAs send a bearish signal, with SHIB sitting below the 50-day EMA, currently at $0.00000980. This morning, the 50-day EMA fell back from the 100-day EMA, with the 100-day EMA easing back from the 200-day EMA. The signals were bearish.

A move through R1 ($0.00000954) would give the bulls a run at the 50-day EMA ($0.00000980) and R2 ($0.00000984). However, failure to move through the 50-day EMA would leave SHIB under pressure.

EMAs bearish.
SHIBUSD 161122 4 Hourly Chart

XRP Price Target Remains $0.55 as Investors Await SEC Response

Key Insights:

  • On Thursday, XRP rose by 0.84% to extend the winning streak to four sessions.
  • XRP bucked the top ten trend for a second session, with investors reacting further to updates from the ongoing SEC v Ripple case.
  • The technical indicators are bullish, with XRP sitting above the 50-day EMA, supporting a return to $0.55.

On Thursday, XRP rose by 0.84%. Following a 1.78% gain on Wednesday, XRP ended the day at $0.49287. XRP bucked the top ten trend for a second day to extend its current winning streak to four sessions.

A bullish start to the day saw XRP rise from a low of $0.48835 to an early morning high of $0.50552. XRP broke through the First Major Resistance Level (R1) at $0.5026 before sliding back to sub-$0.49. However, a bullish final hour delivered Thursday’s gain.

US economic indicators took a back seat on Thursday, with hawkish FMOC member chatter pegging XRP back. However, investors continue to respond to updates from the ongoing SEC v Ripple case, which remain XRP positive.

Bullish Fed Chatter Fails to Influence with Ripple Grit Resonating

There were no updates from the SEC v Ripple case overnight to provide XRP with direction. The lack of updates left Ripple’s response to the SEC’s opposition to amicus brief motions from I-Remit and TapJets to resonate.

On Wednesday, the Defendants filed a response to the SEC’s opposition, saying,

“The SEC remarkably suggests that it would be prejudiced by its inability to evaluate the factual veracity of their claims or show that Movants’ ‘facts’ are disputed.”

Ripple went on to say,

“The SEC has sought summary judgment based on what it erroneously claims are undisputed facts that every purchase of XRP is an investment and that every XRP purchaser expects profits from Ripple’s efforts. Nothing could be more to the point than these two amicus briefs (or at least disputing) both points.”

The letter concluded by saying,

“If the SEC cannot evaluate the veracity of such claims, then it had no business bring this litigation in the first place.”

While markets responded favorably to the response, investors await an SEC response to the latest Court ruling on the Hinman docs. Despite more than seven rulings against the SEC, the SEC has failed to turn over Hinman’s speech-related docs.

The former SEC Director of the Division of Corporation Finance, William Hinman, has been a central figure in the SEC v Ripple case. In a famous 2018 speech, Hinman said that Bitcoin (BTC) and Ethereum (ETH) are not securities.

XRP Price Action

At the time of writing, XRP was down 1.21% to $0.48691.

A mixed start to the day saw XRP rise to an early high of $0.49487 before falling to a low of $0.48245. XRP fell through the First Major Support Level (S1) at $0.4856 before steadying.

XRP under early pressure.
XRPUSD 071022 Daily Chart

Technical Indicators

XRP needs to move through the $0.4956 pivot to target the First Major Resistance Level (R1) at $0.5028 and the Thursday high of $0.50552. SEC v Ripple case updates and today’s US nonfarm payrolls will be the key drivers.

In the case of an extended rally, the bulls would take a run at the Second Major Resistance Level (R2) at $0.5128. The Third Major Resistance Level (R3) sits at $0.5299.

Failure to move through the pivot would leave the First Major Support Level (S1) at $0.4856 in play. Barring an extended sell-off, XRP should avoid sub-$0.47. The Second Major Support Level (S2) at $0.4784 would likely limit the downside.

An SEC appeal against the Court’s latest ruling on the Hinman docs would be XRP price negative. A sharp increase in US nonfarm payrolls would also test buyer appetite.

The Third Major Support Level (S3) sits at $0.4612.

XRP support levels in play below the pivot.
XRPUSD 071022 Hourly Chart

The EMAs and the 4-hourly candlestick chart (below) sent a bullish signal.

At the time of writing, XRP sat above the 50-day EMA, currently at $0.47341. The 50-day EMA pulled away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA. The signals were bullish.

An XRP hold above the 50-day EMA ($0.47341) would support a run at R1 ($0.5028) to target R2 ($0.5128). However, a fall through S1 ($0.4856) would give the bears a run at S2 ($0.4784) and the 50-day EMA ($0.47341). The 200-day EMA sits at $0.42447.

EMAs bullish.
XRPUSD 071022 4-Hourly Chart

5 Things to Know in Crypto Today: BTC Dips to $23K, ETH Under $1.7K as US CPI Release Looms

Key Points 

  • Cryptocurrency markets have been pulling lower since Tuesday in nervous pre-US Consumer Price Index data release trade.  
  • Bitcoin was last trading near $23,000 and Ethereum just below $1,700.  
  • Coinbase Global’s shares are lower in pre-market trade after posting worse-than-expected Q2 revenues and a decline in trading volumes.  

Crypto Prices Dip Ahead of US CPI Release 

Cryptocurrency markets have been pulling lower since Tuesday in nervous pre-US Consumer Price Index data release trade, with downside in US equities yesterday as a result of further downbeat earnings from US chipmakers and hotter-than-expected Q2 labor cost growth data exacerbating losses. Bitcoin was last trading with losses of just over 3.5% in the last 24 hours nearly bang on the $23,000 level, according to CoinMarketCap. Ethereum, meanwhile, was last down about 5.0% over the same time period and trading just under $1,700.  

BTC/USD
BTC/USD pulls back from recent highs ahead of US CPI data. Source: FX Empire

If upcoming US Consumer Price Index data for July prints substantially to the upside of expectations, this could result in markets building up Fed tightening bets, which could send US yields and the US dollar higher, whilst weighing on stocks and crypto. A substantial downside miss could see the opposite happen. Headline inflation rates are seen dipping to 0.2% MoM and 8.7% YoY from 1.3% and 9.1% in June.  

Coinbase Shares Dip on Weak Q2 Earnings Figures 

After dropping over 10% on Tuesday, Coinbase Global’s share price is down another 6% in pre-market trading after the largest US-based cryptocurrency exchange reported a substantial drop in Q2 trading volumes to $217 billion from $309 billion in Q1. The firm’s quarterly revenue came in at $803 million, below consensus expectations for $873.8 million, as per FactSet.  

Coinbase had a difficult Q2 amid the broad cryptocurrency market decline, with the company announcing job cuts and a focus on cost cutting. But its start to Q3 has been brighter. The company last Friday announced a new partnership with the world’s largest asset manager BlackRock in order to offer trading services to its institutional clients.  

Curve.Finance Loses $570K in Latest Crypto Hack 

Decentralized Finance (DeFi) protocol Curve.Finance lost $570,000 in a hack on Tuesday. Curve’s developers urged users to revoke any contracts approved on the platform in the last few hours. Curve advised its users to refrain from using the platform until its operators are able to locate the source of the hack. The project announced shortly after that the issue was reverted. The hack of Curve.Finance comes shortly after high-profile attacks on the Solana ecosystem and Nomad cross-chain bridge

Canadian Regulators Working with US to Investigate Celsius Network as CEO Unloads CEL Tokens 

According to a report by Canadian news outlet Financial Post, regulators in Canada are working with their US counterparts to investigate now bankrupt Celsius Network, which froze user withdrawals nearly two months ago with the crypto winter having inflicted a more than $1 billion hole in the company’s balance sheet, according to court filings. The Ontario Securities Commission (OSC) is looking into how the crypto lending platform’s collapse impacted Canadian users.  

Separately, according to crypto intelligence firms Nansen and Arkham Intelligence, Celsius CEO Alex Mashinsky has been selling his CEL tokens, taking advantage of their recent pump. According to the two crypto intelligence firms, a wallet address identified as Mashinsky’s just made its first transactions since late May, a swap of 17,475 CEL tokens for $28,242 worth of ETH.  

Reddit partners with FTX to enable ETH gas fees for community points  

On Tuesday, online discussion forum Reddit and cryptocurrency exchange FTX announced a new partnership to bolster the Reddit Community Points feature. Reddit Community Points allow users to “own” a piece of the online communities they are involved in and also act as a measure of reputation/clout.  

“As a unit of ownership, points capture some of the value of their community,” Reddit said in May 2020 when it released the feature. “They (points) can be spent on premium features and are used as a measure of reputation in the community”. Community Points are an ERC-20 token built on the Arbitrum blockchain, an Ethereum scaling solution. Reddit “users need ETH for gas fees to transact with their (Community) Points on-chain, and FTX Pay allows them to do that,” said FTX’s Amy Wu in a tweet.

USD/JPY Falls Another 1.1% to Below 132.00 on Fresh US Recession Fears

Key Points

  • USD/JPY fell sharply on Monday, tracking further downside in long-term US bond yields as weak US data spurred fresh recession bets.
  • GBP/USD hit more than one-month highs near 1.2300 amid buck weakness, with investors focused on Thursday’s BoE monetary policy announcement.
  • The loonie was the underperforming currency amid sharp downside in oil prices as weak global data triggered demand outlook concerns.

USD/JPY’s Sharp Decline Continues On Further Weak US Data

Downside in long-term US bond yields in wake of US ISM Manufacturing PMI data that showed growth in the industrial sector falling to its lowest since June 2020 and a gauge of the prices paid by manufacturers for inputs also falling to two-year lows sent USD/JPY tumbling further on Monday, marking a third successive session of sharp declines. The pair was last trading below 132.00, its lowest since 16 June and now down around 5.5% versus mid-July’s multi-decade highs above 139.00.

The latest US manufacturing survey data contributed to a combination of 1) fears about a slowing US economy and 2) hopes that inflation might have now peaked. Investors suspect both mean the Fed will take a more measured approach to further rate hikes going forward. The Japanese yen, given the fact that the BoJ locks Japanese 10-year yields close to zero as part of its ultra-accommodative monetary policy, is particularly sensitive to movements in global bond yields. US 10-year yields hit their lowest since early April under 2.60% on Monday, down around 90 bps versus June’s highs.

Sterling, Aussie, Kiwi Also Benefit

Sterling was a beneficiary of buck weakness on Monday, with GBP/USD hitting its highest levels in over a month near 1.2300 after gaining around 0.6% on the day. The UK also saw the release of Manufacturing PMI data, which confirmed that growth in the industrial sector had slipped to its weakest in two years in July after a preliminary version of the data was released midway through last month. But sterling traders did not pay much heed to the data, with focus instead on Thursday’s upcoming BoE rate decision, with money market pricing implying about an 80% chance of a 50 bps rate hike.

AUD/USD and NZD/USD also both benefitted from the weaker US dollar on Monday, with both printing new six-week highs above 0.7000 and 0.6300 levels respectively and gaining in the region of 0.4% to 0.6%. Aussie traders are on notice for a monetary policy announcement from the RBA during the upcoming Tuesday Asia Pacific session, whilst kiwi traders are monitoring the release of Q2 labor market figures during Wednesday’s Asia Pacific session.

Loonie Loses Out On Oil Price Slump

A sharp drop in oil prices on concerns about the demand outlook in wake of recent downbeat global manufacturing PMI data weighed heavily on the Canadian dollar, which reversed sharply higher from intra-day lows in the 1.2760s to current levels just above 1.2850. However, the loonie still arguably remains in a trend of appreciation versus the US dollar, with traders focused on Friday’s Canadian jobs report for insight into the state of the Canadian economy.

Finally, the euro saw modest upside as a result of the weaker US dollar, though EUR/USD was only able to rally about 0.3% to just above 1.0250, leaving its still well within recent ranges. The single currency’s lack of vigor was likely down to further bad news on Monday regarding the Eurozone economy. The final version of the Eurozone’s manufacturing PMI survey data confirmed that Eurozone industrial activity contracted last month.

Meanwhile, Retail Sales in Germany saw a much larger than expected MoM rate of decline in June as the energy crisis/rising cost of living takes its toll on consumers. The bleak Eurozone outlook as it struggles with the economic fallout of Russia’s invasion of Ukraine continues to act as a deterrent for the euro bulls.

The Dollar Consolidates Ahead of the Fed Decision

Key Insights

  • The dollar consolidated near the 2022 highs. 
  • Treasury yields consolidated.
  • The Fed is on deck on Wednesday.

USD/CAD eased from the recent highs and remained near the breakout level. The Fed finishes its 2-day monetary policy meeting on Wednesday. The upcoming 50-basis point Fed rate hike underpins a bullish outlook for the dollar. Treasury yields moved higher, reaffirming hot inflation.

The Labor Department reported a stronger than expected JOLTS report on Tuesday ahead of the Fed meeting. Employment openings exceeded the level of available workers by 5.6 million in March. Quits totaled 4.54 million, an increase of 152,000 from the previous month. The Jobs Opening and Labor Turnover report that the job postings hit 11.55 million for the month, a record for data back to December 2000.

Technical Analysis

The USD/CAD hit 2022 highs and consolidated ahead of the Fed meeting. The pair has a bullish outlook, with Fed tightening acting as a tailwind for the dollar.

Resistance is seen near the December highs at 1.2965. Support is seen near the 20-day moving average of 1.2674. the 20-day moving average crossed above the 50-day moving average, which means that a medium-term uptrend is now in place.

Short-term momentum turns negative as the fast stochastic might have a crossover sell signal. Medium-term momentum is positive as the MACD line generated a crossover buy signal. The exchange rate is overbought with the fast stochastic printing a reading of 85, above the overbought trigger level of 80.

This scenario happens when the MACD line (the 12-day moving average minus the 26-day moving average) crosses the MACD signal line (the 9-day MA of the MACD line). The trajectory of the MACD is in positive territory, which reflects an upward trend in price movement.

Managing Your Commodity Price Risk

February 24, 2022, might be a day that lives in infamy. Only time will tell. The invasion by Russia into Ukraine was telegraphed, but market participants seemed to act as if they were surprised initially.

The price action was a classic “buy the roomer sell the news” scenario as many commodities that could be impacted by the Russian attack sold off, as traders took profits on the news.

Oil prices have been in the headlines, as higher gasoline prices impact our wallets.

Liquid natural gas (LNG) has also been in the news, as Russia has historically supplied the bulk of the natural gas that flows into Western Europe. LNG shipments have been redirected to Europe to compensate for the absence of LNG supply.

Agricultural products prices have also been impacted, and the price action has been volatile. The historical volatility of benchmark Ag product corn is on the lower end of the 5-year range. Current historical volatility is approximately 15%, while the 5-year high is close to 50%.

What is Volatility

Volatility is a statistical term that tells you how much an asset moves on an annualized basis. The technical calculation is the standard deviation of the returns of an investment multiplied by the square root of time.

Option Valuation

Despite the recent turmoil in the Black Sea region, the volatility of grain prices remains subdued. Look at a chart of the implied volatility of the CORN ETF listed on the NYSE. This ETF holds corn futures.

While the implied volatility of CORN has come off its lows, the implied volatility is well below the highs seen above 35%. This level has been seen 3-times in the last 10-years. You can purchase corn options on several exchanges.

But what if you desire to buy options on a different type of corn. Say corn is located in the Black Sea or even organic corn in the United States. For that, you would need to know how to hedge without a futures market.

There is the capability for those in need of risk management solutions to hedge using financial instruments that track the movements of some of the most reputable benchmarks.

Bet on Your Business, not On Commodity Prices

One of the reasons you might consider hedging is that commodity price volatility can last a while, especially if there is rising demand and supply disruption. To reduce the volatility in your business’s cash flows, you can fix your commodity price exposure using financial instruments.

These derivatives allow you to reduce your risk because if you decide not to hedge, you are betting on commodity prices instead of betting on your business model.

Natural Gas Prices Rallied on Declining Inventories

Natural gas prices moved higher but finished off the session highs. Geopolitical concerns continue to buoy gas prices as LNG exports accelerate higher. A larger than expected decline in natural gas inventories put upward pressure on prices.

The weather is expected to be colder than normal in the mid-West and East Coast over the next 6-10 days, but the weather is expected to become milder. A warm front will cover most of the mid-West through the South East and the West. Geopolitics are also generating volatility.

Technical Analysis

Natural gas prices moved higher but were well off the highs of the day. Support near the 10-day moving average at 4.31. Resistance is seen near the February highs at 4.86. Prices look like they are forming a small head and shoulder pattern.

Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. Medium-term momentum has also turned positive. The MACD (moving average convergence divergence) index generated a crossover buy signal. The MACD histogram is printing in positive territory with an upward sloping trajectory which points to higher prices.

According to EIA estimates, natural gas in storage was 1,782 Bcf as of Friday, February 18, 2022. This represents a net decrease of 129 Bcf from the previous week. Natural Gas Intelligence, the median forecasting NGI model is for a decline of 121 Bcf. Stocks were 209 Bcf less than last year at this time and 214 Bcf below the five-year average of 1,996 Bcf. At 1,782 Bcf, total working gas is within the five-year historical range.

Natural Gas Prices Whipsaw Despite Robust Inventory Draw

On Thursday, natural gas prices whipsawed despite a larger than expected draw in natural gas inventories. The weather is expected to be colder than normal in the mid-West and West Coast for the next 2-week but warmer than normal on the East Coast. The most recent commitment of traders’ report shows that long and short positions in managed money are equal.

Technical Analysis

Natural gas prices whipsawed and moved lower but remain above support near the 10-day moving average at 4.27. Resistance is seen near the February highs at 4.86. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. Medium-term momentum is poised to turn positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This scenario occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line.

Natural gas in storage was 1,911 Bcf as of Friday, February 11, 2022, according to EIA estimates. This represents a net decrease of 190 Bcf from the previous week. Expectations were for a 181 Bcf draw according to Natural Gas Intelligence. Stocks were 404 Bcf less than last year at this time and 251 Bcf below the five-year average of 2,162 Bcf. At 1,911 Bcf, total working gas is within the five-year historical range.

Gold Prices Edge Higher Ahead of U.S. Inflation Data

Gold prices continued to move higher as the dollar index eased. U.S. yields were mixed as the 10-year continued to rally, but the 2-year pulled back, allowing the interest rate curve to flatten. The German yield curve also flattened as the 10-year bund yield hit a fresh 3-year high. Since gold is quoted in the U.S. dollar, a stronger dollar is generally beneficial for gold prices. Last week stronger than expected U.S. jobs data was offset by solid inflation data released for the entire Eurozone.

[fx-broker slug=fxtm]

Technical Analysis

Gold prices rallied slightly and remained rangebound. Prices remain above support near the 50-day moving average at 1,803. Resistance is seen near a downward sloping trend line that comes in near $1,857. Short-term momentum has reversed and turned positive as the fast stochastic generated a crossover buy signal. Medium-term momentum is negative as the MACD (moving average convergence divergence) index has 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). The MACD histogram prints in negative territory with a downward sloping trajectory pointing to lower prices.

Inflation Data Will be Carefully Watched

All eyes this week will be on the U.S. CPI data, which is scheduled to be released on Thursday. December data showed that CPI rose 7% year over year. Despite the robust inflation data, consumers are getting higher wages. The stronger than expected jobs data released in the U.S. on Friday showed that wages increased a robust 5.7% year over year. Yields have been surging in the U.S., but strong inflation data in Europe has allowed the German 10-year yield to recently outpace its U.S. counterpart, helping to lift the Euro versus the Greenback.

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.

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