GBP/JPY Price Forecast – British Pound Continues Consolidation Against Yen

The British pound has initially pulled back during the trading session on Friday but has seen buying come in and push the market towards the top of the short-term range again. At this point though, the market still sees a lot of noise in general, so I do think that we are likely to see choppy trading back and forth. The 50 day EMA is sitting just above, and therefore it should be paid attention to. If the market were to break above there, the likelihood of a move towards ¥135 increases drastically. On the other hand, if the market were to break down below the ¥132 level again, one would have to think that the overall trend would come back into play, suggesting that we are going to go lower.

GBP/JPY Video 01.06.20

Having said that, there seems to be a lot of hope out there that as economies around the world open up, there should be an opportunity to pick up profits in general and therefore it should be more “risk on” that it has been. Perhaps the idea is that we had oversold everything to do with risk appetite, and therefore it makes sense that this pair pops. Ultimately, the market is at a major decision area, and therefore we should see some type of bigger move coming, so next week will be crucial. The 50 day EMA of course is an area that should cause some kind of barrier, so breaking above there will attract a lot of momentum traders.

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

Price of Gold Fundamental Daily Forecast – Trump’s Announcement, China’s Response Sets the Tone

Gold is trading higher on Friday in reaction to lower Treasury yields and a plunge below long-term support by the U.S. Dollar. The catalysts behind gold’s strength are lingering U.S.-China trade tensions as traders cautiously await Washington’s response to the Chinese parliament’s approval of a national security law for Hong Kong.

At 12:26 GMT, August Comex Gold is trading $1745.60, up $17.30 or 1.00%.

The price action suggests that traders are betting against the U.S. Dollar ahead President Trump’s response to China’s tightening control over Hong Kong, which could worsen tensions between the two over the financial hub.

Traders fear that new U.S. sanctions against China might escalate into something more serious. If Trump announces more tariffs, for example, then look for retaliation by China. Both moves will put pressure on the U.S. and Chinese economies at a time when they are just starting to show signs of recovering from the impact of the coronavirus pandemic.

Moh Siong Sim, a currency strategist at Bank of Singapore, doesn’t expect Trump to come down too hard on China because of the state of economy. He said, “You can never quite predict Trump. But I think this year it’s really difficult for him to do tough action.”

Trump to Hold Press Conference

U.S. President Donald Trump is expected to hold a news conference on China later on Friday as his administration moves to pressure Beijing over its treatment of Hong Kong.

“People will be looking for guidance to see whether that could trigger further escalation between the two largest economies. After Trump’s speech, people will also be keen to see China’s response,” said Bank of China International analyst Xiao Fu.

“Even with many economies reopening, the economic status is still quite weak. So with this new geopolitical tension it means that recovery in many parts of the world can take longer, which could lift gold prices.”

Daily Forecast

The direction of the gold market the rest of the session on Friday will be determined by Trump’s announcement. A soft response by Trump to China could help the U.S. Dollar recover, pressuring gold prices.

But a tough response that garners a swift retaliation from China will likely drive the U.S. Dollar lower against the major currencies, which will be supportive for gold.

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

Oil Price Fundamental Daily Forecast – Worsening US-China Relations Likely Source of Impending Volatility

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging lower on Friday with prices dragged down by weak U.S. fuel demand, fears of a second wave of coronavirus cases in South Korea and a worsening in U.S.-China relations. Nonetheless, the markets remain on track for a hefty monthly gain.

At 11:55 GMT, July WTI crude oil is trading $32.85, down $0.86 or -2.55% and August Brent crude oil is at $35.28, down $0.75 or -2.08%.

Both futures contracts are also in a position to post their first weekly loss after four consecutive weeks of gains that leave them set for the biggest monthly gains in years thanks to production cuts and optimism over Chinese-led demand recovery, analysts said.

WTI is on track for a record monthly gain of 72% in May, with Brent set for a 35% increase that would represent its strongest monthly rise since March 1999, Reuters said.

There are headwinds, however, which is likely the reason behind this week’s abrupt halt of the current rally.

“The global reaction to China’s move to propose new security laws for Hong Kong continues to increase, while there’s a score of new COVID-19 cases in South Korea,” said Rystad Energy’s head of oil markets, Bjornar Tonhaugend.

U.S. President Donald Trump is due to announce his response to the situation in Hong Kong later on Friday. His announcement is likely to be the source of volatility later in the session.

Despite US-China Issues, There are Positives

Thursday’s data from the Energy Information Administration (EIA) showed that U.S. crude oil and distillate inventories rose sharply last week. Fuel demand remained slack even as various states lifted travel restrictions they had imposed to curb the coronavirus pandemic, analysts said.

However, storage in Cushing, Oklahoma, the main delivery point in WTI, decreased by 3.4 million barrels, and refinery utilization also rose to 71% from 69%.

Additionally, producers have scaled back output at a record pace as plunging prices made operation uneconomical. OPEC and its oil-producing allies agreed to the steepest production cut in history during an extraordinary, multi-day meeting in April. Then, earlier in May, Saudi Arabia said that, beginning June 1, it would voluntarily cut an additional 1 million bpd, on top of its portion of the cuts agreed to by OPEC+. Kuwait and UAE were among the other cartel members that followed suit and said they would also exercise additional cuts.

Daily Forecast

The wild price swings seem to be behind us, but the market is still vulnerable to a steep retracement of the recent rally. Traders are now waiting for the next OPEC+ meeting to set the longer-term tone. However, over the short-run Trump’s announcement regarding China’s influence in Hong Kong is likely to set the tone. We’re looking for a near-term correction of the recent rally.

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

Will the Fed Trigger Inflation This Time, Boosting Gold?

During Great Recession, many people feared that the Fed’s quantitative easing would trigger high inflation, or even hyperinflation. As we know, it didn’t happen. Why? Well, the main reason is that the Fed created money – that’s true – but in the form of bank reserves. And this is a very specific medium of exchange that does not enter the real economy like cash, but stays within the interbank market. You see, bank reserves are a special kind of money used only between commercial banks and central bank and between commercial banks themselves. So, larger supply of reserves does not therefore automatically translate into higher prices.

This can happen only if these additional reserves motivate commercial banks to expand their lending. Investors should remember that in the contemporary banking model based on the fractional reserve banking, the bank deposits account for the majority of the money supply. And when the bank deposits are created? They are created whenever banks grant loans.

As the chart below shows, the growth rate of credit supply was falling during Great Recession, reaching even negative values for some time. Why? For two reasons. First, American households have deleveraged, i.e., they decided to pay back the debts they had, so they were not interested in taking new loans. Second, as the name suggests, the global financial crisis was, well, financial crisis to a large extent. It means that banks were severely hit and they were left with a lot of toxic assets. So, banks themselves were not interested in granting new loans, rather they cleaned their balance sheets. Please also remember that the supervisors tightened the bank capital requirements in the aftermath of the Lehman Brothers’ collapse.

Chart 1: US bank credit (annual % change) from January 2007 to December 2010.

However, this crisis is different. The Fed and other central banks did not only introduce quantitative easing, but they also implemented other programs which can turn out to be more inflationary. For example, the US central bank will lend, under the Term Asset-Backed Securities Loan Facility, to holders of certain AAA-rated securities backed by newly and recently originated consumer and small business loans. Moreover, the new Main Street Lending Program set by the Fed in April works like this: commercial banks grant loans to small and medium companies employing up to 10,000 workers or with revenues of less than $2.5 billion, and then they retain 5 percent of the loan on their balance sheets but sell the remaining 95 percent of the loans to the Main Street facility created by the Fed.

All these programs aim to support the flow of credit to employers, consumers, and businesses, encouraging commercial banks to grant new loans to companies that have suffered as a result of the economic lockdown. Moreover, the financial sector has not been hit initially by the coronavirus crisis, while the supervisors eased reserve and capital requirements for banks. The demand for loans from entrepreneurs is also vivid. All this means that the pace of growth of credit and money supply may be higher than during the Great Recession. Indeed, as the chart below shows, they accelerated in March and April.

Chart 2: The annual % change of the US bank credit (green line) and M2 money supply (red line) from January 2019 to April 2020.

 

Summing up, the unconventional monetary policy implemented in the aftermath of the Great Recession did not spur inflation. However, this time may be different. To be clear, we are not saying that we will see hyperinflation in the US. That’s still very unlikely. What we mean is that the commercial banks are – so far – significantly more eager to grant new loans. So, the resulting increase in money supply should create higher inflation after some time, if other factors remain unchanged.

In other words, this crisis is more likely to result in stagflation than the Great Recession, especially as economy faces disruptions in the supply chains. Indeed, please take a look at inflation expectations derived from the 5-year inflation-adjusted Treasuries displayed in the chart below – as you can see, the market does not expect deflation now, as it did in the aftermath of the previous economic crisis.

Chart 3: US 5-year breakeven inflation rate from January 2007 to April 2020

Given that gold is considered to be an inflation hedge, the higher odds of inflation are fundamentally positive for the gold prices. It does not mean that disinflation or deflation would be negative for the yellow metal, as it could shine nevertheless during the crisis of any kind, but increased chances for stagflation should be an additional factor that could encourage more investors to buy gold.

Thank you for reading today’s free analysis. We hope you enjoyed it. If so, we would like to invite you to sign up for our free gold newsletter. Once you sign up, you’ll also get 7-day no-obligation trial of all our premium gold services, including our Gold & Silver Trading Alerts. Sign up today!

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

Arkadiusz Sieron, PhD
Sunshine Profits: Analysis. Care. Profits.

 

Brent Oil and Gold With Interesting Setups

In today’s analysis, we will focus on commodities: Gold and Oil. In the previous months, Gold was climbing has been mostly moving higher and oil has been declining. Despite the most recent rise in the price of Brent and a small decline in the price of gold, we think that we are about to see a comeback to the dominant trend. In both cases, gold has a nice bullish signal and oil is drawing rather bearish pattern.

First, lest start with Brent Oil, where its price has doubled since the end of April. In the last two weeks, the upswing stopped and the price is creating a head and shoulders pattern. The price is creating the right shoulder of the pattern. The main up trendline was already broken but the neckline is still intact. In this case, the price breaking the neckline can be a nice selling opportunity.

The second instrument is Gold, where the price is currently breaking the upper line of the flag formation. The flag was a correction in the bullish trend, so it promotes another wave up. The real, legitimate buy signal will be triggered, when the price will break the horizontal resistance at 1735 USD/oz.

The last instrument is not a commodity but the USDJPY pair which is definitely worth mentioning. This Friday is crucial for this pair as the price has managed to escape from the recent sideways trend. Sellers broke two up trendlines and the lower line of the rectangle pattern. Currently, we are testing this last support as a resistance. The test so far is positive for sellers, which may indicate a willingness for a further slide. Sentiment here is negative.

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

GBP/USD Daily Forecast – Test Of Key Resistance At 1.2350

GBP/USD Video 29.05.20.

Increasing U.S. – China Tensions Do Not Help The U.S. Dollar

GBP/USD is testing the resistance level at 1.2350 as the U.S. dollar remains under pressure against a broad basket of currencies despite the increase in U.S. – China tensions.

U.S. President Donald Trump is set to hold a press conference on China on Friday. The key intrigue is whether U.S. will choose some mild sanctions like travel bans for certain Chinese officials or impose new tariffs on China.

Interestingly, the deterioration of U.S. – China relations and the prospect of a new phase of the trade war between the two biggest economies do not help the U.S. dollar which has served as a safe haven asset of last resort during the coronavirus crisis.

The U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, has broken out of the 99 – 101 range and is trending down, which is bullish for GBP/USD. Currently, the U.S. Dollar Index has settled closer to 98.

It’s too early to say whether the safe haven status is shifting from the U.S. dollar to gold, which is gaining ground today. If that’s the case, GBP/USD will get more support in the upcoming trading sessions.

Technical Analysis

gbp usd may 29 2020

The recent sell-off, caused by fears about upcoming Brexit problems, proved to be temporary, and GBP/USD quickly returned above 1.2250 and headed towards the test of the nearest resistance level at 1.2350.

This level has already been tested several times, and each time GBP/USD met significant resistance. The 50 EMA is located in the nearby and serves as an additional obstacle on the way up.

In case GBP/USD manages to settle above 1.2350, it will gain additional upside momentum and head towards the next resistance level at 1.2450.

On the support side, the nearest support for GBP/USD is located at the 20 EMA at 1.2280, followed by the major support level at 1.2250. Most likely, the whole area between 1.2250 and 1.2280 will serve as one significant support level for GPB/USD.

If GBP/USD settles below this level, it will gain downside momentum and head towards the test of the next support area between 1.2170 and 1.2200.

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

 

EOS, Ethereum and Ripple’s XRP – Daily Tech Analysis – 29/05/20

EOS

EOS rose by 1.67% on Thursday. Following on from a 2.49% gain on Wednesday, EOS ended the day at $2.6146.

A bearish start to the day saw EOS fall to a late morning intraday low $2.5202 before making a move.

EOS fell through the first major support level at $2.5245 before rallying to a final hour intraday high $2.6269.

EOS broke through the first major resistance level at $2.5935 and the second major resistance level at $2.6181 before pulling back.

The pullback saw EOS fall back through the second major resistance level.

At the time of writing, EOS was up by 1.56% to $2.6555. A mixed start to the day saw EOS rise from a low $2.6146 to an early morning high $2.6747.

EOS broke through the first major resistance level at $2.6543 early on.

EOS/USD 29/05/20 Daily Chart

For the day ahead

EOS would need to hold above the first major resistance level at $2.6543 to bring the second major resistance level at $2.6939 into play.

Support from the broader market would be needed, however, for EOS to break out from the morning high $2.6747.

Barring an extended crypto rally, resistance at $2.70 would likely leave EOS short of the second major resistance level.

Failure to hold above the first major resistance level could see EOS hit reverse.

A fall through the morning low $2.6146 to sub-$2.60 levels would bring the first major support level at $2.5476 into play.

Barring an extended crypto sell-off, however, EOS should steer clear of sub-$2.60 levels on the day.

Looking at the Technical Indicators

Major Support Level: $2.5476

Major Resistance Level: $2.6543

23.6% FIB Retracement Level: $6.62

38% FIB Retracement Level: $9.76

62% FIB Retracement Level: $14.82

Ethereum

Ethereum rallied by 5.77% on Thursday. Following on from a 3.75% gain on Wednesday, Ethereum ended the day at $220.44.

A bearish start to the day saw Ethereum fall to a late morning intraday low $204.50 before making a move.

Steering clear of the first major support level at $203.29, Ethereum rallied to a final hour intraday high $220.68.

Ethereum broke through the first major resistance level at $211.01 and the second major resistance level at $213.60.

At the time of writing, Ethereum was up by 0.62% to $221.80. A mixed start to the day saw Ethereum rise to an early morning high $224.84 before falling to a low $220.25.

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

ETH/USD 29/05/20 Daily Chart

For the day ahead

Ethereum would need to avoid sub-$215.20 levels to bring the first major resistance level at $225.91 into play.

Support from the broader market would be needed, however, for Ethereum to break out from the morning high $224.84.

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

Failure to avoid sub-$215.20 levels could see Ethereum hit reverse.

A fall through the morning low $220.25 to sub-$215.20 levels would bring the first major support level at $209.73 into play.

Barring an extended crypto sell-off, however, Ethereum should steer well clear of the second major support level at $199.03.

Looking at the Technical Indicators

Major Support Level: $209.73

Major Resistance Level: $225.91

23.6% FIB Retracement Level: $257

38.2% FIB Retracement Level: $367

62% FIB Retracement Level: $543

Ripple’s XRP

Ripple’s XRP rose by 1.37% on Thursday.  Following on from a 2.19% gain on Wednesday, Ripple’s XRP ended the day at $0.20082.

Tracking the broader market, Ripple’s XRP fell to a late morning intraday low $0.19509 before finding support.

Steering clear of the first major support level at $0.1943, Ripple’s XRP rallied to a final hour intraday high $0.20142.

Ripple’s XRP broke through the first major resistance level at $0.2015 and second major resistance level at $0.2049 before pulling back.

The pullback saw Ripple’s XRP fall back through the major resistance levels to limit the upside on the day.

At the time of writing, Ripple’s XRP was down by 0.27% to $0.20027. A choppy start to the day saw Ripple’s XRP jump to an early morning high $0.20340 before falling to a low $0.19988.

Ripple’s XRP tested the first major resistance level at $0.2031 early on.

XRP/USD 29/05/20 Daily Chart

For the day ahead

Ripple’s XRP will need to avoid sub-$0.1990 levels to support another run at the first major resistance level at $0.2031.

Support from the broader market would be needed, however, for Ripple’s XRP to break back through to $0.2030 levels

Barring a broad-based crypto rebound, the first major resistance level and morning high would likely limit any upside.

Failure to avoid sub-$0.1990 levels could see Ripple’s XRP fall deeper into the red.

A fall through the morning low to sub-$0.1990 levels would bring the first major support level at $0.1968 into play.

Barring another crypto meltdown, however, Ripple’s XRP should steer well clear of the second major support level at $0.1928.

Looking at the Technical Indicators

Major Support Level: $0.1968

Major Resistance Level: $0.2031

23.6% FIB Retracement Level: $0.3638

38.2% FIB Retracement Level: $0.4800

62% FIB Retracement Level: $0.6678

Please let us know what you think in the comments below.

Thanks, Bob

The Crypto Daily – Movers and Shakers -29/05/20

Bitcoin rallied by 4.11% on Thursday. Following on from a 4.12% breakout on Wednesday, Bitcoin ended the day at $9,589.3.

A mixed start to the day saw Bitcoin fall to a mid-morning intraday low $9,118.2 before making a move.

Steering clear of the first major support level at $8,946.67, Bitcoin rallied to a final hour intraday high $9,630.3.

Bitcoin broke through the first major resistance level at $9,349.47 and second major resistance level at $9,488.63 before easing back.

The near-term bearish trend, formed at late June 2019’s swing hi $13,764.0, remained firmly intact, reaffirmed by the March swing lo $4,000.

For the bulls, Bitcoin would need to break out from the 62% FIB of $10,034 to form a near-term bullish trend.

The Rest of the Pack

Across the rest of the majors, it was also a bullish day for the majors on Thursday.

Cardano’s ADA surged by 17.71% to lead the way.

Binance Coin (+3.64%), Bitcoin Cash ABC (+3.34%), Ethereum (+5.77%), Monero’s XMR (+4.28%), Stellar’s Lumen (+4.92%), Tezos (+4.37%), and Tron’s TRX (+3.12%) also found strong support.

Bitcoin Cash SV (+1.17%), EOS (+1.67%), Litecoin (+2.05%), and Ripple’s XRP (+1.37%) trailed the front runners.

In the current week, the crypto total market cap fell to an early Monday low $238.04bn before rising to an early Friday high $263.53bn. At the time of writing, the total market cap stood at $261.58bn.

Bitcoin’s dominance fell to a Monday low 66.38% before a Thursday 69.54% spike. At the time of writing, Bitcoin’s dominance stood at 66.99%.

This Morning

At the time of writing, Bitcoin was down by 0.57% to $9,535.0. A mixed start to the day saw Bitcoin rise to an early morning high $9,618.8 before falling to a low $9,483.5.

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

Elsewhere, it was a mixed start to the day.

Cardano’s ADA joined Bitcoin in the red, with a 0.46% loss at the time of writing.

It was a bullish start to the day for the rest of the pack, however.

EOS led the way early on, rallying by 1.49%.

BTC/USD 29/05/20 Daily Chart

For the Bitcoin Day Ahead

Bitcoin would need to avoid sub-$9,450 levels to bring the first major resistance level at $9,773.67 into play.

Support from the broader market would be needed, however, for Bitcoin to break out from Thursday’s high $9,630.3.

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

In the event of another extended crypto rally, the second major resistance level at $9,958.03 and the 62% FIB of $10,034 would likely come into play.

Failure to avoid sub-$9,450 levels could see Bitcoin fall deeper into the red.

A fall back through the morning low to sub-$9,450 levels would bring the first major support level at $9,261.57 into play.

Barring another extended crypto sell-off, however, Bitcoin should steer well clear of the second major support level at $8,933.83.

Economic Data to Take a Back Seat with Trump’s News Conference the Main Event

Earlier in the Day:

It was a relatively busy day on the economic calendar this morning. The Japanese Yen and Aussie Dollar were in action early in the day.

Away from the economic calendar, the markets responded to Trump’s announcement on Thursday of plans to unveil measures against China at the news conference later today.

Fiscal stimulus from Brussels and the easing of lockdown measures across the EU and the U.S had provided support to riskier assets ahead of today’s open.

Looking at the latest coronavirus numbers,

On Thursday, the number of new coronavirus cases rose by 112,124 to 5,900,627. On Wednesday, the number of new cases had risen by 110,221. The daily increase was higher than both Wednesday’s rise and 106,139 new cases from the previous Thursday.

France, Germany, Italy, and Spain reported 5,612 new cases on Thursday, which was up from 1,892 new cases on Wednesday. On the previous Thursday, 1,976 new cases had been reported.

From the U.S, the total number of cases rose by 22,413 to 1,768,216 on Thursday. On Wednesday, the total number of cases had risen by 20,392. On Thursday 21st May, a total of 28,089 new cases had been reported.

The uptick on Thursday will need to be monitored in the coming days. With the easing of lockdown measures now in the 4th week, it would be in the coming days that a 2nd wave would become evident…

For the Japanese Yen

Inflation was in focus in the early part of the day, along with industrial production and retail sales figures.

In May, the Ku-area of Tokyo saw inflationary pressures return, with core consumer prices rising by 0.20% In April, consumer prices had fallen by 0.10%, year-on-year.

According to the Ministry of Internal Affairs and Communication.

  • Rising prices for clothes & footwear (+1.7%), furniture & household utensils (+1.7%), and culture & recreation (+1.2%) supported the rise.
  • There were also increases in prices for medical care (+0.8%) and housing (+0.7%).
  • Prices for Education (-8.9%) and fuel, light, & water charges (-1.9%) pinned back inflationary pressures, however.
  • There were also declines in prices for transport & communication (-0.1%) and miscellaneous (-0.8%).

In April, industrial production slumped by 9.1%, based on prelim numbers, following a 3.7% decline in March. Economists had forecast a 5.1% slide.

According to the Ministry of Economy, Trade, and Industry,

Industries that mainly contributed to the decrease were:

  • Motor vehicles, iron, steel & non-ferrous metals, and transport equipment (excl. motor vehicles).

Industries that mainly contributed to the increase were:

  • Production machinery.

Forecasts for May were not much better, with the forecast for industrial production revised from -1.4% to -4.1%. For June, however, forecasts are for production to rise by 3.9%.

Retail sales also disappointed in April, with lockdown and social distancing measures weighing.

According to the Ministry of Economy, Trade, and Industry, retail sales tumbled by 13.7% in April, year-on-year, following a 4.7% slide in March. Economists had forecasts an 11.50% decline.

The Japanese Yen moved from ¥107.701 to ¥107.608 upon release of the figures. At the time of writing, the Japanese Yen was down by 0.22% to ¥107.41 against the U.S Dollar.

For the Aussie Dollar

Private sector credit stalled in April, following a 1.10% increase in March.

According to figures released by RBA,

  • Business credit rose by 0.1%, following a 3.1% rise in March.
  • Personal credit slid by 3.0%, following a 1.4% decline in March.
  • Housing credit rose by 0.2%, which was down from a 0.3% rise in March.

The Aussie Dollar moved from $0.66312 to $0.66315 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.08% at $0.6642.

Elsewhere

At the time of writing, the Kiwi Dollar was down by 0.11% to $0.6203.

The Day Ahead:

For the EUR

It’s a busy day ahead on the economic calendar. Key stats include French and German retail sales figures for April and the Eurozone prelim inflation numbers for May.

Prelim inflation figures for France and Italy and 2nd estimate GDP numbers for France are also due out.

We will expect the numbers to have a muted impact on the EUR, however. The EU’s recovery plan and the continued easing of lockdown measures remain positives.

While COVID-19 news and updates remain EUR positive, the markets will need to monitor the number of new cases. On Thursday, there was an uptick. If an upward trend begins, this could question member state plans to ease lockdown measures further.

From the early part of the day, it was risk aversion that pinned back the EUR as the markets await Trump’s news conference later today.

At the time of writing, the EUR was up by 0.07% to $1.1085.

For the Pound

It’s yet another quiet day ahead on the economic calendar. There are no material stats due out to provide the Pound with direction.

Through the day, expect market risk sentiment and any Brexit chatter to be key drivers.

At the time of writing, the Pound was up by 0.01% to $1.2322.

Across the Pond

It’s another busy day ahead on the U.S economic calendar. Economic data includes April inflation and personal spending figures and May consumer sentiment and Chicago PMI numbers.

Expect the May figures to have the greatest influence, with the markets likely to brush aside April numbers.

Outside of the numbers, FED Chair Powell is scheduled to speak. Any commentary on the U.S economy and monetary policy will garner plenty of attention.

The main event of the day, however, is Trump’s news conference. What does the U.S President have in store for China?

The Dollar Spot Index was up by 0.02% to 98.407 at the time of writing.

For the Loonie

It’s also a busy day on the economic calendar. Key stats include 1st quarter GDP numbers and April’s RMPI.

Expect the GDP figures to have some influence, though the markets are expecting some quite dire numbers. Anything better than forecast should be Loonie positive…

Crude oil prices and market risk sentiment will be the key driver on the day, however.

At the time of writing, the Loonie was down by 0.10% to C$1.3777 against the U.S Dollar.

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

European Equities: U.S – China Tensions ahead of Trump’s News Conference to Test the Rally

Economic Calendar:

Friday, 29th May

German Retail Sales (MoM) (Apr)

French Consumer Spending (MoM) (Apr)

French GDP (QoQ) (Q1) 2nd Estimate

Italian CPI (MoM) (May) Prelim

Eurozone CPI (YoY) (May) Prelim

The Majors

It was a 5th consecutive day in the green for the DAX30, as the European majors continued to eat into the current year losses.

The CAC40 led the way once more rallying by 1.76%, with the DAX30 and EuroStoxx600 rising by 1.06% and 1.64% respectively.

Economic data from the Eurozone had a muted impact on the majors as the markets continued to respond to the EU recovery plan as lockdown measures ease.

From the U.S, the markets found solace in the U.S weekly jobless claims in spite of another 2m jump in initial jobless claims. While coming in at 2.123m for the week ending 22nd May, it was lower than in recent weeks.

Ultimately, however, the upbeat reaction to the recovery plan muted market jitters over rising tensions between the U.S and China.

The Stats

It was a quiet day on the Eurozone economic calendar on Thursday. Key stats included May’s prelim inflation figures for Germany and Spain.

For Spain, consumer prices fell by 1.0%, year-on-year, following a 0.7% decline in April. The Harmonised Consumer Price Index fell by 0.9%, year-on-year, also following a 0.7% fall in April.

Things were not much better out of Germany, with consumer prices falling by 0.1%, month-on-month. In April, consumer prices had risen by 0.4%.

From the U.S, it was a busy day on the economic calendar.

According to 2nd estimate GDP figures, the economy contracted by 5.0% in the 1st quarter, revised down from a 1st estimate 4.8%.

Core durables goods orders slid by 7.4%, with durable goods orders tumbling by 17.2%. While dire, both sets of figures came in ahead of forecasts.

Pending home sales figures were also disappointing. In the month of April, sales tumbled by 21.8% versus a forecasted 15% slide. In March, pending home sales had slumped by 20.8%. Since late April, however, housing sector activity has rebounded, limiting the impact of the numbers.

The markets have moved on from the 1st quarter and April figures, considered to have been the economic bottom.

For the markets, the weekly jobless claims figures garnered greater interest on the day.

The Market Movers

For the DAX: It was a bearish day for the auto sector on Thursday. Volkswagen and Daimler slid by 3.72% and by 3.19% respectively to lead the way down. BMW and Continental saw more modest losses of 2.29% and 1.17% respectively.

It was a mixed day for the banks, however. Deutsche Bank declined by 2.13%, while Commerzbank closed out the day with a 0.70% gain.

Deutsche Lufthansa continued to find support from the easing of lockdown measures and bailout. Following on from a 1.74% gain on Wednesday, a 2.86% rally delivered a 4th consecutive day in the green for the week.

From the CAC, it was also a mixed day for the banking sector on Thursday. BNP Paribas and Soc Gen fell by 0.12% and by 2.71% respectively, while Credit Agricole eked out a 0.03% gain.

The auto sector returned to the red, however, with Peugeot and Renault falling by 1.10% and by 2.67% respectively.

Air France-KLM rose by a further 0.61% following Wednesday’s 2.81% gain, while Airbus SE fell by a further 1.65%.

On the VIX Index

It was a 1st day in the green from 4 on Thursday. Reversing a 1.39% fall from Wednesday, the VIX rose by 3.51% to end the day at 28.6.

The upside on the day came in response to the rising tensions between the U.S and China. On Thursday, the U.S President announced that he would unveil measures against China at Friday’s news conference.

This announcement came in the wake of China approving the security bill for Hong Kong. On Wednesday, Secretary of State Pompeo had stated that HK was no longer autonomous with China.

The U.S majors had been in positive territory before Trump’s announcement that led to a pullback late in the session.

VIX 29/05/20 Daily Chart

The Day Ahead

It’s a busy day ahead on the Eurozone economic calendar. Key stats include April retail sales figures from France and Germany and May’s prelim inflation figures for the Eurozone.

2nd estimate GDP numbers are also due out of France along with May’s prelim inflation figures from France, Italy, and Spain.

With the markets looking beyond the 1st quarter and April, the stats should have a muted impact on the majors today.

From the U.S, it’s also a relatively busy day ahead on the economic calendar. Once again, the lion’s share of the stats is for April that should have a limited impact later in the day.

Any downward revisions to finalized consumer sentiment figures could draw some attention.

FED Chair Powell will also have some influence late in the session. Expect the Trump news conference to be the main event of the day…

Ahead of the European open, the majors were under pressure in anticipation of sanctions and more on China…

The Latest Coronavirus Figures

On Thursday, the number of new coronavirus cases rose by 112,124 to 5,900,627. On Wednesday, the number of new cases had risen by 110,221. The daily increase was higher than both Wednesday’s rise and 106,139 new cases from the previous Thursday.

France, Germany, Italy, and Spain reported 5,612 new cases on Thursday, which was up from 1,892 new cases on Wednesday. On the previous Thursday, 1,976 new cases had been reported.

From the U.S, the total number of cases rose by 22,413 to 1,768,216 on Thursday. On Wednesday, the total number of cases had risen by 20,392. On Thursday 21st May, a total of 28,089 new cases had been reported.

In the futures markets, at the time of writing, the DAX was down by 151.5 points, with the Dow down by 111 points.

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

Natural Gas Price Prediction – Prices Fall Following Larger than Expected Inventory Build

Natural gas prices dropped nearly 3% on Friday as inventories built more than expected. Strong production despite continued declines in rig count, has kept natural gas prices on their heels. The weather is expected to remain warmer than normal for most of the United States which should increase cooling demand. Softer than expected Durable goods order likely reduced natural gas demand. Orders for durable goods, plunged 17.2% in April after dropping 16.6% in March.

Technical Analysis

Natural gas prices dropped on Thursday declining nearly 3% but bouncing near support which is an upward sloping trend line that comes in near 1.82. A close below this level would likely see a decline to the June contract lows at 1.60. Resistance on natural gas is seen near the 10-day moving average of 1.89. The 10-day moving average recently crossed below the 50-day moving average which means that a short term downtrend is now in place. Short term momentum is negative as the fast stochastic generated a crossover sell signal. The current reading of the fast stochastic is 5, well below the oversold trigger level of 20 which could foreshadow a correction.

Inventories Rise More than Expected

Natural gas in storage was 2,612 Bcf as of Friday, May 22, 2020, according to the EIA. This represents a net increase of 109 Bcf from the previous week. Expectations were for a 107 Bcf build according to survey provider Estimize. Stocks were 778 Bcf higher than last year at this time and 423 Bcf above the five-year average of 2,189 Bcf. At 2,612 Bcf, total working gas is within the five-year historical range.

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

Gold Price Prediction – Prices Edge Higher Following Weak US Data

Gold prices moved higher on Thursday following a slew of US economic data which came in worse than expected. GDP shrank by 5%, durable goods orders fell by 17% and jobless claims continued to rise climbing by 2.1-million. Despite a robust jobless claims headline number, this was the lowest total since the coronavirus crisis began. The dollar moved lower but failed to generate tailwinds for gold prices as US yields edged higher. Riskier assets continued to rally which capped any upward momentum in gold prices.

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Technical analysis

Gold prices moved higher but was unable to push through resistance near the 5-day moving average at $1,719,  Target support is still an upward sloping trend line that comes in near $1,693. Below that level is support near the 50-day moving average at $1,675. Short-term momentum has turned negative as the fast stochastic recently generated a crossover sell signal in overbought territory. Medium-term momentum has also turned negative as the MACD (moving average convergence divergence) index recently generated a crossover sell signal. This 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 has also generated a crossover sell signal. The histogram is printing in the red with a declining trajectory which points to lower prices.

US GDP Contracted More than Expected

GDP which is the broadest measure of economic health, fell at an annual rate of 5% in the Q1 a bigger decline than the 4.8% drop first estimated a month ago. It was the biggest quarterly decline since an 8.4% fall in the fourth quarter of 2008.

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

Gold Price Futures (GC) Technical Analysis – Potentially Bearish Secondary Lower Top May Be Forming

Gold climbed more than 1% early in the session but has since then given back all of those gains. I guess there wasn’t enough gold bug money out there willing to chase it higher at current price levels. Surprising because the chat room commentators think gold should be trading at $2000 because of all that stimulus money floating around.

The price action suggests the stimulus money is fully-priced in so unless the central banks and governments decide to throw more money into their respective economies, a gold rally is going to have trouble gaining traction. It also suggests that perhaps traders are getting fed up chasing the headlines and may be waiting for a strong pullback into a value area.

Just keep remembering that gold is an investment and not a so-called safe-haven asset. Gold investors want to buy gold low and sell it higher. Professionals are buying dollars when there is fear and they are selling gold and dollars when conditions soften.

That’s the way the market is trading now. The traditional dollar/gold relationship has been shelved for the time being.

If gold prices went up because of the threat of a major global recession then it makes sense that it should weaken a little now that the economies are opening up. But we could get another flare-up in prices if a second wave of coronavirus cases hits.

At 18:04 GMT, August Comex gold is trading $1726.70, down $0.10 or -0.01%.

In other news, the number of Americans filing for unemployment benefits held above 2 million for a 10th straight week, while a separate report showed GDP contracted at a bigger-than-expected 5% annualized rate in the first quarter, the deepest drop in output since the 2007-09 Great Recession.

Daily August Comex Gold

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum has been trending lower since the formation of the closing price reversal top on May 18.

A trade through $1787.50 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend changes to down on a move through $1683.30, but the really hard selling is likely to start if $1668.40 fails as support.

The minor trend is down. This is controlling the momentum. Taking out $1701.60 should strengthen the downside momentum and bring the new minor top down to $1743.70.

The minor range is $1787.50 to $1701.60. Its retracement zone at $1744.10 to $1754.30 is resistance.

The short-term range is $1789.00 to $1668.40. Its 50% level at $1728.70 is potential support and also the trigger point for an even steeper sell-off.

The main range is $1454.80 to $1789.00. Its retracement zone at $1621.90 to $1582.40 is the primary downside target and potentially major support.

Short-Term Outlook

We’re going to be watching trader reaction and order flow at $1728.70 into the close. This should tell us if the selling is getting stronger or if buyers are coming in to support the market. The reaction to the earlier rally suggests the move was fueled by short-covering rather than new buying.

Furthermore, the formation of a secondary lower top at $1743.70 will be a sign of weakness.

E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Key Level into Close is 25534

June E-mini Dow Jones Industrial Average futures are trading higher at the mid-session on Thursday, boosted by gains in healthcare and technology stocks, as investors hoped for a swift economic recovery from a coronavirus-driven economic slump.

Boeing Co. climbed 3.3%, the most among the 30 blue-chip Dow components, as the planemaker said it had resumed production of its 737 MAX passenger jet at its Washington plant, although at a “low rate”.

At 16:42 GMT, June E-mini Dow Jones Industrial Average futures are trading 25684, up 150 or +0.59%.

Although the Dow is testing levels not reached since March 6, the buying has been tentative on Thursday. Worsening ties between Washington and Beijing over the handling of the coronavirus outbreak and a new national security law in Hong Kong pose a major threat to the stock market’s strong recovery from the crash earlier this year.

President Donald Trump has promised action over Hong Kong by the end of the week.

In other news, the number of Americans filing for unemployment benefits held above 2 million for a 10th straight week, while a separate report showed GDP contracted at a bigger-than-expected 5% annualized rate in the first quarter, the deepest drop in output since the 2007-09 Great Recession.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was reaffirmed when buyers took out yesterday’s high. The next objective is the March 3 main top at 26962. A trade through 22704 will change the main trend to down.

The minor trend is also up. A move through 24076 will change the minor trend to down. This will shift momentum to the downside.

The main range is 29506 to 18086. Its retracement zone at 25144 to 23796 is controlling the longer-term direction of the Dow. The nearest support is the main Fibonacci level at 25144.

Daily Swing Chart Technical Forecast

Look for the upside bias to continue as long as the June E-mini Dow Jones Industrial Average remains above 25144. If this is able to generate enough upside momentum then look for the rally to possibly extend into 26962.

A failure to hold 25144 should result in the loss of upside momentum. This could trigger a near-term correction into a minor pivot at 24935. Since the main trend is up, buyers are likely to come in on a test of this level. If it fails then look for the selling to possibly extend into a cluster of potential support levels at 24076, 23796 and 23571.

S&P 500 Price Forecast – Stock Markets Continue to Defy Gravity

The S&P 500 continues to be off the chain, as the markets continue to see a celebration of a potential opening of the economy despite the fact that the economies are still going to be sluggish to say the least. At this point, I believe that the market will continue to try to grind higher, but there is a massive amount of resistance between here and the 3100 level, so it is not going to be easy. The question now is whether or not the market can continue the narrative of “everything’s getting better”, or will they pay attention to economic figures such as the Pending Home Sales drop of 35% year-over-year during the early part of the session?

S&P 500 Video 29.05.20

We are in a bear market and have seen a massive bounce. That being said, the 3000 level is going to continue to be crucial so if we were to break back down below it certainly would be somewhat of a negative headwind. However, if we can break above the 3100 level then there is almost nothing to keep this market from going to the all-time highs it is difficult to say right now, but clearly the buyers are pressing the issue. If the sellers do not get involved rather soon, we will eventually see that explosive break out and potential “blow off top” before the market starts the price and the reality of 40 million jobs lost, which would certainly have an effect on an economy that is driven by the 70% consumption. If the consumer does not have a job, it is not consuming.

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

Silver Price Forecast – Silver Markets Continue to Pound Into Resistance

Silver markets are going back and forth overall between the $18 level on the top and the $17 level on the bottom. With that being said, it is worth paying attention to due to the fact that silver has a lot of meaning when it comes to the overall economy. After all, silver is a major industrial metal, and therefore if there is an explosion in the industrial sector, then by all means it looks like the demand for silver will continue to be strengthening.

SILVER Video 29.05.20

However, there is also the precious metals trade, due to the fact that central banks around the world continue to print money as fast as they can. Here that sound in the background? That is the sound of the printing press is going full tilt, and that of course helps the idea of metals. However, silver plays a second fiddle to gold, and therefore you need to look at that as reality.

To the downside, if we break the $17 level it is likely that the 200 day EMA and the 50 day EMA both will come into play and offer support. I think that silver needs to pullback drastically, and as a result we should see some more position building to the upside. However, if we do break above the $18.25 level then it is likely that we go looking towards the $19 level above. If we managed to break above there, then the market is likely to go towards the $20 level after that. Expect volatility regardless.

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

USD/CAD Daily Forecast – Flat Despite Broad Weakness Of U.S. Dollar

USD/CAD Video 28.05.20.

Canadian Dollar Fails To Gain More Ground

USD/CAD stays below the resistance level at 1.3800 as the U.S. dollar is losing ground against a broad basket of currencies while oil is steady despite a surprising increase in oil inventories.

Today, the U.S. has provided a number of economic reports. In general, the economic picture continues to look grim.

Initial Jobless Claims report showed that 2.1 million Americans filed for unemployment benefits in a week. Durable Goods Orders declined by 17.2% month-over-month in April. First-quarter GDP Growth Rate was -5%.

However, some hope was provided by Continuing Jobless Claims which declined from 25 million to 21 million.

The new portion of economic data from the U.S. and the continued increase in U.S. – China tensions did not spoil the mood of global markets today. The demand for safe haven assets decreased, and the U.S. dollar found itself under material pressure.

The U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, has declined closer to 98.5. The U.S. Dollar Index has spent two months between 99 and 101, and a move out of this range could lead to increased downside momentum for the U.S. dollar.

Technical Analysis

usd cad may 28 2020

USD/CAD failed to continue the downside move despite the fact that the U.S. dollar is under significant pressure against a broad basket of currencies. The likely reason for this is that the previous downside move was too fast and USD/CAD needs a pause before it will be able to make the next move.

The nearest support level for USD/CAD is located at 1.3730. This level has already been tested several times and has proved its strength. In case USD/CAD manages to get below this level, it will likely gain additional downside momentum and head towards the next support level at 1.3650.

The 20 EMA has recently crossed the 50 EMA to the downside, suggesting the continuation of the downside trend.

On the upside, a minor resistance near 1.3800 was formed. If USD/CAD gets above this level, it will head towards the test of the major resistance level at 1.3850. I’d expect that USD/CAD will attract a lot of interest if it gets back to 1.3850 as this level served as the low end of the two-month trading range between 1.3850 and 1.4250.

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

Crude Oil Price Update – Reaction to $32.77 Pivot Sets the Tone into the Close; EIA Says Crude Stocks Rose

U.S. West Texas Intermediate crude oil futures are trading marginally lower at the mid-session on Thursday following the release of government report that showed a surprise increase in U.S. crude stocks, which offset hopes for a demand recovery as coronavirus lockdowns ease.

According to the U.S. Energy Information Administration (EIA), U.S. stockpiles rose by 7.9 million barrels the week-ending May 22. Analysts had been expecting a draw of 2.5 million barrels although analysts at FactSet were predicting a 1.3 million barrel draw.

At 14:40 GMT, July WTI crude oil is trading $32.73, down $0.08 or -0.24%.

The market is actually clawing back earlier losses that pushed prices into an intraday low of $31.14. This move was fueled by a surprise build in Wednesday afternoon’s American Petroleum Institute (API) weekly inventories report.

Also weighing on prices was uncertainty about Russia’s commitment to continuing deep output cuts ahead of a June 9 meeting of the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, however, momentum is trending higher. A trade through the main tops at $34.81 and $351.8 will change the main trend to up.

The minor trend is up. This is controlling the momentum. A trade through $30.72 will change the minor trend to down. This will shift momentum to the downside.

The main range is $54.86 to $17.27. Its retracement zone at $36.07 to $40.50 is the primary upside target and potential resistance zone.

The minor range is $30.72 to $34.81. Its 50% level at $32.77 should act like a pivot. It is providing resistance early Thursday.

The short-term range is $17.27 to $34.81. If the momentum shifts to the downside then its retracement zone at $26.04 to $23.97 will become the primary downside target area.

Daily Swing Chart Technical Forecast

Based on the early price action and the current price at $32.73, the direction of the July WTI futures contract the rest of the session on Thursday is likely to be determined by trader reaction to $32.77.

Bearish Scenario

A sustained move under $32.77 will indicate the presence of sellers. If this move creates enough downside momentum then look for a test of the minor bottom at $30.72. This is a potential trigger point for an acceleration to the downside.

Bullish Scenario

A sustained move over $32.77 will signal the presence of buyers. This could lead to a quick test of $32.98, followed by $34.81.

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

Crude Oil Price Forecast – Crude Oil Markets Continue to Press the Issue

West Texas Intermediate Oil

The West Texas Intermediate Crude Oil market has initially pulled back a bit during the trading session on Thursday, but then turned around to show signs of strength again as continuing optimism floods into the market. That being said, it is quite interesting considering that there is a gap above and it is likely that it will probably get filled given enough time. That does not mean that it will be easy, and I do think that once we get to the top of the gap, closer to the $41 level, there is the 200 day EMA coming into focus there as well, so I think that is about as far as that goes. To the downside, there is plenty of support at the $30 level and of course the 50 day EMA.

Crude Oil Video 29.05.20

Brent

Brent markets have also pulled back slightly but then showed signs of life again as the market continues to see a lot of support based upon the 50 day EMA. Ultimately, this is a market that I think continues to see a lot of noise, but it is choppy to say the least and therefore you have to be overly cautious. The $40 level above starts to begin of a major gap that extends to the $45 level, so it is likely that we could see a bit of interest in trying to fill that as well. To the downside, it is not until we break the $30 level that uncomfortable shorting. Granted, economies are opening but demand is going to be weak.

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

Natural Gas Price Forecast – Natural Gas Markets Going Sideways

Natural gas markets continue to be noisy, as we had a relatively tight trading session on Thursday. Ultimately, the market is likely to see more noise, as there are multiple factors out there that can continue to push this market wildly. The 50 day EMA of course attracts a lot of attention, and therefore it will be interesting to see where we resolve this issue. Having said that, I think that is likely that we will see a lot of erratic behavior in the market.

NATGAS Video 29.05.20

To the downside I think that the $1.80 level is likely to offer a certain amount of support, so I am looking for short-term pullbacks in order to buy the contract for short-term trades only. Ultimately, the market is trying to build a larger basing pattern from what I can see, as economy start to open up again. Ultimately though, the question will come down to whether or not the demand finally picks up enough to take out the massive oversupply. We also have bankruptcies coming so that could help as well. We are at extremely low levels so I do anticipate that the market will try to bounce but it is not going to be extremely easy to deal with.

With that in mind, even if we do break down below the $1.80 level, it is likely that we will see the previous gap at the $1.70 level also offering it. If we can break above the $2.00 level, then it is likely that the market will then go looking towards the 200 day EMA just above.

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