USD/JPY Fundamental Daily Forecast – Poised to Breakout to Upside on Higher Fed Rate Hike Expectations

The Dollar/Yen moved sharply higher on Friday with the Forex pair closing in a position to breakout to the upside of its nearly one-month range. The price action reflects a major adjustment by traders to renewed expectations of the U.S. Federal Reserve’s interest rate hiking campaign.

On Friday, the USD/JPY settled at 131.191, up 2.504 or +1.95%. The Invesco CurrencyShares Japanese Yen Trust ETF (FXY) closed at $71.07, down $1.31 or -1.81%.

US Dollar Driven Higher by Surge in Yields, Rising Fed Rate Hike Expectations

The spike in prices was fueled by soaring U.S. Treasury yields which spiked higher after data showed that U.S. Non-Farm Payrolls surged by 517,000 jobs last month, the most in six months. Economists in a Reuters poll had expected a gain of 185,000. Data for December was revised higher to show 260,000 jobs added instead of the previously reported 223,000.

The unemployment rate hit its lowest level since May 1969, coming in at 3.4%. Average Hourly Earnings were 0.3%, but the previous month was revised higher to 0.4%.

Not only did the data point to a persistently tight labor market, but it also supported the argument that the Fed might have to remain a little bit more aggressive going forward.

At the close, financial market traders increased the odds for a 25-basis-point rate hike at the Fed’s March meeting. But they also changed their target of the U.S. central bank’s benchmark interest rate. They now see the Fed’s terminal rate peaking at 5.03% by June compared to 4.88% earlier.

Japanese Yen Longs Adjusting Positions amid Concerns of Higher US Rates

On Wednesday, the Japanese Yen rose even after the U.S. Federal Reserve increased its benchmark rate by a quarter-of-a-percentage-point to 4.5%-4.75%. Following the move, Fed Chair Jerome Powell said that with the labor market still tight he expects to need “ongoing” increases to get monetary policy “sufficiently restrictive” to engineer a more balance job market and bring down too-high inflation.

The Japanese currency rose because traders were skeptical of such a move after Powell repeated references to the start of a disinflationary trend as signaling that just one more rate hike, in March, could suffice.

Yen traders reversed these fresh long positions and then some on Friday, signaling that investors were making adjustments to the possibility the Fed will continue to drive rates into at least June and over the 5.0% threshold.

This Week’s Outlook

We’re looking for USD/JPY investors to continue to make adjustments to their previously bearish outlook. This means further upside action.

The first real test for investors this week will be Fed Chair Powell’s speech at 17:00 GMT on Tuesday. He’s not likely to deviate from his remarks last Wednesday, but this time traders may interpret them as hawkish rather than dovish.

Traders are likely to become more data dependent too. The next major U.S. economic release that may give further clues on Fed policy will be consumer price data for January due on Feb. 14.

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

AUD/USD and NZD/USD Fundamental Daily Forecast – Fed Rate Hike Expectations Rise Ahead of RBA Rate Increase

The Australian and New Zealand Dollars plunged on Friday after a government report showed that U.S. employers added significantly more jobs in January than economists expected, potentially greenlighting the Federal Reserve to keep raising interest rates.

On Friday, the AUD/USD settled at .6922, down 0.0155 or -2.24% and the NZD/USD finished at .6326, down 0.0151 or -2.39%. The Invesco CurrencyShares Australian Dollar Trust ETF (FXA) closed at $68.47, down $1.62 or -2.32%.

Aussie, Kiwi Traders Shift Gears

The surprisingly strong payrolls number reversed a move from Wednesday when Aussie and Kiwi traders raised bets that the U.S. central bank would stop hiking borrowing costs after a widely expected 25-basis-point rate increase in March.

“After the Fed meeting it looked like markets had the advantage – it was still pricing in a rate cut, they took interest rates down, and they took the (US) dollar down, and now I think 48 hours later the Fed looks like they might have the upper hand again,” Marc Chandler, chief market strategist at Bannockburn Global Forex in New York said.

New Fed Expectations

Fed officials in December said they expected to raise the central bank’s benchmark overnight interest rate above 5%. Policymakers reiterated the message throughout January, even stressing they will need to hold it in restrictive territory for a period of time in order to sustainably bring down inflation.

Ahead of Friday’s U.S. Non-Farm Payrolls report, traders had bet the terminal rate will peak below 5% and that the Fed will cut rates in the second half of the year as the economy slows.

Traders are now pricing in the Fed’s policy rate to peak at 5.03% in June, up from 4.88% on Thursday afternoon.

Australian and New Zealand Dollar longs were forced to make adjustments to their forecasts calling for a pause by the Fed. This led to Friday’s massive liquidation by the previously bullish Aussie and Kiwi traders.

This Week’s Outlook – RBA to Lift Benchmark Rate 25 Basis Points

The major news this week that should influence the Australian and New Zealand Dollars is Tuesday’s Reserve Bank of Australia (RBA) monetary policy and interest rate decisions. Traders could also react to a speech by Fed Chair Jerome Powell, additional speeches by Fed officials and a preliminary report on consumer sentiment.

The RBA is expected to deliver a fourth successive quarter-point interest rate hike on Tuesday and is likely to follow up with a fifth in March as it grapples with an unexpected revival in inflation, a Reuters poll found.

Policymakers and analysts had expected price rises to cool toward the end of last year but were caught off guard. Inflation rose from 7.3% to a 33-year high of 7.8% last quarter, more than double its 2-3% target range.

All but one of 31 economists polled said the RBA would raise its official cash rate by 25 basis points to 3.35% at its meeting on Feb. 7. Only one respondent in the Jan. 27-Feb 2 survey expected no change.

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

S&P 500, NASDAQ Composite Settle Lower Amid Rising Fed Rate Hike Expectations

The major U.S. stock indexes finished lower on Friday after shockingly resilient jobs data ignited concerns about aggressive Federal Reserve action, while investors failed to be impressed by a mixed bag of megacap company earnings reports.

On Friday, the blue chip Dow Jones Industrial Average settled at 33926.01, down 127.93 or -0.38%. The benchmark S&P 500 Index finished at 4136.48, down 43.28 or -1.04% and the tech-weighted NASDAQ Composite closed at 12005.95, down 193.86 or -1.59%.

Despite Friday’s setback, the S&P 500 Index still managed to eke out a gain for the week, while finishing just below a five-month high. The NASDAQ Composite rung up its fifth straight weekly rise, its longest winning streak since late 2021.

Daily S&P 500 Index

Gains Capped by Unexpected Strength in US Labor

U.S. labor market growth accelerated sharply in January, with nonfarm payrolls surging by 517,000 jobs, well above an estimate of 185,000. The unemployment rate hit a more than 53-1/2-year low of 3.4%.

Wages also posted solid gains for the month. Average hourly earnings increased 0.3%, in line with the estimate, and 4.4% from a year ago, 0.1 percentage points higher than expectations though a bit below the December gain of 4.6%.

Service Sector Delivers Upside Surprise

In another sign of economic strength, U.S. services industry activity rebounded strongly in January, with new orders recovering and prices paid by businesses for materials continuing to rise at a moderate pace, hopeful signs for the economy as it braces for a possible recession this year.

The Institute for Supply Management (ISM) said on Friday its non-manufacturing PMI increased to 55.2 last month. The index dropped to 49.2 in December, falling below the 50 level, which signals contraction, for the first time since May 2020. Economists polled by Reuters had forecast the non-manufacturing PMI rising to 50.4.

This report follows the ISM manufacturing PMI report which contracted for a third straight month in January.

US Stock Market Adjusting to New Fed Rate Hike Target

On Wednesday, the Federal Reserve raised its benchmark interest rate a widely expected 25-basis points. Stocks railed because investors believed the central bank would stop hiking rates in March.

Furthermore, after a long pause, investors started to price in the possibly of two rate hikes before the end of the year. The bullish price action indicated that investors thought they had the advantage over the Federal Reserve.

Following the robust jobs data, it now looks like the Fed may have gained the upper hand again. Since December, central bank policymakers have been saying that the Fed Funds rate will have to rise above 5% in order to tame inflation. But stock market investors had bet the rate will peak below 5%.

Traders are now pricing in the Fed’s policy rate to peak at 5.03% in June, up from 4.88% on Thursday afternoon.

It’s a Complicated Situation for the Fed and Investors

The strength of Friday’s jobs report confirms what the Fed has been saying. That rates have to move above 5%. Now investors are convinced that the move may be necessary.

Stocks could weaken as investors adjust to the change, but raising rates to more than 5% will not be enough to crash the market since the central bank is still moving toward ending its aggressive rate hike campaign.

However, there is still the chance of much lower prices if the Fed decides to attack inflation with a vengeance. This runs the risk of a not so soft landing or a deeper than previously expected recession.

If the U.S. stock market weakens considerably next week than consider this a sign that investors have taken off the table the chances of the Fed engineering a soft-landing.

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

If You Did Not Hear This Coming, You Had Better Get Your Ears Checked

The Federal Reserve Was Right

On August 25, 2022, participants from 34 countries assembled in Jackson Hole Wyoming for the annual economic policy symposium hosted each year by the Federal Reserve Bank of Kansas City. For the last 45 years, this economic symposium includes central bankers, policymakers, academics, and economists from around the world. Chairman Jerome Powell presented the keynote speech in which he said,

“At past Jackson Hole conferences, I have discussed broad topics such as the ever-changing structure of the economy and the challenges of conducting monetary policy under high uncertainty. Today, my remarks will be shorter, my focus narrower, and my message more direct.”

“While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses.”.

The chairman conveyed this same message exactly one year earlier at the prior Jackson Hole Economic Symposium. In fact, the chairman repeated this message on multiple occasions underscoring the Federal Reserve’s resolve to “do whatever it takes” to reduce inflation that had spiraled to a 40-year high.

That being said, market participants continued to ignore his message not believing the resolve of the Federal Reserve. The expectation was that the Federal Reserve would not make good on its commitment to continue one of the most aggressive monetary policies in recent history. They also assumed that the Federal Reserve would taper its aggressiveness in two ways; how high the Federal Reserve would take its benchmark interest rates and the length of time that those interest rates would remain elevated.

The Federal Reserve announced its economic projections in December, vis-à-vis the “dot plot”. They revealed that interest rates were still short of their target of 5.1% and that they would maintain that elevated rate throughout 2023, to bring inflation down to their target of 2%. Clearly, the Federal Reserve expressed its intent that it would result in pain and announced that it intended to accomplish that without crashing the economy.

Economists had predicted that the US employment growth would accelerate by approximately 180,000 new jobs being added in December, the actual numbers were that an additional 517,000 new positions were added well above expectations. The strong numbers revealed today confirmed that the Federal Reserve was correct in its resolve to fight inflation and that the US economy is strong enough to withstand the Federal Reserve’s elevated rates.

Gold Today

As of 3:56 PM EST gold futures are currently fixed at $1878.40 down $52.60. Over the last two trading days, gold has lost $89.00 so those that were hard at hearing in regards to the Fed’s forward guidance should now have gotten the message loud and clear.

For those who would like more information simply use this link.
Wishing you as always good trading,

Gary S. Wagner

Deepening Bearish Sentiment in Natural Gas Takes it to New Lows

Natural Gas Forecast Video for 06.02.23 by Bruce Powers

Natural gas reached a new low of 2.34 Friday as bearish sentiment prevailed as it has for many weeks. The 88.6% Fibonacci retracement at 2.42 was exceeded to the downside with price entering a somewhat large support zone identified from monthly support of two years ago. There doesn’t seem to be panic, just a slow relenting drip lower.

Chart, histogram Description automatically generated

No Secret

The situation with natural gas is not a secret. When most market participants are aware and watching what is going on, the expected scenario may not happen. We could be seeing that play out not for natural gas.

Many traders and investors are watching natural for a chance at catching a strong rally off the bottom. Of course, buying near support is fraught with danger, particularly now given that all prior potential support levels have been busted to downside, and this occurred with little hesitation. Counter-trend rallies since the mid-December swing high have lasted no more than a day. That’s over 31 trading days without a proper retracement and a testament to the degree of bearish sentiment contained within the downtrend. There are no indications yet that bearish sentiment has abated or weakened in any way.

Support Levels to Watch

Just below today’s low is the completion of a falling measured move at 2.33. At that point the second leg down (2) off the August 2022 high matches the first decline that starts at (1). It is not uncommon to see this type of symmetry or similarity between swings in financial market. The measured move is one of the most common chart patterns in technical analysis.

A monthly support range is highlighted in red on the chart. It starts at 2.42 and goes down to 2.24. Typically, traders will watch for a reversal off a support zone once it is reached. If a daily time frame is the primary decision tool, then a 4-hour or 2-hour chart might be used for a reversal signal that allows for the opportunity to get in closer to a low, so risk is tight. The risk and initial stop are clear at entry.

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

S&P 500 Price Forecast – S&P 500 Finds Buyers After Initial Selloff

US Stock Market Forecast Video for 06.02.23

S&P 500 Technical Analysis

The S&P 500 E-mini contract initially fell during the trading session on Friday but found enough buyers underneath to turn the market around. By doing so, it looks as if we are trying to take off to the upside and break above the 4200 level. Quite frankly, this is a bit surprising considering that the Federal Reserve has been so adamant in its talk of tight monetary policy, despite the fact that Wall Street believes they are going to have to cut rates by the end of the year.

Whether or not this is true is completely irrelevant, because the reality is that the market is choosing to ignore reality anyway. This happens from time to time and is quite common when you are in massive bubbles. We have seen a massive popping of a bull last year; it will be interesting to see how this plays out given enough time. If we were to break down below the bottom of the candlestick for the trading session on Friday, that would make it a “hanging man”, which then opens up the possibility of a move down to the 200-Day EMA, which is sitting right around the 4000 level.

Anything below there could be rather negative, and could open up a move down to the 3900 level. Alternatively, if we turn around and break above the 4200 level, then it’s likely that this market just looking towards the 4300 level, which is a large, round, psychologically significant figure that has had interest previously.

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

Gold Price Forecast – Gold Markets Get Slammed

Gold Price Predictions Video for 06.02.23

Gold Market Technical Analysis

Gold markets fell rather hard during the trading session on Friday in what looks very much like a complete trend reversal for the short term. You typically don’t see to red candlesticks like this in a row without some type of follow-through. At this point, I think that short-term rallies will be selling opportunities at the first signs of exhaustion. It’s worth noting that we broke down below the $1900 level, and that’s obviously an area that has a certain amount of psychology attached to it as it is a large, round, psychologically big figure.

It’s also worth noting that the 50-Day EMA is sitting right around the $1857 level, and if we can break down below there is likely that we could send this market down to the 200-Day EMA near the $1800 level. Gold is going to move in an opposite direction of the US dollar, so all of that is worth paying close attention to. While I don’t necessarily think we can’t turn around and rally significantly, but I need to see some type of supportive candlestick to make that happen.

In general, it’s likely that we see a lot of volatility and therefore it’s more likely than not going to be a market that you will need to be very cautious with, especially with your position size as gold tends to be very volatile to say the least. Nonetheless, I think in the short term we probably have more negativity ahead and therefore caution will be the better part of valor. It certainly looks like something just broke, so the next couple of days will be very important.

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

U.S. Dollar Index (DX) Futures Technical Analysis – Trend Changes to Up on Higher Rate Hike Expectations

The U.S. Dollar is sharply higher against a basket of major currencies at the mid-session on Friday, following a similar move in U.S. Treasury yields, after jobs data came in much hotter than expected.

Nonfarm payrolls increased by 517,000 for January, notably above the 187,000 additions estimated by Dow Jones. Additionally, the unemployment rate fell to 3.4%, lower than the 3.6% expected by Dow Jones.

Average hourly earnings rose 0.3% after gaining 0.4% in December. That lowered the year-on-year increase in wages to 4.4% from 4.8% in December. Economists polled by Reuters had forecast a 4.3% year-on-year jump in wages.

At 17:31 GMT, March U.S. Dollar Index futures are trading 102.780, up 1.205 or +1.19%. The Invesco DB US Dollar Index Bullish Fund ETF (UUP) is at $27.79, up $0.36 or +1.29%.

Ahead of the jobs report, traders were betting the Fed would end its rate hiking campaign in March with rates peaking below 5%. Traders are now pricing in the Fed’s policy rate to peak at 5.03% in June, up from 4.88% on Thursday afternoon.

The rally in the U.S. Dollar is reflecting the jump in expectations for the Fed’s terminal rate.

Daily March U.S. Dollar Index

Daily March U.S. Dollar Index Technical Analysis

The main trend is up according to the daily swing chart. The trend turned up earlier Friday when buyers took out the last main top at 102.655. A trade through 100.680 will change the main trend to down.

The minor range is 100.680 to 102.780. Its pivot at 101.730 is new support. This level will move up as the market moves higher.

The main range is 105.500 to 100.680. Its 50% level at 103.090 is the next upside target.

The major resistance is the long-term Fibonacci level at 103.664.

Daily March U.S. Dollar Technical Forecast

Trader reaction to the minor pivot at 101.730 is likely to determine the direction of the March U.S. Dollar Index into the close on Friday.

Bullish Scenario

A sustained move over 101.730 will signal the presence of buyers. If this continues to generate enough upside momentum into the close then look for a late session surge into a 50% level at 103.090, followed by 103.664.

Bearish Scenario

A sustained move under 101.730 will indicate the presence of sellers. This would be a bearish sign since it would put the index in a position to close lower for the session.

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

Crude Oil Price Update – Mid-Session Plunge Fueled by ‘Hard-Landing’ Recession Fears

U.S. West Texas Intermediate crude oil futures are down sharply at the mid-session on Friday in a volatile session. Triggering the selling and erasing earlier gains is a stronger U.S. Dollar, which made the commodity more expensive for foreign buyers.

The catalyst behind the rise in the dollar is a surge in U.S. Treasury yields and concerns about higher interest rates after the release of a stronger-than-expected U.S. labor market report.

At 17:30 GMT, March WTI crude oil futures are trading $73.26, down $2.62 or -3.45%. The United States Oil Fund ETF (USO) is at $64.41, down $2.16 or -3.25%.

Financial futures traders are now pricing in more rate hikes from the Fed, perhaps into June and higher than 5.0%. This is raising fears about a recession that would lead to lower demand for crude oil. Ahead of the jobs report, traders were betting on the Fed orchestrating a “soft-landing”. Now they are pricing in a “hard-landing”.

Crude oil traders are basically following the old adage, “When in doubt, get out.”

Daily March WTI Crude Oil

Daily March WTI Crude Oil Technical Analysis

The main trend is up according to the daily swing chart. However, momentum is trending lower. A trade through $72.74 will change the main trend to down. A move through $82.66 will signal a resumption of the uptrend.

The minor trend is down. This is controlling the momentum. A trade through $78.00 will change the minor trend to up.

The nearest resistance is a series of retracement levels at $75.18, $76.61 and $77.70. The closest support is a long-term 50% level at $70.21.

Daily March WTI Crude Oil Technical Forecast

Trader reaction to the short-term Fibonacci level at $75.18 is likely to determine the direction of March WTI crude oil into the close on Friday.

Bearish Scenario

A sustained move under $75.18 will indicate the presence of sellers. If this continues to generate enough downside momentum into the close then look for sellers to make a run at the main bottom at $72.74.

Taking out $72.74 will change the main trend to down and could trigger an acceleration into the main bottom at $70.56, followed by the major 50% level at $70.21.

Bullish Scenario

Overtaking $75.18 will likely indicate late session profit-taking or short-covering. This is likely to be a labored event with $76.61 and $77.70 providing resistance.

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

Silver Price Forecast – Silver Markets Get Clobbered

Silver Price Forecast Video for 06.02.23

Silver Markets Technical Analysis

Silver has been absolutely crushed during the trading session on Friday, as the jobs number in the United States came out much hotter than anticipated. At this point, it looks as if the market is trying to reach down toward the gap underneath, which is right around the 200-Day EMA. The 200-Day EMA is also at the $22 level, so it all comes together quite nicely for potential buying area. Whether or not that actually ends up being the case is a completely different question, but at this point it’s hard to argue with the negativity of the candlestick for the session.

At this point, I do believe that there are plenty of buyers underneath that are more than willing to step in and take advantage of this situation. If we were to break down below the 200-Day EMA, that would obviously be very negative, therefore it’s likely that we would see even more selling pressure, perhaps opening up a move down to the $21 level, an area that previously had been supported. Anything below there would be the end of the uptrend for silver. I don’t necessarily think that’s going to be the case anytime soon, but it is something that we need to keep in the back of our minds, because these types of massive moves typically lead to something a bit bigger.

At this juncture, we are trying to close at the very bottom of the candlestick, so that typically means that there will be a bit of follow-through given enough time. I do anticipate that there is going to be a lot of noisy behavior, so you need to be very cautious, but I do think that given enough time there are plenty of buyers out there willing to jump on that longer-term uptrend that we have seen.

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

Crude Oil Price Forecast – Crude Oil Markets Continue to See Downward Pressure

Crude Oil Prices Forecast Video for 06.02.23

WTI Crude Oil Technical Analysis

The West Texas Intermediate Crude Oil market had initially tried to rally during the trading session on Friday but touch the top of the previous triangle and then pulled back to show signs of negativity. Furthermore, the 50-Day EMA sits just above the top of the candlestick, so it does suggest perhaps there’s a little bit of technical resistance as well. However, you should also keep in mind that underneath, we have a nice uptrend line from that triangle and that’s basically where we are sitting at right now. If we break down below the suction line, then it’s likely that the crude oil market goes looking down to the $72.50 level. Alternatively, we can take out the 50-Day EMA above, and the market could go looking to the $82.50 level.

Brent Crude Oil Technical Analysis

Brent markets initially tried to rally during the course of the trading session as well but found the 50-Day EMA and the top of the previous triangle to be a bit too much to deal with. By doing so, we ended up forming a bit of an inverted hammer, which of course will attract a lot of attention. In this scenario, I think you got a situation where we could go looking to the $80 level rather quickly, and breaking down below that level opens up the possibility of $77.50 next. All things being equal, this is a market that is going to continue to be very choppy, but I believe it’s probably only a matter of time before we have to make a bigger move. There are a lot of moving pieces out there, so I would anticipate that we would see a lot of noise.

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

Gold Price Forecast XAU/USD – Extending Losses at Mid-Session Following Hot US Jobs Report

Gold futures are plunging at the mid-session on Friday, hitting a three-week low after hotter-than-expected U.S. labor market data increased fears that the Federal Reserve could keep raising interest rates in an effort to tame inflation.

At 17:11, April Comex gold futures are trading $1878.20, down $52.60 or -2.72%. The SPDR Gold Shares ETF is at $173.43, down $4.47 or -2.51%.

Pressured by Rising Fed Rate Hike Expectations

Earlier in the session, the U.S. government reported that employment growth accelerated sharply in January, with 517,000 positions added, almost double the gain in December. The unemployment rate hit its lowest level since May 1969, coming in at 3.4%. Average Hourly Earnings were 0.3%, but the previous month was revised higher to 0.4%.

Not only did the data point to a persistently tight labor market, but it also supported the argument that the Fed might have to remain a little bit more aggressive going forward.

At the mid-session, financial market traders increased the odds for a 25-basis-point rate hike at the Fed’s March meeting. But they also changed their target of the U.S. central bank’s benchmark interest rate. They now see the Fed’s terminal rate peaking at 4.95% by June compared to 4.88% earlier.

Short-Term Outlook

Essentially it is soaring U.S. Treasury yields and a spike in the U.S. Dollar weighing on gold prices. Higher rates make non-yielding gold a less-attractive investment, while a rising greenback tends to drive down foreign demand for dollar-denominated bullion.

Daily April Comex Gold

Daily April Gold Technical Analysis

The main trend is down according to the daily swing chart. The trend turned down earlier in the session when sellers took out the main bottom at $1915.50. A trade through $1975.20 will change the main trend to up.

The nearest resistance is a long-term Fibonacci level at $1889.50 and a minor 50% level at $1909.30. The closest support is a short-term 50% level at $1862.40, followed by a long-term 50% level at $1843.40.

Essentially, the longer-term term direction will be determined by trader reaction to the retracement zone at $1843.40 to $1889.50. Bearish under $1843.40 and bullish over $1889.50.

Daily April Gold Technical Forecast

Trader reaction to the long-term Fib level at $1889.50 will determine the direction of the April Comex gold futures market into the close on Friday.

Bearish Scenario

A sustained move under $1889.50 will indicate the presence of sellers. This could extend the selling into a pair of 50% levels at $1862.40 and $1843.40.

Bullish Scenario

A sustained move over $1889.50 will signal the return of buyers with $1909.30 the first target, followed by an intraday pivot at $1924.90, followed by the main top at $1975.20.

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

Natural Gas Price Forecast – Natural Gas Markets Continue to See Negativity

Natural Gas Price Forecast Video for 06.02.23

Natural Gas Technical Analysis

Natural gas markets have dropped a bit during the trading session on Friday to break down below the $2.50 level, and now it looks as if we are ready to go much lower. At this point, if we continue to see any negativity, it’s likely that the $2.00 level could be a target. The $2.00 level is a large, round, psychologically significant figure and an area that has been important in the past, and of course will attract a lot of attention. At this point, this is a situation where things have gotten so out of control you cannot chase the market all the way down here.

The only thing I think you can think about doing at this point is waiting for some type of bear market rally that you can start fading at the first signs of exhaustion. If you are short-term day trader, then you can fade short-term rallies, but you need to keep in mind that this is a market that is way oversold at this point, and seemingly is right for some type of bear market rally that could rip the face off of sellers.

The 50-Day EMA is near the $4.14 level and is dropping, so I think it’s likely that we could see that offer a bit of resistance on a rally, and I think at this point it’s very likely that we would see some type of cold snap cause this, but quite frankly the cold snap that is going on right now in the United States has not moved the needle, so we will have to wait and see how this plays out.

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

GBP/JPY Forecast – British Pound Bounces From Extreme Lows

GBP/JPY Forecast Video for 06.02.23

British Pound vs Japanese Yen Technical Analysis

The British pound has initially fallen during the Friday session, but then turned around to show signs of life again as we are near the bottom of a major consolidation area. At this point, it’s obvious that the market is trying to recover its overly negative behavior as of late, and I think at this point it’s likely that this bounce could continue as interest rates are rising around the world. This of course works against the Bank of Japan and everything that it’s trying to accomplish. Because of this, it’s likely to be a situation where the higher interest rates will continue to work against the value of the yen as they continue to throw money at the bond market. In other words, they are printing yen.

Nonetheless, I think this is a situation where you have to look at this through the prism of back-and-forth choppy range bound behavior, with the top of it being near the ¥161.50 level, and of course the moving averages in that same neighborhood. With that being the case, I think we’ve got a situation where the traders out there will continue to look at this as a back-and-forth market, until we get some type of definitive action.

Expect more volatility, not less, as the traders around the world continue to see a lot of questions when it comes to growth, and of course monetary policy in general. I expect to see more of this nasty volatility for the foreseeable future, and therefore you need to be cautious with your position size. With that being said, I expect a lot of bouncing around in this same rectangle in the near term.

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

AUDUSD Forecast – Australian Dollar Plunges After Jobs Report

AUDUSD Forecast Video for 06.02.23

Australian Dollar vs US Dollar Technical Analysis

The Australian dollar has fallen hard during the trading session on Friday, as the Bureau of Labor Statistics of the United States released the January employment figures, with a scorching 518,000 as the result. Wall Street was looking for 188,000 for the month of January, so obviously this had traders caught off guard. That being said, it looks like we are still trying to respect the overall consolidation level so far, but at this point it looks like there’s been a major shot across the bow of US dollars selling.

If we break down below the lows of the Friday candlestick, I think the Aussie dollar continues to drop, perhaps down to the 0.69 level initially. This is basically where you will have the 50-Day EMA and the 200-Day EMA indicators hanging about, and an area where we’ve seen plenty of interest previously. Breaking down below that could open up quite a bit of selling, and the Aussie should plunge at that point.

The alternate scenario is that we bounce a bit, and hang out in the consolidation area that we have been in previously. That is very possible, considering that the market is so hell-bent on selling off the US dollar, despite the fact that the Federal Reserve is going to stay tight for much longer than people anticipated. It’s also worth noting that we were right around the 50% Fibonacci level, which of course attracts a lot of attention in and of itself. Regardless, I think you see choppy behavior, but I think the massive selling of the US dollar is at the very least going to slow down now.

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

Natural Gas Price Fundamental Daily Forecast – Eases to 21-Month Low with Warmer Weather in Forecast

Natural gas futures are inching lower early Friday after touching a fresh 21-month low the previous sessions on forecasts for the weather to turn mostly warmer than normal through mid-February and on a smaller than usual storage withdrawal.

At 15:47 GMT, March natural gas futures are trading $2.416, down $0.040 or -1.63%. The United States Natural Gas Fund ETF (UNG) is at $8.17, down $0.21 or -2.51%.

Buyers are scarce for another session on Friday amid meteorologist forecasts calling for temperatures across much of the U.S. Lower 48 states to remain below normal through Feb. 4 before rising to mostly above-normal levels from Feb. 5 through at least Feb. 17.

Short-Term Weather Outlook

According to NatGasWeather, “Frosty conditions will continue across the northern and central U.S. the next 3-days with rain, snow and chilly lows of -10s to 20s for strong demand, while aided by lows of 20s to 30s into Texas.

The far West will be comfortable with highs of 40s to 60s, while nice over the Southeast with highs of 60s to 80s.

Cold air will retreat to the northern tier this weekend into next week, while the southern 2/3 of the U.S. warms into the nice 50s to 70s.

Overall, high to very high demand the next 3-days, then low.

EIA Reports Utilities Pulled More Gas than Expected Last Week

The U.S. Energy Information Administration (EIA) reported on Thursday that domestic natural-gas supplies fell by 151 billion cubic feet (Bcf) for the week ended Jan. 27. That compared with an average analyst forecast for a decline of 146 Bcf, according to a survey conducted by S&P Global Commodity Insights.

The latest data, however, included a revision to stocks for the week ended Jan. 20, the EIA said. It was upwardly revised that week’s total to 2.734 trillion cubic feet (Tcf) from 2.729 trillion.

Total working gas stocks in storage for the latest week was at 2.583 Tcf, up 222 Bcf from a year ago and 163 Bcf above the five-year average, the government.

Short-Term Outlook

The market is so bearish at this time that it can’t even muster enough to sustain a small short-covering rally despite forecasts for higher heating demand over the next two weeks than previously expected and growing expectations the Freeport liquefied natural gas (LNG) export plant in Texas could start pulling in big amounts of gas in coming weeks.

Furthermore, bullish traders are running out time because winter is quickly coming to an end. We’re watching for a sharp spike to the downside to signal that the last of the longs have finally thrown in the towel on Winter 2022-2023.

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

S&P 500, NASDAQ Wavering as Traders Assess Impact of Jobs Data on Fed Policy

The major U.S. stock indexes are lower shortly after the opening on Friday after a shockingly strong U.S. jobs report indicated the Federal Reserve may need to keep interest rates elevated to control inflation. The markets are also being capped by disappointing earnings from Google, Apple and Amazon, released after the close on Thursday.

At 14:45 GMT, the blue chip Dow Jones Industrial Average is trading 34023.78, down 30.16 or -0.09%. The benchmark S&P 500 Index is at 4155.22, down 24.54 or -0.59% and the tech-weighted NASDAQ Composite is trading 12089.54, down 111.28 or -0.91%.

Non-Farm Payrolls Overshoot Economists’ Expectations

The closely watched U.S. Non-Farm Payrolls report showed U.S. employers added 517,000 new workers in January, vastly overshooting expectations of economists polled by Reuters for a 185,000 gain.

The Unemployment Rate fell from 3.5% to 3.4%, versus an estimate of 3.6%. Average hourly wages, which analysts and investors focus on for clues about whether a tight labor market may continue to fan the flames of inflation, rose 0.3%, matching economists’ forecasts. The prior month was revised upward to 0.4%.

US Treasury Yields Soar

U.S. Treasury yields jumped Friday after jobs data came in much better than expected. The 10-year Treasury yield was up about 11 basis points (bps) at 3.512%. The 2-year Treasury was up around 16 basis points to 4.253%.

The Fed hiked its benchmark interest rate by 25 bps to a range of 4.5% to 4.75% on Wednesday, taking benchmark borrowing costs to their highest level since late 2007, and signaled more hikes to follow.

Federal Reserve policymakers have been saying that rates may have to rise above 5.0% in order to tame inflation and the jobs market. This means another 25 basis point rate hike in March and June.

The market, however, believes the Fed could stop in March after a 25 basis point rate hike. And could even start cutting rates before the end of the year.

This suggests the next major move in the stock market will be determined by the January consumer inflation report. In other words, the market will become more data dependent until the next Fed meeting in March.

Tech Shares Take a Beating

U.S. tech shares took a beating in after-hours trading on Thursday in a move that carried over into Friday’s session. Dragging the S&P 500 and NASDAQ Composite lower was Apple, which projected another revenue decline in the start of the year. Additionally, Amazon warned that its operating profit could fall to zero in the current quarter. Google parent Alphabet also missed fourth-quarter profit and revenue expectations.

Short-Term Outlook

The jobs report is open to interpretation so it’s better to let Treasury yields determine the direction of the market on Friday.

The surge in non-farm payrolls could be interpreted as bullish for the economy especially since the Fed may be nearing the end of its interest rate hiking cycle. Or it could mean the Fed is going to have to stay aggressive in order to gain control of inflation.

However, looking at the reaction in the Treasurys, it looks as if investors are betting on more rate hikes, which could put short-term pressure on stocks.

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

USD/JPY Forecast – US Dollar Shoots Higher During the Trading Session on Friday

USD/JPY Forecast Video for 06.02.23

US Dollar vs Japanese Yen Technical Analysis

The US dollar has shot straight up in the air after the jobs number came out of the United States at an addition of 517,000. This was much stronger than the anticipated number, somewhere near 188,000, and therefore there has been a huge shock in the market. The size of the candlestick is significant, and it does suggest that we are trying to do everything we can to break out to the upside. There is an inverted hammer from a couple of weeks ago, and if we can break above there it’s likely that this pair goes much higher. The US dollar is getting a boost by the expected inflationary environment, and of course what’s going on in the bond market.

Underneath, I see the ¥127 level as a major support level, and I think it’s probably only a matter of time before that area brings in more buyers. Breaking down below that level, then it’s likely that we could see this market fall apart, and therefore open up the massive air pocket underneath which I think could send this pair down to the ¥115 level. I see that as being very unlikely, but if that were to happen, we would see the Japanese yen overtake most currencies.

That being said, there is a lot of noise just above, so I think the next 50 pips or so are going to be a bit of a choppy affair. Having said that, if we do break above the top of that inverted hammer, this market could really start to take off to the upside.

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

GBP to USD Forecast – British Pound Plunges After Jobs Number

GBP to USD Forecast Video for 06.02.23

British Pound vs US Dollar Technical Analysis

The British pound has fallen rather hard during the trading session on Friday, as the Non-Farm Payroll numbers came out at over 500,000 in the United States, signifying that inflation is far from dead in that country. Because of this, we are more likely than not going to continue to see plenty of US dollar strength going forward. We may have just seen the British pound top and form a double top at this point. It is probably a little early to say that, but certainly this will go a long way to make that happen. With that being the case, I think it’s probably only a matter of time before something rather ugly happens in this market.

The 1.20 level underneath should be a significant support level, so I certainly think that is a reasonable target. At this juncture, I anticipate that we have a scenario where the level will be a major battlefield, and if the British pound were to slip below there on a daily close, we could have a major drop at that point. In fact, I think we got a situation where you could go down to the 1.15 level.

On the other hand, there may be some narrative to make this market bounce a bit, but at best we would look at a sideways market to say the least. If we can somehow break above the 1.25 level, then it would obviously be very bullish, but I don’t see that happening anytime soon. With that being the case, I think we’ve got a situation where you have to look at rallies as potential selling opportunities in this market.

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

EUR/USD Forecast – Euro Plunges After Jobs Report

EUR/USD Forecast Video for 06.02.23

Euro vs US Dollar Technical Analysis

The Euro initially tried to rally during the trading session on Friday, but then plunged. The jobs number in the United States came out at 517,000 added last month, and therefore I think we have to look at this through the prism of whether or not inflation is going to go anywhere. Quite frankly, it’s not going to, and it seems as if there is a lot of distortion in the data. We could be looking at the beginning of something rather big to the downside, as the ECB looks to raise rates, but have already stated when they were going to stop.

Whether or not this causes a complete breakdown remains to be seen, but this certainly was a shot across the bow for the bulls. With this, it looks like almost everybody was on the wrong side of the market, and the reaction has clearly shown that to be the case. At this point, if we break down below the hammer from earlier in the week, that could send this market plunging, but I have learned over the years that the Non-Farm Payroll announcement is typically a very noisy affair, and we see the true reaction the following day. However, if we close at the end of the Friday session below that hammer, I think that’s an ominous sign and we probably go looking to the 1.06 level.

On the other hand, if we were to bounce, then we may just kind of hang around in a consolidation area, which is fine, because it just shows more of the same. Regardless, this is a market that I think is going to see more volatility, not less.

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