Price of Gold Fundamental Daily Forecast – Poor U.S. Retail Sales Providing Support Along with Brexit, Trade Concerns

Gold futures are trading higher on Wednesday shortly after the cash market opening. The market has regained some of its upside momentum after rebounding from early session weakness. The catalysts behind the strength are lingering concerns over Brexit, pessimism over U.S.-China trade relations and weaker-than-expected U.S. economic data, which could mean an end of the month rate cut by the Fed.

At 12:57 GMT, December Comex gold is trading $1494.60, up $11.10 or +0.77%.

Renewed Brexit Worries

Gold is being underpinned this morning by renewed worries over Brexit after Tuesday’s optimistic outlook drove gold prices sharply lower.

On Tuesday, optimistic comments on Brexit from European negotiator Michel Barnier were backed up by reports that a draft legal text over the divorce was being drawn up.

“Our team(s) are working hard, and work has just started now today, this work has been intense over the weekend and yesterday, because even if the agreement will be difficult, more and more difficult, to be frank, it is still possible this week,” Barnier told reporters in Luxembourg on Tuesday morning.

He added that “any agreement must work for everyone,” saying it is “high time to turn good intentions into a legal text.”

By mid-afternoon (Tuesday), one report suggested that a draft deal was in the works according to two separate sources familiar with negotiations.

On Wednesday, traders aren’t so optimistic about a deal and are seeking protection in gold. This comes after “constructive” talks between the U.K. and the E.U. to get a Brexit deal, went on past midnight. Investors are still unclear if both parties can avoid postponing the U.K.’s departure from the EU on October 31.

U.S.-China Trade Relations Sour

There’s a little more tension between the United States and China on Wednesday, which is raising concerns over whether the two parties will reach even a partial trade agreement over the near-term.

This is stemming from reports that China is threatening “countermeasures” in response to the U.S. House of Representatives passing four pieces of legislation taking a hard line on Beijing for its violent response to protesters in Hong Kong.

U.S. Retail Sales Underperform

U.S. retail sales fell for the first time in seven months in September, raising fears that a slowdown in the American manufacturing sector could be starting to bleed into the consumer side of the economy. Furthermore, the disappointing report could help alter the split in the Federal Open Market Committee (FOMC) with more policymakers leaning toward a rate cut.

Daily Forecast

I’m looking for prices to remain underpinned unless an actual deal between the U.K. and the EU over Brexit is actually announced.  The U.S. and China seem far apart in their efforts to finish phase one of their partial trade agreement and the retail sales report is helping to support an end of October rate cut by the Fed.

Futures Fall Despite Solid EPS, Retail Sales Miss, Brexit Deal Remains Elusive

Futures Fall As Worries Creep  Back Into Focus

The U.S. equity market is indicated lower in early Wednesday trading despite signs 3rd quarter earnings are better than expected. The Dow Jones Industrial Average and S&P 500 are both indicated lower by 0.20% while the NASDAQ Composite is down about -0.30%. The move is driven by growing concern China will not follow through on its pledge to buy more U.S. agricultural products. If this is the case it is likely additional tariffs will be enforced later this year. China has pledged as part of the Phase I trade deal to buy up to $50 billion in U.S. products.

In earnings news, financial stocks Bank of America and Bank Of New York Mellon both reported better than expected EPS. Both companies reported strength in consumer segments that helped drive share prices higher. Shares of BAC are up more than 2.5% while BNY-Mellon is up about 1.5%. In economic news, Retail Sales were weaker than expected. September retail sales fell -0.3% versus an expected gain of 0.3%. The mitigating factor is an upward revision to the past month of 0.2%. Later in the session traders will have an eye out for the NAHB Index and the FOMC’s Beige Book.

Europe Mixed, Brexit Deal Is Still Elusive

European markets are flat and mixed at midday as traders fret over trade and the Brexit. On the trade front, China’s demands the U.S. remove the threat of more tariffs before signing the Phase I deal has thrown a wrench into the works. At this stage it is becoming less and less likely Phase I will come to fruition. In Brexit news, negotiations stalled on Wednesday despite a narrowing of differences. The Irish PM confirms the back-stop is yet to be resolved but there is hope. The two sides will begin a two-day summit tomorrow that will, hopefully, result in a deal.

The German DAX is in the lead at midday with a gain of 0.22% while the FTSE and CAC are both edging lower. In stock news, shares of UK tech giant Micro Focus is up 4.3% on its results as is seafood producer Mowi. At the other end of the rankings, IMCD and DBA Aviation are both down more than -4.0%.

Asia Mostly Higher On Brexit Hopes

Asian markets are mostly higher at the end of Wednesday’s session. The Nikkie and ASX are both up more than 1.0% while the Hang Seng and Kospi are up closer to 0.70%. The moves are driven by hope for a Brexit deal, however elusive it may seem right now. In Hong Kong, leader Carrie Lam is under intensifying pressure as she rejects HK’s bid for autonomy. The Shanghai composite is the only index to move lower, it posted a loss of -0.41%.

Natural Gas Price Fundamental Daily Forecast – Traders Hunting for Stops Over $2.568 Amid Calls for Chilly Temps

Natural gas futures are edging higher for a fourth session on Wednesday, putting the market in a position to take out the two-week high and change the short-term trend to up.

Once again, the catalysts underpinning the market and driving out the weak short-sellers are stronger spot market prices amid forecasts pointing to chilly temperatures in store for the Great Lakes and Northeast late in the month.

At 12:50 GMT, December Natural Gas is trading $2.548, up $0.016 or +0.63%.

On Tuesday, the Global Forecast System (GFS) showed a “much colder pattern” compared to its European counterpart, and the midday GFS run trended even colder for late October, according to NatGasWeather.

“There remain three major periods of interest, starting with a cold shot currently sweeping across the northern U.S. for a bump in national demand,” the forecaster said. “This will be followed by national demand dropping below normal this weekend through early next week…but where the data is cold enough and bullish in most weather models is October 24-30 as a series of stronger cold shots advance deep into the U.S. with widespread lows of teens to 30s.”

Short-Term Weather Outlook

According to NatGasWeather for October 16-22, “A weather system with showers and cooling will sweep across the Midwest and Northeast the next few days with lows of 30s to 40s. Texas and the southern US will be mostly comfortable with highs of upper 60s to lower 80s, although locally hotter over the Southwest, South Texas, & Florida. High pressure and above normal temperatures will gain across the eastern half of the country this weekend with near perfect highs of 60s to 80s, while slightly cool over much of the West. Overall, decent demand the next few days, then lighter this weekend.”

Daily Forecast

The trend will change to up on a trade through $2.568, making this today’s upside target. Should a move through this level generate enough upside momentum, then with help from the “chilly” forecast, we could see an eventual surge into a 50% retracement level target at $2.636.

A failure to reach or blow through $2.568 will indicate traders are becoming concerned over Thursday’s government storage report that could show another triple digit build. However, since this is stale data and traders are more focused on the future weather, any correction is likely to be short-lived.

Crude Steadies, But Remains Under Pressure

Crude oil is showing little movement on Wednesday. In the European session, WTI is trading at $53.14, up $0.20, or 0.38%. Brent crude is trading at $58.91, down $0.06, or 0.10%.

Is a U.S-China Trade Deal at Hand?

Investors are keeping a close eye on trade talks between the U.S. and China. There has been some optimism that a limited deal (“Phase 1”) can be hammered out, which would be the first of up to three “mini agreements”. This would enable to sides to remove tariffs, while at the same time, postpone the most intractable issues for another time. If the sides can reach any kind of a deal, growth will improve and the demand for crude will increase. However, investor confidence slipped earlier in the week, as the Chinese media reported that China would demand further talks before agreeing to a Phase 1 agreement. The U.S. has sounded optimistic about reaching a deal, and has canceled tariffs which were set to take effect this week. A new 15% on $160 billion in Chinese goods is scheduled to take effect on December 15, but would likely be rescinded if the sides can reach an agreement before then. Traders should be prepared for further volatility from crude, depending on the progress of the current round of trade talks.

Crude Inventories – Another Surplus?

Another important factor for crude movement is the Energy Information Administration (EIA) crude inventory report. The weekly report has been posted four successive surpluses, pointing to an oversupply of U.S. crude. Another large surplus is expected on Thursday, with a forecast of 3.0 million barrels. This streak of surpluses is putting upward pressure on crude prices, and another surplus could push crude higher on Thursday.

WTI/USD 4-hour Chart

Oil Price Fundamental Daily Forecast – Underpinned by Upbeat Brexit News, but Gains Capped by Trade War Concerns

U.S. West Texas Intermediate and international-benchmark crude oil futures are trading nearly flat to slightly better on Wednesday, underpinned by optimism over Brexit and new signs that OPEC and its allies are willing to make further supply cuts, but pressured by renewed concerns over U.S.-China trade relations and potentially bearish weekly inventories reports.

At 11:54 GMT, December WTI crude oil is trading $53.04, up $0.16 or +0.30% and December Brent crude oil is at $58.71, down $0.03 or -0.05%.

Traders Hoping for Favorable Brexit Deal

Traders are optimistic that the European Union and the United Kingdom will strike a deal that avoids a “hard” or no-deal Brexit. This should boost economic growth and consequently oil growth and prices.

Early Tuesday optimistic comments on Brexit from European negotiator Michel Barnier were backed up by reports that a draft legal text over the divorce was being drawn up.

“Our team(s) are working hard, and work has just started now today, this work has been intense over the weekend and yesterday, because even if the agreement will be difficult, more and more difficult, to be frank, it is still possible this week,” Barnier told reporters in Luxembourg on Tuesday morning.

He added that “any agreement must work for everyone,” saying it is “high time to turn good intentions into a legal text.”

By mid-afternoon (Tuesday), one report suggested that a draft deal was in the works according to two separate sources familiar with negotiations.

Further Supply Curbs Possible

OPEC Secretary-General Mohammad Barkindo said OPEC “will do whatever (is) in its power” along with its allied producers to sustain oil market stability beyond 2020.

Daily Forecast

The markets are at a stalemate on Wednesday because of fading hopes of a trade deal between the United States and China after the latter threatened countermeasures against the U.S. for showing support for the Hong Kong protesters.

Traders are also looking for further developments over Brexit. A deal to allow the U.K. without hard ramifications should underpin prices.

Late in the session, the price action will be driven by the weekly inventories report from the American Petroleum Institute at 20:30 GMT. It is expected to show U.S. crude stocks probably grew for the fifth straight week, according to a Reuters survey.

The report has been delayed one day because of Monday’s U.S. bank holiday. The Energy Information Administration will report on Thursday.

Silver Dips to 2-Week Low as U.S-China Trade Talks Continue

Silver prices are lower on Wednesday, following the downward trend seen on Tuesday. In the European session, silver is trading at $17.27, down $0.14, or 0.80% on the day. Earlier in the day, the white metal slipped to $17.21, its lowest level since October 3.

Stocks Up, Silver Down

Risk appetite rose on Tuesday, as investors are somewhat optimistic that the U.S. and China will reach a limited trade agreement. The “Phase 1” deal would be the first of up to three mini-agreements, allowing the sides to postpone dealing with thorny issues such as forced technology transfers to another time. The Trump administration has canceled tariffs that were scheduled to take effect this week. Still, the U.S. has yet to remove a new 15% tariff scheduled to commence on December 15 on $160 billion worth of Chinese goods. Treasury Secretary Mnuchin said this week that he expects a deal to be reached, which would cancel those tariffs. Investors have responded by buying equities, while precious metals have lost ground. Silver prices have been fairly steady in the month of October, but that could quickly change, based on developments in the U.S-China talks.

There is added pressure on China to show more flexibility in the negotiations, as the Chinese economy has been the big loser in the trade war with the U.S. In September, Chinese exports to the U.S. declined by 22%, on an annualized basis. The Chinese manufacturing sector is sputtering, as the Chinese Manufacturing PMI has pointed to contraction for the past four months.

Silver Technical Analysis

Silver is currently showing some downward movement, but the metal has remained close to the 17.50 line for most of October. The 50-EMA is at 17.46, but it is the 200-EMA at 16.90 which could become relevant, if the downward movement continues. On the upside, the round number of 18.00 has remained intact since late September.  
XAG/USD 4-Hour Chart

USD/JPY Fundamental Daily Forecast – Pressured by Renewed Safe-Haven Buying

The Dollar/Yen is trading lower on Wednesday after failing to follow-through to the upside following yesterday’s strong performance. On Tuesday, the Forex pair was boosted by strong demand for risky assets and higher Treasury yields. The rise in share prices was fueled by better-than-expected U.S. earnings reports. The move in yields was driven by optimistic news over Brexit.

At 09:28 GMT, the USD/JPY is trading 108.685, down 0.178 or -0.16%.

Today’s early weakness is likely being fueled by some light hedging pressure triggered by China’s threat of countermeasures in response to a U.S. bill supporting Hong Kong protesters.

China Vows ‘Strong Countermeasures’

Three bills were approved in the House of Representatives Wednesday evening, one supporting the right of individuals to protest, another allowing for the U.S. to check on Beijing’s influence over the territory and a third aimed at preventing U.S. weapons from being used by police against protesters.

“If the relevant act were to become law, it wouldn’t only harm China’s interests and China-U.S. relations, but would also seriously damage U.S. interests,” said Geng Shuang, China’s Foreign Ministry spokesperson, in a statement on the body’s website. “China will definitely take strong countermeasures in response to the wrong decisions by the U.S. side to defend its sovereignty, security and development interests.”

Geng said while China was working to restore law and order in Hong Kong, U.S. lawmakers were “disregarding and distorting facts,” by turning criminal acts and violence against police into issues of “human rights or democracy.”

“That is a stark double standard. It fully exposes the shocking hypocrisy of some in the U.S. on human rights and democracy and their malicious intention to undermine Hong Kong’s prosperity and stability to contain China’s development,” said Geng, who urged the U.S. to “stop meddling.”

Brexit Traders Eye Imminent Draft Deal

Perhaps helping to limit losses on Wednesday are optimistic comments on Brexit from European negotiator Michel Barnier were backed up by reports that a draft legal text over the divorce was being drawn up.

IMF Warning

Another factor that could be pressuring the Dollar/Yen is a bearish report from the International Monetary Fund.  The U.S.-China trade war will cut 2019 global growth to its slowest pace since the 2008-2009 financial crisis, the International Monetary Fund (IMF) warned on Tuesday, adding that the outlook could darken considerably if trade tensions remain unsolved.

Daily Forecast

The markets are relatively calm overnight despite the threat of countermeasures by China to the U.S. legislation supporting the Hong Kong protesters. However, investors have taken precautionary steps by buying the Japanese Yen, gold and Treasury bonds for protection.

Keep an eye on this story to see if President Trump responds to the threat. He could trigger a huge break in the Dollar/Yen if he says anything negative about China that would put a trade deal in jeopardy.

Later today, traders will get the opportunity to respond to the U.S. retail sales report for September and the Fed Beige book. Both reports could influence the Fed’s decision on interest rates later in the month.

Bearish numbers will increase the chances of a Fed rate cut, further weakening the Dollar/Yen.

GBP/USD Daily Forecast – Sterling Holds Near Highs Awaiting Further Brexit News

Brexit Talks Resume in Brussels

EU’s chief negotiator Michael Barnier wanted a legal text of a potential deal delivered by Tuesday but after negotiating until 1:30 AM yesterday, an agreement could not be made. Talks resume today, taking it right down to the wire as negotiations are not meant to take place during the EU summit which starts tomorrow.

I suspect GBP/USD will extend gains if we get word later in the day that a legal text was finalized. However, UK Prime Minister Johnson still has his work cut out for him.

If he’s able to come to an agreement with EU negotiators today, the deal will still need to be approved by the member states at the EU summit which takes place on Thursday and Friday.

But more importantly, the UK parliament needs to vote on the deal. Since Johnson has lost his majority, it’s unclear if all his efforts will be fruitful since parliament could turn it down.

If a deal is not reached, Johnson will be required to request an extension under the recently passed Benn act. This could get tricky as the British PM has said several times that the UK will leave on October 31 no matter what. But when pressed for an answer, he has also said that he will abide by the law.

Technical Analysis

GBP/USD is up about 4% since Johnson announced last week that he found a pathway to a potential deal. Although technical indicators are in oversold territory at this point, I think the exchange rate can continue to move higher if there is further positive news.

GBPUSD 4-Hour Chart

The next level I have my eye on is 1.2924. This level was respected on a weekly chart after the referendum that took place over three years ago.

Price action is likely to be volatile and therefore I’m looking at support at 1.2575. Normally, that level would fall well out of the daily range for the pair. However, considering what is at stake, I’m not ruling out a dip towards it.

Bottom Line

  • An announcement might come that a deal has been agreed on with negotiators later today.
  • The legal text of these negotiations would then be put forth to a vote at the EU summit.
  • If approved at the EU summit, it will go to the UK parliament. In a rare move, parliament will convene on Saturday to decide on the next step.

EUR/USD Daily Forecast – Euro Continues to Battle 50-Day Moving Average

Brexit Talks Stand to Drive Volatility to EUR/USD

Price action in the FX markets on Tuesday provided a glimpse of which currencies are likely to see a reaction based on how things progress with reaching a Brexit deal.

Since last week, the British pound has been firmly bid and was last seen trading near highs not seen since June against the dollar. But yesterday’s surge higher in GBP/USD accompanied a bullish reaction in EUR/USD which we’ve not seen before.

EUR/USD had declined below the 1.1000 handle and then rallied nearly 50 pips in 30 minutes on Brexit news. This suggests if Brexit talks are favorable, EUR/USD is likely to continue its recent upward trend.

So far the 50-day moving average has been holding the pair lower on a daily close basis. But the indicator is not likely to be much of a hurdle on positive Brexit news. We are likely to get some market-moving news later today as Brexit negotiations will stop before the EU summit which starts tomorrow.

EUR/USD Little Changed After CPI Data

The consumer price index in the Euro zone was reported to rise at the slowest pace in nearly three years. Meanwhile, core CPI, which strips away volatile items such as food, energy, alcohol, and tobacco, remained unchanged at 1% in the year to September. The exchange rate had a muted reaction to the report.

Technical Analysis

Two items have been capping rallies in EUR/USD. A horizontal level at 1.1059 and the 50-day moving average.

EURUSD Daily Chart

If we get some further positive Brexit news, I’d expect this area to be breached, putting in focus resistance at 1.1129. This is a level that was major support April and in May.

In the absence of news, I expect that sellers will try and drive the pair lower once again. Although we may see buyers step in ahead of yesterdays low just below 1.1000, this continues to be an important area for the pair.

Bottom Line

  • Headlines related to Brexit stand to move EUR/USD and today could be a volatile day for the pair.
  • Euro zone CPI data fell short of expectations but did not have an impact on the exchange rate.

AUD/USD, NZD/USD, USD/CNY – Asian Session Daily Forecast

AUD/USD

AUD/USD has lost ground for a third successive day. In Wednesday’s Asian session, the pair is trading at 0.6743, down 0.14% on the day.

Investors Eye Job, Confidence Data

There are no key Australian events on Wednesday, but the markets are waiting for key employment numbers on Thursday. Employment change is expected at 15.3 thousand in September, lower than August but still a decent reading. The unemployment rate is projected to remain steady at 5.3%.

As well, the NAB releases its quarterly business confidence report. Traders should be prepared for stronger movement from the pair on Thursday.

AUD/USD Technical Analysis

AUD/USD continues to move lower and tested support at 0.6760 on Tuesday. Currently, the pair is slightly below this level. If the downward movement continues, support at 0.6710 will be vulnerable. This line is protecting the round number of 67.00, which last saw action in early October.

AUD/USD 4-hour Chart

USD/CNY

USD/CNY is showing limited movement in early Wednesday trade. In the Asian session, the pair is trading at 7.0915, up 0.14% on the day.

USD/CNY Technical Analysis

USD/CNY has reversed directions after the recent rally by the yuan, in which the pair lost close to 1.0%. The pair tested support at 7.0592 on Monday, but this line has since stabilized, with the pair moving higher. Still, this line could be further tested during the week. Below, we find support at the 7.0400 line. On the upside, 7.1100 is relevant and could face pressure if the upward movement continues.

USD/CNY 4-Hour Chart

NZD/USD

NZD/USD has posted slight losses on Wednesday.  In the Asian session, the pair is trading at 0.6285, down 0.14% on the day.

New Zealand CPI Beats Forecast

New Zealand CPI, which is released every quarter, was better than expected in the third quarter. Consumer inflation gained 0.7%, edging above the estimate of 0.6%. NZD/USD has responded to the release with marginal gains.

NZD/USD Technical Analysis

NZD/USD continues to test support at 0.6280, but is having difficulty consolidating below this stubborn line. Below, we find support at 0.6230. On the upside, 0.6357 has remained intact in resistance since mid-September.

NZD/USD 4-Hour Chart

US Stock Market Overview – Stock Rally Driven by Healthcare and Robust Bank Earnings

Stock prices moved higher on Tuesday as riskier assets gained traction. As stock prices move higher, US yields move in tandem. The higher yields reflect the market’s belief that a trade agreement could occur. Better than expected earnings were released on Tuesday in the banking sector which buoys the US stock market, raising yields and pushing gold lower. Most sectors were higher, driven by healthcare, and technology shares, consumer staples, and utilities bucked the trend. Financials were also a robust performer following stronger than expected earnings.

Banks Beat the Street

In the banking sector, shares of JPMorgan Chase, rose 3.25% after the bank reported better than expected financial results. The company continued to see strength in both its consumer and investment-bank businesses. JPMorgan reported a profit of $9.08 billion, or $2.68 a share. Expectations had been for earnings of $2.45 a share. A year earlier, the bank reported a profit of $8.38 billion, or $2.34 per share. Revenue from non-lending operations at the bank jumped 13% to $15.11 billion. In the bank’s consumer unit, revenue rose 7% to $14.26 billion and in the corporate and investment bank it rose 6% to $9.34 billion.

Citi also beat on the top and bottom line. Citi reported earnings of $1.97 per share versus expectations that the company would earn $1.95 per share. Revenue came in at $18.6 billion versus expectations that the firm would post revenue of $18.545 billion. Fixed-income trading posted revenue of  $3.211 billion versus expectations of $3.09 billion. Net interest margin came in at 2.56% versus 2.66% forecast.

Not all the banks beat. Goldman Sachs disappointed. The company said that profit slumped 26% to $1.88 billion, or $4.79 a share, below the $4.81 expected. Revenue fell 6% to $8.32 billion, slightly above the $8.31 billion expected, on lower results in the firm’s investing and lending and investment banking divisions.

Healthcare Rallies on J&J Earnings

Healthcare was the best performing sector in the S&P 500 index following robust financial results from Johnson & Johnson. The company reported earnings per share $2.12 versus $2.01 expected. Revenue came in at $20.73 versus $20.07 billion expected. J&J also raised its full-year guidance and now sees earnings of $8.62 to $8.67 per share, with revenue in the range of $81.8 billion to $82.3 billion. Prior to the report, analysts were expecting full-year earnings guidance of $8.53 to $8.63 a share on revenue of $82.4 billion to $83.2 billion.

Natural Gas Price Prediction – Prices Rise on Cool Weather Forecast

Natural gas prices surged another 2.5% on Tuesday. Tropical depression 15, forming in the Atlantic and there is one other storm that has less than a 10% chance of becoming a tropical cyclone. There is also one storm in the Gulf of Mexico with a 10% chance of becoming a tropical cyclone. The weather is expected to be colder than normal throughout most of the mid-west which could buoy natural gas heating demand.

Technical Analysis

Natural gas prices rallied sharply and is poised to test resistance near the October highs at 2.40. Support on natural gas is seen near the 10-day moving average at 2.28 and then the October lows at 2.18. Short term momentum has flipped and turned positive in oversold territory as the fast stochastic generated a crossover buy signal. Additionally, the current reading on the fast stochastic is 43, above the oversold trigger level of 20 and in the middle of the neutral range. The fast rebound in the fast stochastic reflects accelerating positive momentum. Medium-term momentum as turning and the MACD (moving average convergence divergence) is poised to generate a crossover buy signal.

Export Demand is Flat Week over Week

The Energy Information Administration reports that liquid natural gas exports are flat week over week. Eleven LNG vessels, according to the EIA, with a combined LNG-carrying capacity of 41 Bcf departed the United States between October 3 and October 9. One vessel was loading at the Sabine Pass LNG terminal on Wednesday. Net injections into storage totaled 98 Bcf for the week ending October 4, compared with the five-year average net injections of 89 Bcf and last year’s net injections of 91 Bcf during the same week.

Gold Price Prediction – Prices Slide as Positive Earnings Sentiment Buoys the Dollar and Weighs on Gold

Gold prices moved lower on Tuesday as the Chinese now seem to agree with phase one of the US-Chinese trade agreement. Trump and Xi are scheduled to meet on the sidelines of the APEC meeting in the middle of November. On the geopolitical front, Turkey and Syria remain in the headlines. After the US withdrew from northern Syria and Turkish forces moved in, the Kurds had no choice but to look to Syrian forces loyal to President Assad.  The US has now lost any voice in this conflict which is what President Trump likely wanted.

 

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Technical Analysis

Gold prices moved lower pushing down after Monday’s inside day. Prices are poised to test support which is seen near an upward sloping trend line that comes in near 1,473. Resistance is seen near the 10-day moving average at 1,496, and then a downward sloping trend line that comes in near 1,513. Short term momentum has turned negative as the fast stochastic generated a crossover sell signal. The fast stochastic is printing in the middle of the neutral range. Medium-term momentum has also turned negative. The MACD histogram is printing in the red with a declining trajectory which points to accelerating negative momentum and lower prices.

Positive Sentiment Weighs on Gold Prices

Gold prices lost ground as riskier assets gained traction. As stock prices move higher, US yields move in tandem. The higher yields reflect the market’s belief that the dark clouds that have covered any trade agreement could be getting lifted. Higher US yields and a weak European economy point to a stronger dollar which weighs on the price of the yellow metal. Better than expected earnings were released on Tuesday in the banking sector which buoys the US stock market, raising yields and pushing gold lower.

USD/JPY Fundamental Daily Forecast – Investors Shedding Safe-Haven Yen Amid Upbeat Brexit Comments

The Dollar/Yen is trading higher and in a position to take out last week’s high at 108.626 after a string of better-than-expected earnings reports offset concerns over U.S.-China trade relations. A reversal to the upside in U.S. Treasury yields and increased demand for risky assets are also driving investors away from the lower-yielding Japanese Yen.

At 15:33 GMT, the USD/JPY is trading 108.801, up 0.402 or +0.36%.

Upbeat Brexit Outlook

Positive news over Brexit is also reducing demand for the safe-haven Japanese Yen. This move is being fueled by the latest comments on Brexit from European negotiator Michel Barnier sounded an optimistic tone.

“Our team(s) are working hard, and work has just started now today, this work has been intense over the weekend and yesterday, because even if the agreement will be difficult, more and more difficult, to be frank, it is still possible this week,” Barnier told reporters in Luxembourg on Tuesday morning.

Treasury Yields Rise

U.S. Treasury yields are on the rise on Tuesday after opening lower, making the U.S. Dollar a more attractive asset. Traders are saying the move is being fueled as investors dump safe-haven assets like the Japanese Yen amid increasing hopes for a Brexit deal.

U.S. Equities Strengthen

The Japanese Yen is being further pressured by a sharp rise in U.S. equities as corporate earnings season go off to a strong start. The early rally was ignited by strong performances in the banking and health care sectors.

Shares of J.P. Morgan Chase jumped 3.8% after its third-quarter numbers topped analyst expectations. The company’s revenue also hit a record, boosted by home and auto loans along with credit cards.

UnitedHealth posted a quarterly profit that topped analyst expectations by 13 cents per share. The company’s results got a boost from growing pharmacy benefits. UnitedHealth also hiked its full-year earnings guidance. UnitedHealth shares climbed 8%.

Increasing demand for risk is good for the U.S. Dollar because of the carry trade, whereby investors sell borrowed Yen from Japanese banks to buy U.S. equities.

Kuroda Speaks

Earlier today, the Bank of Japan (BOJ) raised its assessment for one of the country’s nine regions and stuck to its sanguine view on the rest, though frail factory production and exports suggested pressure for more stimulus is unlikely to ease anytime soon.

BOJ Governor Haruhiko Kuroda said on Tuesday the central bank would not hesitate to take additional easing steps if risks to the economy grow and threaten momentum toward its 2% inflation target.

“We need to pay closer attention to the possibility that momentum toward achieving our price target will be lost,” Kuroda said in a speech at a quarterly meeting of the central bank’s regional branch managers.

GBP/USD, USD/CAD, USD/MXN – North American Session Daily Forecast

After an impressive late-week rally, GBP/USD has settled down early this week and is range-bound. In the North American session on Tuesday, the pair is trading at 1.2646, up 0.29% on the day.

Brexit Negotiations Continue

Negotiations continue at a feverish pace, as London and Brussels and continue to try and hammer out a withdrawal agreement, with only two weeks to go before the U.K. is scheduled to depart the EU. The main sticking point continues to be the Irish border, with the EU insisting on a customs border between Ireland and Northern Ireland, which would be a problematic arrangement for the U.K. Can the sides come up with a creative solution? The pound soared last week on news that the sides were close to an agreement, and traders can expect further volatility this week, as the sides rush to reach an agreement before the October 31 deadline.

Technical Analysis

GBP/USD has been range-bound since Friday. The pair tested resistance at 1.2653 earlier on Tuesday. Above, there is resistance at 1.2750. On the downside, there is support at 1.2585.

GBP/USD 4-Hour Chart

USD/CAD

USD/CAD recorded sharp losses to end the week, but has leveled off this week. In Tuesday’s North American session, the pair is trading at 1.3234, up 0.06%.

Investors Brace for Soft Cdn. CPI

Canadian consumer inflation contracted in August, marking the second decline in three months. The September data will be published on Wednesday. The markets are expecting another decline, with an estimate of -0.3%. Traders can expect pressure on the Canadian dollar is inflation declines for a second straight month.

Technical Analysis

USD/CAD remains range-bound this week. The pair is putting strong pressure on resistance at 1.3240 and could test this line later on Tuesday. On the downside, there is immediate support at the round number of 1.3200. The pair tested this line on Friday but has since retraced upwards.

USD/CAD 4-Hour Chart

USD/MXN

USD/MXN is flat in Tuesday trade. In the North American session, the pair is trading at 19.26, down 0.03% on the day.

Technical Analysis

After gains of above 1.0% last week, the Mexican peso continued its downward movement and tested support at 19.30. This level had remained intact since early August. The pair is within striking distance of support at 19.20 and with the trend pointing down, this level could be tested during the week. Above, there is resistance at 19.45.

Futures Rise, Earnings Season Off To Shaky Start, Trade Concerns Dampen Investor Appetite

The U.S. Futures Are Rising In Early Trading

The U.S. indices are indicated higher in early trading as earnings season kicks off. Today’s news includes reports from more than a half-dozen important names and the results are mixed. The big banks are the main focus as JP Morgan, Goldman Sachs, Wells Fargo, and Citigroup all report. JP Morgan posted a nice beat on the top and bottom lines driven by strength in consumer lending. Citigroup, Goldman Sachs and Wells Fargo are all trading lower after reporting weaker than expected numbers.

In other news, United Health and Johnson & Johnson both beat expectations. Johnson & Johnson also reports strength in the consumer units while United Health upped its full-year guidance. Both stocks are moving higher by roughly 2.0%.

The Down Jones Industrial Average, S&P 500, and NASDAQ Composite are all up about 0.25% in early trading. The sentiment is buoyed by trade hopes but also tempered by caution. While China and the U.S. have signaled a Phase 1 deal is at hand there is still no deal in place. Until such time traders are cautioned to be prepared for negative headlines. On the economic front, the Empire State Manufacturing Survey rose modestly to 4 from last months 2.0 as production and employment edge higher.

European Markets Are Mixed, Hope For A Smooth Brexit Persist

European markets are mixed at midday on Tuesday after remarks from the EU’s Brexit team renewed hope. Michel Barnier said that despite the increasing difficulty it is still possible to reach a deal this week. The DAX and CAC are both up about 0.35% to 0.40% while the FTSE is down roughly -0.25%. Retail is in the lead with a gain of 0.90%.

In economic news, unemployment ticked higher in the UK. The 3rd quarter figure came in at 3.9%, a tenth higher than the previous. In stock news, shares of Hays are up 5.5% after it reported flat results. The good news is weakness in the UK was offset by strength in offshore markets. Share of Wirecard, however, are not so buoyant. The Financial Times did an expose on the company’s accounting practices and shares are down -17% because of it.

Asia Mixed, Trade Hopes Clash With Trade Fears

Asian markets are wildly mixed after Tuesday’s session. The Japanese Nikkei led the market with a gain of 1.9% after being closed Monday for holiday. Chinese indices are broadly lower following the release of inflation data. CPI rose 3% on a 69% increase in pork prices while PPI fell. The Shanghai Composite is down -0.56% on the news, the Hang Seng a more tepid -0.07%. Elsewhere in the region, the ASX and Kospi are both up mildly.

Crude Steady as Investors Eye U.S-China Trade Talks

Crude oil is showing limited movement on Tuesday. In the European session, WTI is trading at $53.37, down $0.14, or 0.26%. Brent crude is trading at $59.18, down $0.04, or 0.02%. U.S. crude oil posted a late-week rally, climbing over 5%. However, the rally fizzled out, as crude reversed directions on Monday and dropped below the $53 level earlier on Tuesday.

Trade Deal Optimism on Hold

The ongoing trade war between China and the U.S. has taken a toll on both economies and contributed to weaker global growth. Recent figures show that the Chinese economy has been hit hard, which may force the Chinese to show some flexibility in the current round of talks between the sides. In September, Chinese exports to the U.S. declined by 22%, on an annualized basis. The Chinese manufacturing sector is sputtering, as the Chinese Manufacturing PMI has pointed to contraction for the past four months.

The markets were brimming with optimism last week, as the U.S. and China renewed trade talks after a long break. Previous rounds of negotiations have ended without success, but these talks are taking a different approach, with a focus on achieving a limited deal, which is being labeled “Phase 1”. The aim is to reach a partial agreement and leave thorny issues such as intellectual property theft for another day. However, China is saying that additional talks will be needed before a limited agreement is reached. In the meantime, the Trump administration suspended higher tariffs which were set to take effect this week. Still, tariffs that are scheduled to take effect in December remain in place. The level of progress in these talks can have a significant effect on crude prices, since a trade agreement between the two largest economies in the world would re-energize the world economy and increase demand for crude from China and other major economies.

WTI/USD 4-hour Chart

Price of Gold Fundamental Daily Forecast – Just Enough Concern Over Trade Deal to Underpin Prices

Gold futures are edging higher on Tuesday amid concerns over U.S.-China trade relations. Lower U.S. Treasury yields are helping to underpin prices, while gains are being capped by increased demand for risky assets and a firmer U.S. Dollar. Traders are also attributing the early strength to dampened hopes of a prolonged trade deal between the United States and China, and ahead of a summit that will determine how Britain leaves the European Union.

At 12:21, December Comex gold is trading $1497.90, up 0.30 or +0.035.

The lukewarm response to phase one of the trade deal continues to encourage gold bulls to hang on to their long positions. However, this isn’t really bullish news either. It seems to be just enough to prevent the market from collapsing like it did last week.

At the same time, the fact that the two sides keep talking is helping to keep a lid on prices with some saying the threat of a more permanent deal being signed at any time over the next few weeks is enough to keep even the strongest bulls from adding to their long positions.

The Brexit narrative is also playing with investor sentiment ahead of the make-or-break summit between Britain and the European Union on Thursday and Friday that will determine whether Britain is headed for a deal to leave the bloc on October 31, a disorderly no-deal exit or a delay.

Daily Forecast

There are no major economic releases in the United States on Tuesday, but it is the start of earnings season on Wall Street. Although most analysts are forecasting a weak earnings season, today’s session started with a bang with a number of major companies posting big earnings beats.

Stronger-than-expected reports could help boost stock prices, which could put some pressure on demand for gold.

Traders are also monitoring the situation in the Middle East after the U.S. decided to stop trade negotiations with Turkey and raised steel prices to 50%. Gold could find support if the situation escalates in the area.

Oil Price Fundamental Daily Forecast – Choppy Trade Expected as US-China Hammer Out Details of Trade Deal

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Tuesday, after clawing back most of its early session losses. The catalyst behind the second day of weakness is worry over U.S.-China trade relations that is raising concerns over the weakening global economy and declining demand growth.

At 11:55 GMT, December WTI crude oil is at $53.29, down $0.36 or -0.68% and December Brent crude oil is at $59.04, down $0.31 or -0.56%.

Weak data from China is also pressuring prices. Earlier on Tuesday, the National Bureau of Statistics (NBS) reported that China’s factory gate prices declined at the fastest pace in more than three years in September. That follows customs data on Monday that showed Chinese imports had contracted for a fifth straight month.

On Friday, the announcement of a partial trade deal between the United States and China helped boost prices, but these gains were erased on Monday when China said it wanted to continue discussions before agreeing to the first phase of the deal. This news rekindled concerns over demand ground.

However, the market did get a slight boost on Tuesday after OPEC Secretary-General Mohammad Barkindo said OPEC and its allies “will do whatever (is) in its power” to sustain oil market stability beyond 2020.

Rising tensions in the Middle East are also providing some support on concerns over a possible support disruption after President Trump imposed sanctions on Turkey and demanded the NATO ally stop a military incursion in northeast Syria that is rapidly reshaping the battlefield of the world’s deadliest ongoing war.

According to CNBC, the move highlights increasing instability in the Middle East amid months of attacks on tankers and oil sites in and around the oil-exporting Gulf region.

Daily Forecast

It seems U.S.-China trade relations will be the main focus for traders for several weeks or until the two economic powerhouses sign the “Phase One” trade agreement. So expect a volatile two-sided trade.

Short-term investors will be watching U.S. inventories. Prices could get a boost this week as investors are expecting a drawdown in crude inventories in the United States.

This week’s American Petroleum Institute (API) and U.S. Energy Information Administration (EIA) inventories reports are expected to show a slight draw down.

Natural Gas Price Fundamental Daily Forecast – Traders Await Further Confirmation of Late October Cold Spell

Natural gas futures are inching lower early Tuesday after failing to follow-through to the upside overnight, following two days of higher gains. It’s probably too early to pass judgment on the price action, which is suggesting investor indication and impending volatility.

The market could also be going through a transition period after last week’s steep sell-off as weather models show colder temperatures arriving in late October. Buyers are being a little tentative, however, because they aren’t sure if the weather pattern is indicating a “cold snap” or something more pronounced.

The catalysts underpinning the market are stronger spot market prices amid forecasts pointing to cooler temperatures in store for the Great Lakes and Northeast later this week.

Additionally, guidance from both the American and European models reflected a colder pattern in the 11-to-15 day period, according to Bespoke Weather Services.

At 11:47 GMT, December natural gas is trading $2.504, up $0.006 or +0.24%.

Short-Term Weather Outlook

According to NatGasWeather for October 15-21, “A strong cool shot will sweep across the Midwest the next few days after tracking out of the Rockies and Plains with lows of 20s and 30s. Texas and the southern US will be mostly comfortable with highs of upper 60s to lower 80s, although locally hotter over the Southwest, South Texas & Florida. The West will see a mix of weather systems and warm breaks, coolest Northwest with 50s and 60s, while hottest over California and the Southwest with 70s to near 90 Fahrenheit. Overall, stronger demand this week compared to last week due to cooling across the North.”

Mid-Term Weather Outlook

Bespoke chief meteorologist Brian Lovern said, “…models appear to be bringing a wave of tropical forcing out toward the central Pacific, allowing a warmer ridge to develop in the West, sending a colder trough into the eastern half of the nation. The bulk of the forcing hands back over the Indian Ocean, however, and without blocking in place, it is possible that this colder push is simply another transient one.”

Daily Forecast

The shift in the weather pattern has been just enough so far to chase out a few of the weaker shorts. The stronger short-sellers want to see stronger evidence of a prolonged cold spell.

“Even with the colder trends over the weekend, gas-weighted degree day totals over the next 15 days are still on track to fall below normal,” Bespoke said.

“We respect the model output but want to see more in order to be convinced that this is a fundamental shift in base state toward higher than normal demand, as opposed to just another window of variability,” Bespoke chief meteorologist Brian Lovern said.

The daily chart indicates the direction of the market on Tuesday will likely be determined by trader reaction to a minor 50% level at $2.278. Holding above it will indicate the short-covering is getting stronger.