Metals Take a Cue from the Markets

It was just that kind of a day yesterday. A day when nothing much happens, a slow drab and rangy day all across the markets. Some had a bearish tone while some had a bullish tone but the overall mood was the same, not to take any major positions, not to do anything untoward until the markets wake up from their slumber. The metals and the commodities were no exception to this rule.

As indicated yesterday, Gold continued its tight range between 1311 and 1320. This is a smaller range within a larger range of 1303 and 1330. Mark off these 2 ranges and these could serve as very important ranges in the coming weeks unless Gold chooses to do something dramatic, post-FOMC. Gold sits at 1319 at the time of writing and for the past 24 hours it hasn’t even made an attempt at the range top at 1320. We could see an attempt at this price sometime today but we are not very enthusiastic about a break of this price today. If we see some USD weakening after the FOMC tomorrow, we could see a break of 1320 and Gold easily target 1330. A break of this could see Gold vault towards 1350.

Gold Hourly
Gold Hourly

Its cousin, Silver, also had an unusually quiet day. Unusual, as Silver has been more liquid and volatile over the past month than Gold. Silver was also held into a tight range between 19.29 and 19.11 and these would again mark the range for today as well. Only a break in either direction could see a larger move. Otherwise, the commodity is set to have a rangy day today as well. It would be advisable for traders to sit on their hands for the day or at least wait for the price to reach the range top or bottom before trying to take a position. As we said, its that kind of a day.

Oil was a bit different as it genuinely tried to make a break at the top and raced towards 44.75 on news that Oil producers could start thinking about cutting their output to control the falling oil prices but this break was only short-lived as the price was quickly pushed back into range and it now sits at 43.52, down 0.43%. This region has some good support and hence could hold for the rest of the day. So, for now, the better option is to buy Oil intra-day for a move to the top of the range.

DAX Fundamental Forecast – September 20, 2016

Stock markets around the world generally had a good day yesterday with some ranging all day with a bullish bias while others making a decent break to the upside providing good returns to those who were long. The German DAX also had a bullish day after a fall last Friday. It recovered smartly from the dumping it received last Friday and ended the day at 10373.87, up about 97.7 points over its close on Friday.

This was due to the overall good mood surrounding the markets all across the world and also with the increasing realisation that the Fed would not be increasing the interest rates this week, which will be generally good for the stock markets. This positive tone is set to continue today as well as the S&P closed flat for the day yesterday and the Nikkei having a bullish day today. Yesterday, the DAX tried to break through the resistance at 10387 but with a failure there, it dropped back into the range and it sits at 10345 as we write.

GDAX Hourly
GDAX Hourly

The DAX is expected to open in a bullish manner and we could see the DAX challenge the top of the range at 10387 first and then 10424 where we could see some very strong resistance building. Considering the fact that most markets are still range-bound, we could safely expect 10387 to hold for today. The direction for the rest of the week would depend on the outcome of the Fed meeting on Sep 21 and if the rates are held, then it could continue to provide a bullish tone to the DAX for the rest of the week and that would be the time when we can safely expect a challenge to the resistance at 10424. The support comes in at 10275 and we could see a visit here if the volatility picks up as we head into the meeting and the rate statement. These two points should then cap the movement of the DAX for the rest of the week.

GBP/USD Fundamental Forecast – September 20, 2016

Ever since Brexit, the pound has been like a kid with a new-found toy, running all over the place and not wanting to stop anywhere anytime for a break or a rest. The same continues for the pound, which has been one of the most volatile currency even during times of low-volatility as it has been over the past week.

Last Thursday and Friday, we finally saw some correction in the pound which was having a bullish tone till then due to positive data out of the UK over the past few weeks. Last Friday saw the pound correct by close to 250 pips and yesterday, the drop was reversed as the pound chose to take a bullish tone. The pair moved up to its resistance in the 1.3080 region and tried to make a break of it but could not sustain the break. So, by the end of the day, the pair dropped back below 1.3050 which confirmed the short term bearish bias. This could lead the pound downwards to the support region at around 1.2930 which is a target that can be reasonably expected between now and the FOMC statement on Sep 21.

GBPUSD Hourly
GBPUSD Hourly

We expect this bearish bias on the pound to stall at around 1.2930-50 and post the release of the FOMC statement, we can expect the pound to make a run towards the resistance at 1.3180-3200. The USD strength is expected to return back in the coming weeks and these two points could then mark the range of the pound over the next few weeks unless there is a decisive break on either side.

For today, we can expect the pound to trade with a bearish tone with 1.3080 expected to continue to cap the upper side and with the ultimate target as 1.2950.

USD/CAD Fundamental Forecast – September 20, 2016

The USDCAD pair seems to have been affected by a disease that has been familiar to most markets and many currency pairs over the past few days. Though the pair has been having a bullish time of late, for the last 24 hours, it sits in a tight range not knowing what to do and which direction it should be taking in light of the FOMC announcement scheduled for Sep 21, a predicament that seems to be affecting most markets across the globe in the last few days.

To its credit, it sits on top of its daily range at 1.32, a range that has been established since August 1 of this year. It sits just beneath the daily 200 SMA, an indicator used by a lot of top traders and fund managers across the world. A break of this top could see USDCAD enter into a new bullish phase while a top failure could see the pair drop back into its daily range for atleast a couple of more weeks. The direction that it will take will be known in the next couple of days.

USDCAD Daily
USDCAD Daily

Of late, USDCAD has been inversely proportional to the price of oil mainly due to the dependency of both on the value of the dollar. With oil prices expected to continue to weaken in the medium term, due to oversupply across the world, we could expect USDCAD to eventually break the top of its range and move higher. But when this would happen remains the key. Like any good trader, it is always better to wait for the market to show its hand rather than jump in based on assumptions. For now, the pair has not shown any inclination to break the range and so it is better to either wait for the pair to move to the range bottom to go long or wait for the break of the top. And when the break does indeed come, do remember to go in the direction of the break and not make the familiar mistake of trying to fade the break.

For today, expect USDCAD to continue to hold the top of the range with a bearish tone targeting 1.3150.

EUR/USD Fundamental Forecast – September 20, 2016

EURUSD had one of the tightest ranging days yesterday as the markets await a range of news this week. This includes the FOMC statement and the meetings of the BOJ and RBNZ, all of which are expected to have a large effect on different markets of the world.

The EURUSD range yesterday was a total of 47 pips against the usual average of close to 100 pips that the pair is supposed to have. A look at the charts will tell us that the pair is very close to a strong support and this should prevent any movement downwards atleast until the release of the FOMC statement. This strong support comes in not only due to the fact that the price bounced off this region during previous times but also that the daily 200 SMA comes in at around 1.1155.

EURUSD Hourly
EURUSD HourlyEUR

Fundamentally also, we have long held the belief that with the Brexit causing a large fall in the value of the pound, it is important for the banks and other institutions to shore up the value of the euro and not allow it to fall too much as Europe simply cannot afford to have two weak major currencies.

We also believe that the Fed would not raise rates this week and this could disappoint a few dollar bulls who expect a hike this week. Hence, we could see a period of dollar weakness after the release of the statement on Sep 21 and this could help EURUSD bulls to use 1.1155 as the base to move the pair higher following the meeting. We expect the USD strength to return back in the following weeks which should keep the pair range bound for the rest of the year.

For today, EURUSD is expected to have a tight range with 1.1155 forming the base and 1.1200 forming the ceiling. A break of 1.1200 could open the path to 1.1230.

Gold Continues to Range Ahead of FOMC

All eyes are on the FOMC meeting and statement this week and though a small section of the market continues to expect a rate hike this year, it is becoming increasingly unlikely that this will happen anytime this year. Gold has taken a cue from ranging markets and has continued to have a bearish tone but within set ranges. The range was set on Sep 2, which had a long bar on the charts with its top at 1330 and bottom at 1304 and this range has continued to hold from that day. Somewhere close to the bottom of the range was visited last Friday as some strong CPI data raised the hope of dollar bulls for a hike this year.

Gold Hourly Chart
Gold Hourly Chart

The bottom continues to hold and for today, we expect Gold to hold 1313 and continue to range between 1313 and 1320 for the rest of the day. This is expected to continue till the FOMC statement after which, a temporary USD weakness would set in which could see Gold visit the top of the range at 1330.

 

Lately, Silver seems to have a mind of its own and it could also be due to the ranging of Gold that has caused Silver to have an increasingly bullish tone. The Gold bulls might be tired of all the Gold ranging and weakness over the past few months and may have shifted to the cheaper Silver. Silver continues to have a bullish bias lately, though, for today, it is at the top of its daily range and hence could see some correction as the day wears on. The short-term bias of silver is bearish (as it is below the hourly 200 SMA) and this could cause a move of its price towards 19.00 over the next 24 hours.

Oil continues to have a bearish tone overall with the supply exceeding demand in many parts of the world. This has put a huge pressure on the price of Oil lately. With the dollar also gaining strength on rate hike expectations, the oil/dollar price has taken a large hit and for today, Oil is expected to correct back towards 44.00 and further depending on the strength of the dollar over the next 24 hours.