Natural Gas Price Fundamental Daily Forecast – Market Edges Lower on Mild Weekend Temperature Forecast

Natural gas futures fell on Friday as investors booked profits ahead of the weekend on fresh uncertainty generated by the latest weather patterns. Rather than guess at the weekend results, traders decided to take to the sidelines instead of risking a potential gap lower opening on Monday if the weekend weather came in milder than expected. According to Natural Gas Intelligence (NGI), traders were focused on a near-term shift in weather that is expected to usher in a reprieve from the oppressive heat that has defined the summer to date over much of the Lower 48.

On Friday, September natural gas futures settled at $3.914, down $0.145 or -3.57%.

NatGasWeather Short-Term Outlook

“National demand will ease to much lighter levels” over the coming week “as weather systems sweep across much of the eastern half of the U.S. with highs of upper 60s to lower 80s,” NatGasWeather said. The firm projected the coolest conditions across the Great Lakes and Northeast. “It will still be hot next week over the West and Plains, including much of Texas, but not enough to counter” the comfortable conditions in the East.

Higher Production Coming?

NGI is reporting that Texas Eastern Transmission Co. (Tetco) notified shippers ahead of trading Friday that it had received approval from federal regulators to return its 30-inch diameter system to full operating pressure, with capacity expected to increase by roughly 0.5 Bcf/d starting in the coming week.

Bespoke Weather Services said this would “have some impact on Henry Hub pricing specifically.” However, the firm doesn’t see the restored capacity “significantly affecting the supply/demand balance,” and it anticipates a return of upward pressure on prices in August.

“Production estimates held around 91.5 Bcf on Friday, shy of the 93 Bcf or higher that Bespoke has said may be needed to keep pace with demand that has been driven by both domestic cooling needs – particularly in the drought-stricken West – and robust levels of liquefied natural gas (LNG) activity. LNG feed gas volumes consistently approached 11 Bcf over the past week, putting export activity near capacity levels,” NGI wrote.

Short-Term Outlook

Although prices struggled last week, it’s not always about heat driven rallies in the summer. Most professionals put the emphasis on low supply heading into winter. If the U.S. starts the winter heating season under supplied then prices are likely to soar if it gets extremely cold.

As far as the summer heat is concerned, sure prices rise when there is intense heat, but production between the end of summer and the start of winter can help increase supply. This is why cold weather rallies are often the most dramatic if the heating season starts undersupplied.

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

Oil Price Fundamental Daily Forecast – Tightening Supplies, Rising Demand Alleviating COVID Concerns

U.S. West Texas Intermediate and international benchmark Brent crude oil futures finished higher on Friday, led by the global benchmark which topped the $75 a barrel level, putting it in a position to challenge its July top at $76.79 over the near-term. Meanwhile, U.S. crude was supported as domestic supplies tightened further after shrinking to the smallest levels since January 2020.

On Friday, September WTI crude oil settled at $73.81, up $0.19 or +0.26% and October Brent crude oil closed at $75.19, up $0.09 or +0.12%.

Bullish Data from Genscape

Reuters reported that data from information provider Genscape indicted that the inventories at the Cushing, Oklahoma storage hub have continued to draw. Cushing stockpiles were seen at 36.299 million barrels by Tuesday afternoon, down 360,917 barrels from July 23.

Supported by Government Inventories Data

The Cushing inventory data came a day after the U.S. Energy Information Administration (EIA) reported that domestic crude inventories fell by 4.1 million barrels in the week to July 23. This was its lowest level since January 2020. Traders said imports and a production drop contributed to the rise.

Gasoline stocks fell by 2.3 million barrels, more than double forecasts for a 916,000-barrel drop. Distillate stockpiles, which include diesel and heating oil, dropped by 3.1 million barrels, data showed, also exceeding expectations for a 435,000-barrel drop.

Net U.S. crude imports fell last week by 616,000 barrels per day, while weekly field production fell by 200,000 bpd to 11.2 million bpd.

Refinery crude runs fell by 132,000 bpd, and refinery utilization rates slipped 0.3 percentage point, EIA data showed.

Fed Comments, Weaker Dollar, Iran Issues Improve Outlook for Higher Prices

The Fed said on Wednesday the U.S. economic recovery is still on track despite the rise in coronavirus infections. However, since it didn’t set a time to start tapering its bond purchases, Treasury yields fell, dragging down the U.S. Dollar. A weaker U.S. Dollar can boost investor demand for dollar-denominated commodities, including crude oil.

Further supporting the outlook for tighter supplies was a statement from Iran blaming the United States for a pause in nuclear talks, which could mean a delay in a return of Iranian barrels to the market.

US Oil & Gas Rig Count Falls for First Week in Eight – Baker Hughes

U.S. energy firms cut the number of oil and natural gas rigs operating for the first time in eight weeks, even though the rig count rose for 12 straight months, amid an industry stampede to reward investors with share buybacks instead of boosting production.

The U.S. oil and gas rig count, an early indicator of future output, fell by three to 488 in the week to July 30, according to data on Friday from energy services firm Baker Hughes Co.

Short-Term Outlook

Traders are watching the COVID developments for any signs of demand destruction, however, even with the number of cases rising globally, so far nothing is showing up in the demand numbers to suggest near-term problems.

“While the risk to the demand outlook could increase due to governments across Europe reducing permission for public gatherings, we note that markets have already undergone several rounds of mobility restrictions… yet, the global recovery was not significantly derailed,” analysts from Citi said in a note.

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

Price of Gold Fundamental Daily Forecast – Sideways to Lower As Rangebound Trade Resumes

Gold prices are trading sharply lower late in the session on Friday amid profit-taking ahead of the weekend in reaction to a rebound in the U.S. Dollar index. The weakness has wiped out more than half of yesterday’s gains that were spurred by U.S. Federal Reserve Chair Jerome Powell’s reassure that a rate hike was not in the cards for the time being.

At 19:50 GMT, December Comex gold futures are trading $1817.40, down $18.40 or -1.00%.

Although the market is weaker on Friday, it’s still on-track for a weekly gain. In addition to Powell’s initial comment about a rate hike, bullish traders also responded positively to his remark that the U.S. job market still had some ground to cover before the Fed would pull back support.

Most traders agree that gold looks good at current price levels especially after forming a support base over a two-week period. The fact that the Federal Reserve didn’t really say anything that changes its direction on mortgage/bond purchases or rate hikes at least helps to put a floor under the market.

However, since the next Fed meeting doesn’t take place until September 21-22, gold traders are going to be without guidance from policymakers for nearly two-months. This means that they will be at the mercy of volatile economic reports and Fed speaker comments for weeks.

On June 16, the Fed moved up its date for the next Fed rate hike and the gold market collapsed from $1860.40 to $1754.50 in just 10 sessions before recovering to $1839.00 over the next 11 days.

It’s going to be hard to justify $1860.00 gold at this time and without the Fed saying anything meaningful until the third week of September, but the economic reports between now and then could do the talking for them.

Between last Wednesday’s meeting and the September 22 Federal Reserve policy statement, policymakers will have had a chance to see two Non-Farm Payrolls and Consumer Price Inflation (CPI) reports. But gold traders will have had the same chance so I think that over the next seven weeks or so, the U.S. economic data will play a greater role in determining the direction of gold prices.

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

Gold at a Crossroads of Hawkish Fed and High Inflation

So, so you think you can tell heaven from hell, a bull market from a bear market? It’s not so easy, as gold seems to be at a crossroads. On the one hand, accelerating inflation should take gold higher, especially that the real interest rates stay well below zero. On the other hand, a hawkish Fed should send the yellow metal lower, as it would boost the expectations of higher bond yields. The Fed’s tightening cycle increases the interest rates and strengthens the US dollar, creating downward pressure on gold.

However, gold is neither soaring nor plunging. Instead, it seems to be in a sideways trend. Indeed, as the chart below shows, gold has been moving in a trading zone of $1,700-$1,900 since September 2020.

Now, the obvious question is: what’s next? Are we observing a bearish correction within the bull market that started in late 2018? Or did the pandemic and the following economic crisis interrupt the bear market that begun in 2011? Could a new one have started in August 2020? Or maybe gold has returned to its sideways trend from 2017-2018, with the trading corridor simply situated higher?

Oh boy, if I had the answers to all the wise questions that I’m asking! You see, the problem is that the coronavirus crisis was a very special recession – it was very deep but also very short. So, all the golden trends and cycles have intensified and shortened. What used to be years before the epidemic, took months this time. Welcome to a condensed gold market!

Hence, I would say that the peak of July 2021 marked the end of the bull market which started at the end of 2018, and triggered a new bear market, as traders decided that the vaccines would save the economy and the worst was behind the globe. This is, of course, bad news for all investors with long positions.

I didn’t call the bear market earlier, as the combination of higher inflation and a dovish Fed was a strong bullish argument. However, the June FOMC meeting and its dot-plot marked a turning point for the US monetary policy. The Fed officials started talking about tapering, divorcing from its extraordinary pandemic stance.

So, I’ve become more bearish in the short-to-medium term than I was previously. After all, gold doesn’t like the expectations of tapering quantitative easing and rising federal funds rate. The taper tantrum of 2013 made gold plunge.

Nonetheless, the exact replay of the taper tantrum is not likely. The Fed is much more cautious, with a stronger dovish bias and better communication with the markets. The quantitative tightening will be more gradual and better announced. So, gold may not slide as abruptly as in 2013.

Another reason for not being a radical pessimist is the prospects of higher inflation. After all, inflation is a monetary phenomenon that occurs when too much money is chasing too few goods – and the recent rate of growth of the broad money supply was much higher than the pace needed to reach the Fed’s 2% target. The inflationary worries should provide some support for gold prices. What gold desperately needs here is inflation psychology. So far, we have high inflation, but markets remain calm. However, when higher inflation expectations set in, gold may shine thanks to the abovementioned worries about inflation’s impact on the economy – and, thanks to stronger demand for inflation hedges.

In other words, gold is not plunging because the Fed is not hawkish enough, and it’s not rallying because inflation is not disruptive enough. Now, the key point is that it’s more likely that we will see a more hawkish Fed (and rising interest rates) sooner than stagflation. As the chart below shows, the real interest rates haven’t yet started to normalize. When they do, gold will suffer (although it might not be hit as severely as in April 2013).

Therefore, gold may decline shortly when the US central bank tapers its asset purchases (and the bond yields increase) while the first bout of inflation softens. But later, gold may rise due to the negative effects of rising interest rates and the second wave of higher inflation.

In other words, right now, the real economy is thriving, so inflation is not seen as a major problem, as it is accompanied by fast GDP growth. However, the economy will slow down at some point in the future (partially because of higher inflation) – and then we will be moving towards stagflation, gold’s favorite macroeconomic environment.

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 a 7-day no-obligation trial for 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: Effective Investment through Diligence & Care.

 

USD/CAD Daily Forecast – Test Of Resistance At 1.2480

U.S. Dollar Moves Higher After Hawkish Comments From Fed’s Bullard

USD/CAD is currently trying to settle above the resistance at 1.2480 while the U.S. dollar is gaining ground against a broad basket of currencies.

The U.S. Dollar Index has recently managed to get back above the resistance at 92 and is testing the next resistance level which is located at 92.15. In case this test is successful, the U.S. Dollar Index will move towards the resistance level which is located near the 20 EMA at 90.30 which will be bullish for USD/CAD.

Today, U.S. reported that Personal Income increased by 0.1% month-over-month in June while Personal Spending grew by 1%. Both reports exceeded analyst expectations.

Foreign exchange market traders also had a chance to take a look at the final reading of U.S. Consumer Confidence report for July which showed that Consumer Confidence declined from 85.5 in une to 81.2 in July compared to analyst consensus of 80.8.

U.S. dollar received additional support after Fed’s Bullard stated that Fed should begin to reduce its asset purchase program this fall and finish the program at the beginning of 2022. It should be noted that the recent Fed’s commentary remained dovish, and it remains to be seen whether Bullard’s views are shared by the majority of Fed members.

Technical Analysis

usd cad july 30 2021

USD to CAD managed to settle above the resistance at 1.2450 and is testing the next resistance level at 1.2480. In case this test is successful, USD to CAD will move towards the resistance at 1.2500.

A move above the resistance at 1.2500 will open the way to the test of the resistance at the 20 EMA at 1.2520. If USD to CAD gets above this level, it will head towards the next resistance at 1.2550.

On the support side, the nearest support for USD to CAD is located at 1.2450. If USD to CAD gets back below this level, it will move towards the support at the 50 EMA at 1.2435.

A successful test of the support at the 50 EMA will push USD to CAD towards the support at 1.2420. If USD to CAD manages to settle below this level, it will head towards the next support at 1.2385.

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

USD/CAD: Loonie Dips After Early Gains But Set to End Week Strong

The Canadian dollar pared early gains against its U.S. counterpart on Friday as crude oil prices marched higher and the greenback recovered after U.S. consumer spending outpaced expectations in June.

Today, the dollar to loonie conversion rose to 1.2472, up from Thursday’s close of 1.2444. The Canadian dollar had lost about 3% in June – posting the biggest monthly drop since March 2020, the early days of the pandemic, and weakened about 0.5% so far this month. Although, the loonie is set to close this week with a gain

“The CAD has extended its rebound this week, even if gains came more as a reflection of a generally softer USD. Commodity prices strengthened broadly, driving the Bloomberg Commodity Index to a new cycle and six-year high Thursday while US-Canada 2Y spreads remain at a CAD-supportive –26bps. Our fair value models continue to reflect a significant USD overvaluation against the CAD (and a broadly overvalued USD against its major currency peers), although CAD-drivers have turned even more positive this week and our FV estimate has edged to a new cycle low below 1.17,” noted Shaun Osborne Chief FX Strategist at Scotiabank.

“It remains to be seen how far the USD will correct lower, however. We think the Fed has put the market on notice that taper timing is a live debate now among policymakers, which may provide the USD with general support in the coming weeks. Speculative FX traders have largely abandoned short USD positions in recent weeks and heightened equity market volatility—something of a “tradition” in August—will tend to work against the CAD and may lift USDCAD towards the upper reaches of our estimated range for next week (1.2508).”

The dollar index, a measurement of the dollar’s value relative to six foreign currencies, was trading 0.3% higher at 92.145 at the time of writing. Still, it hovers close to this month’s low of 91.782.

The dollar stalled its rally after the Fed in its Wednesday’s monetary policy decision highlighted that the interest rate hike is far away. The U.S. central bank also did not give any hint about reducing its purchases of government bonds.

“In the final week of the Olympics, we think the dollar will at least be able to stabilise after the recent correction. The prospect of the Fed’s tapering should be cemented by good payrolls, while global risk assets may still struggle to look past China’s regulatory clampdown. Elsewhere, the BoE and RBA should not deliver any new guidance,” noted analysts at ING.

However, the risk that the world’s dominant reserve currency, the USD, recovery over the coming year is high, largely driven by the Fed’s expectation of two rate hikes in 2023. A strengthening dollar and growing risk that the Federal Reserve would tighten its monetary policy earlier than expected would push the USD to CAD pair higher.

Canada is the world’s fourth-largest exporter of oil, which edged higher on tight supply and rising demand. High oil prices lead to higher U.S. dollar earnings for Canadian exporters, resulting in an increased value of the loonie. U.S. West Texas Intermediate (WTI) crude futures was trading around $73.51 a barrel.

Why Amazon Stock Is Down By 7% Today

Amazon Stock Dives On Weak Q3 2021 Guidance

Shares of Amazon found themselves under significant pressure after the company released its second-quarter earnings report.

Amazon reported revenue of $113.1 billion, which was lower than analyst estimates. The company’s GAAP earnings of $15.12 per share exceeded analyst expectations but were not sufficient enough to provide support to Amazon shares.

In Q3 2021, Amazon expects to report revenue of $106 billion – $112 billion, which means that Amazon’s revenue will decrease compared to the second quarter. The company’s operating income is projected to be between $2.5 billion and $6 billion compared to $6.2 billion in Q3 2020.

The market was clearly shocked by the company’s quidance for the next quarter, and the stock opened with a big gap down. The stock has made an attempt to gain ground as some speculative traders decided to buy the dip, but it failed to develop upside momentum.

What’s Next For Amazon Stock?

Investors and traders got used to strong reports from Amazon so the soft Q3 2021 guidance dealt a major blow to the stock. Analysts expect that the company will report earnings of $55.86 per share in 2021 and $72.38 per share in 2022, so the stock is trading at roughly 46 forward P/E.

Amazon has always enjoyed rich multiples as investors believed in its growth story, and it remains to be seen whether one report will change the market’s view.

It should be noted that the report highlights potential problems for all leading tech companies as they may face slower growth in case the world succeeds in its battle against the coronavirus pandemic and gets back to normal life.

It’s too early to say that Amazon’s growth story is under question, and the stock will surely attract opportunistic buyers. However, it remains to be seen whether support from such buyers will be sufficient enough to push Amazon shares back to recent highs in the upcoming trading sessions.

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

Gold, USDX: Did Powell Spoil the Party?

The War on Debt

With Jerome Powell, Chairman of the U.S. Federal Reserve (FED), struggling to adequately define “transitory” during his press conference on Jul. 28, the market narrative has shifted from ‘hawkish FED’ to ‘dovish FED.’ And with the U.S. dollar bearing the brunt of investors’ wrath, the ‘all-clear’ sign flashed in front of the PMs. However, with post-FED rallies mainstays in the PMs’ historical record, the recent euphoria is much more semblance than substance. Thus, while Powell’s persistent patience elicits fears of financial repression, today’s economic environment lacks many of the qualities that made the gambit viable in the past.

To explain, financial repression includes measures such as direct government financing (the FED prints money and lends it directly to the U.S. Treasury), interest rate caps (yield curve control) and extensive oversight of commercial banks (reserve requirements, controlling the flow of credit). In a nutshell: governments use the strategy to keep interest rates low and ensure that they can finance their debt. And with the U.S. federal debt as a percentage of GDP currently at 128% (updated on Jul. 29), some argue that’s exactly what’s happening. Moreover, with the U.S. 10-Year real yield hitting an all-time low of -1.15% on Jul. 28, is the FED simply turning back the clock to the 1940s?

To explain, during World War Two, surging inflation helped the U.S. government ‘inflate away’ its debt. Think of it like this: if an individual borrows $100 at a 2% interest rate and repays the balance in full after one year, the total outlay is $102. However, if inflation is running at 4% (negative real yield), putting that money to work should result in an asset that’s worth $104 by the end of the year. As a result, the individual nets $2 (104 – 102) due to the inflation rate exceeding the nominal interest rate. And as it relates to the present situation, if the FED keeps real yields negative, then asset price inflation and economic growth should outpace nominal interest rates and allow the U.S. government to ‘inflate away’ its debt.

However, the strategy is not without fault. For one, financial repression occurs at the expense of bondholders. And with pension funds still required to meet the guaranteed outlays for retirees, suppressing bond yields hampers their ability to match assets and liabilities without incurring more risk.

More importantly, though, the FED doesn’t control the long end of the U.S. yield curve. For one, the FED owns roughly 23% of the U.S. Treasury market, and it has a monopoly on confidence, not long-term interest rates. Second, the U.S. 10-Year Treasury yield has dropped because investors fear that the Delta variant and/or the FED’s forthcoming taper will depress the U.S. economy. And eager to front-run the potential outcome, bond investors have positioned for slower growth, lower inflation, and, eventually, a reenactment of the FED cutting interest rates.

For context, even Powell himself admitted on Jul. 28 that the decline has caught him off-guard:

Source: Bloomberg

Likewise, following WW2, the U.S. government implemented structural reforms that are not present today. For example, prudent fiscal policy emerged in the late 1940s, with the government reducing spending and prioritizing debt reduction. In stark contrast, today’s U.S. government is already finalizing an infrastructure package and the federal deficit as a percentage of GDP is still growing. For context, a deficit occurs when the governments’ outlays (expenditures) exceed its tax receipts (revenues).

Please see below:

To explain, the green line above tracks the U.S. federal surplus/deficit as a percentage of GDP. If you focus on the period from 1943 to 1950, you can see that after the deficit peaked in 1943, reduced spending and strong GDP growth allowed the green line to move sharply higher. Conversely, if you analyze the right side of the chart, you can see that current spending still outpaces GDP growth (green line moving lower), and stoking inflation is unlikely to solve the problem.

U.S. 10-Year Treasury Yield Decouples… By a Lot

Circling back to the bond market, the U.S. 10-Year Treasury yield currently trades at an all-time low relative to realized inflation.

Please see below:

To explain, the scatterplot above depicts the relationship between the headline Consumer Price Index (CPI) and the U.S. 10-Year Treasury yield (available data dates back to 1967). For context, the headline CPI is plotted on the horizontal axis, while the U.S. 10-Year Treasury yield is plotted on the vertical axis. If you analyze the dot labeled “Current Reading,” you can see that the U.S. 10-Year Treasury yield has never been lower when the headline CPI has risen by 5% or more year-over-year (YoY). In fact, even if the headline CPI declined to the FED’s 2% YoY target, the U.S. 10-Year Treasury yield at 1.27% would still be the lowest relative reading of all time.

However, it’s important to remember that different paths can still lead to the same destination. For example, if inflation turns out to be a paper tiger, a profound decline in inflation expectations will have the same negative impact on the PMs as a sharp rise in the U.S. 10-Year Treasury yield.

Please see below:

To explain, the green line above tracks the U.S. 10-Year Treasury yield, while the red line above tracks the U.S. 10-Year breakeven inflation rate. If you analyze the gap on the right side of the chart, it’s a decoupling of the ages. However, while the two lines are destined to reconnect at some point, if the red line falls off a cliff, the impact on the PMs will likely mirror the 2013 taper tantrum. For context, gold fell by more than $500 in less than six months during the event.

Finally, and most importantly, U.S. Treasury yields are only one piece of the PMs’ bearish puzzle. Knowing that one shouldn’t put all their eggs in one basket, betting the farm on the U.S. 10-Year Treasury yield would be investing malpractice. That’s why self-similar patterns, ratios, technical indicators, the relative behavior of the gold miners, the USD Index and the FED’s taper timeline are all prudently considered when forming our investment thesis.

As an example, if gold had a perfect correlation with the U.S. 10-Year real yield, the yellow metal would be trading at roughly $1,940. However, with many other factors worthy of our attention, gold’s material underperformance indicates that a mosaic of headwinds undermines its medium-term outlook.

In conclusion, Powell’s party was in full swing on Jul. 29, as the PMs and the USD Index headed in opposite directions. However, with the yellow metal still confronted with a tough road ahead, the fundamental outlook remains dicey over the next few months. For example, with the all-time imbalance in the U.S. Treasury market eliciting little optimism, it took Powell’s dovish remarks to ignite the recent fervor. And with both developments likely to reverse in the coming months, the PMs’ upside catalysts may fade with the summer sun.

Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

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

Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Oil Price Fundamental Daily Forecast – Price Action Indicates Traders Believe Demand Will Outstrip Supply

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading relatively flat on Friday in a lackluster trade as investors do a little position-squaring ahead of the weekend following a volatile, but profitable week.

The catalyst behind this week’s gains has been reduced to the simplest of terms:  bullish traders believe that demand will continue to outstrip supply until at least the end of the year.

At 13:15 GMT, September WTI crude oil futures are trading $73.63, up $0.01 or +0.01%, and October Brent crude oil is at $75.13, up $0.03 or +0.04%.

The week began with a steep sell-off due to concerns over demand destruction as bearish traders increased bets the surging coronavirus delta-variant would slow down the pace of global economic growth.

After a plunge on Monday, buyers stepped in to successfully stop the price slide because they believe that demand will continue to grow the next four months, while vaccinations are expected to alleviate the impact of a resurgence in COVID-19 infections across the globe.

Although buyers and sellers battled it out for two sessions earlier in the week, those with a bullish outlook eventually prevailed when private industry and government inventories data confirmed the strong demand.

The case for stronger demand was further strengthened on Wednesday when the U.S. Federal Reserve confirmed that economic progress was being made. The supply picture even became a little rosier after a story circulated that progress in talks between the United States and Iran over a nuclear deal had stalled, further pushing forward an additional supply from the rogue nation.

Daily Forecast

Although the price action is a little mixed on Friday, the market remains underpinned. This is pretty clear evidence of the presence of buyers even as coronavirus cases rise and parts of the world revert back to lockdowns and restrictions that are not as harsh as we saw during the peak of the pandemic year in 2020. This also offers further evidence that bullish traders believe that higher vaccination rates will keep the new surge under control.

“The oil market no longer appears to be viewing the issue of the Delta variant with quite the same alarm as it was at the beginning of last week,” said Commerzbank analyst Carsten Fritsch.

“There is confidence that the ongoing vaccination campaigns in the industrialized countries will prevent any reintroduction of widespread mobility restrictions,” he added.

“Delta is a risk, but is it going to derail demand growth in the second half?  We may not see that,” said Commonwealth Bank commodities analyst Vivek Dhar.

This bullish theme is likely to carry over into next week with the next major challenge for traders – the fair pricing of crude oil – with OPEC+ expected to begin upping production by 400,000 barrels per day on August 1.

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

Silver Price Daily Forecast – Test Of Resistance At $25.60

Silver Gains Ground Ahead Of The Weekend

Silver continues its attempts to settle above the 20 EMA at $25.60 while the U.S. dollar is gaining ground against a broad basket of currencies.

The U.S. Dollar Index is currently located in the range between the support at the 50 EMA at 91.90 and the resistance at the 92 level. If the U.S. Dollar Index manages to settle back above the 92 level, it will move towards the resistance at 92.15 which will be bearish for silver and gold price today. Stronger dollar is bearish for precious metals as it makes them more expensive for buyers who have other currencies.

Gold failed to settle above the resistance level at $1835 and pulled back towards $1825. The nearest significant support level for gold is located at the 50 EMA at $1815. If gold gets to the test of this level, silver will find itself under pressure.

Gold/silver ratio did not manage to settle back above 71.50 and is slowly moving towards the 71 level. In case gold/silver ratio manages to test the 71 level, silver will get more support.

Technical Analysis

silver july 30 2021

Silver is currently testing the resistance level at the 20 EMA at $25.60. If silver manages to get above the 20 EMA, it will gain additional upside momentum and head towards the next resistance level which is located at yesterday’s highs at $25.80.

A move above the resistance at $25.80 will push silver towards the next resistance at the 50 EMA at $26.10. If silver manages to settle above the 50 EMA at $26.10, it will head towards the resistance level which is located at $26.30.

On the support side, the nearest support level for silver is located at $25.50. If silver declines below this level, it will move towards the support at $25.30. A move below the support at $25.30 will open the way to the test of the support at $25.00. In case silver gets below $25.00, it will move towards the next support level at $24.70.

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

An Economic Data Deluge Delivers EUR Support as the Eurozone Economy Bounces Back

Following interest in the German economy through much of the week, it was the Eurozone and member state economies in focus this morning.

The numbers were skewed to the positive, supporting market optimism.

Member States

In the 2nd quarter, the French economy expanded by 0.9%, quarter-on-quarter, reversing a 0.1% contraction in the previous quarter.

The German economy expanded by 1.5%, partially reversing a 2.1% contraction from the 1st quarter.

Italy and Spain also saw growth in the quarter.

In the 2nd quarter, the Spanish economy grew by 2.8%, reversing a 0.4% contraction from the 1st quarter. Stats from Italy were also positive, with the economy growing by 2.7%. In the 1st quarter, the economy had grown by just 0.2%, quarter-on-quarter.

The Eurozone

In the 2nd quarter, the Eurozone economy grew by 2.0%, quarter-on-quarter, reversing a 0.3% contraction from the previous quarter.

Year-on-year, the economy grew by 13.7% after having contracted by 1.3% in the previous quarter. Economists had forecast a 12.6% increase.

Inflation figures were also in focus, with the annual rate of inflation ticking up from 1.9% to 2.2%. Economists had forecast an annual rate of inflation of 2.0%.

The pickup in inflationary pressures muted unemployment figures for the Eurozone, however. In June, the Eurozone’s unemployment rate slipped from 8.0% to 7.7%. Economists had forecast a fall to 7.8%.

While the economy was in recovery, the need for a consumer driven recovery remains in question as inflationary pressures build.

Market Impact

In response to today’s stats, the EUR fell to a low $1.18751 before climbing to a post-stat and current day high $1.19087.

At the time of writing, the EUR was up by 0.09% to $1.18974.

EURUSD 300721 Hourly Chart

Next Up

Personal spending, inflation, and consumer sentiment figures from the U.S.

Daily Gold News: Friday, July 30 – Gold Broke Above Consolidation

The gold futures contract gained 2.01% on Thursday, as it broke above its July 15 high of $1,835. Precious metals’ prices have followed weakening U.S. dollar after Wednesday’s FOMC Statement release. This morning gold is retracing some of yesterday’s advance, as we can see on the daily chart (the chart includes today’s intraday data):

Today gold is 0.4% lower, as it’s trading slightly below $1,830 mark. What about the other precious metals? Silver is 0.1% higher, platinum is 1.1% lower and palladium is 0.5% higher. So precious metals’ prices are mixed this morning.

Yesterday’s Advance GDP and the Unemployment Claims releases have been worse than expected. Today we will get Personal Income, Personal Spending and Chicago PMI Releases, among others.

Where would the price of gold go following Wednesday’s FOMC news? We’ve compiled the data since January of 2017, a 53-month-long period of time that contains of thirty six FOMC releases. The following chart shows average gold price path before and after the FOMC releases for the past 36 releases. The market was usually declining ahead of the FOMC day. Then it was going up for a week-long period. We can see that on average, gold price was 0.49% higher 10 days after the FOMC Statement announcement.

Below you will find our Gold, Silver, and Mining Stocks economic news schedule for today:

Friday, July 30

  • 4:00 a.m. Eurozone – German Preliminary GDP q/q
  • 8:30 a.m. U.S. – Personal Income m/m, Personal Spending m/m, Core PCE Price Index m/m, Employment Cost Index q/q
  • 8:30 a.m. Canada – GDP m/m, IPPI m/m, RMPI m/m
  • 9:45 a.m. U.S. – Chicago PMI
  • 10:00 a.m. U.S. – Revised UoM Consumer Sentiment, Revised UoM Inflation Expectations
  • 9:00 p.m. China – Manufacturing PMI, Non-Manufacturing PMI

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

Paul Rejczak
Stock Selection Strategist
Sunshine Profits: Analysis. Care. Profits.

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Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

AUD/USD and NZD/USD Fundamental Daily Forecast – Gains Being Capped Amid Weaker Global Equity Markets

The Australian and New Zealand Dollars are trading lower on Friday, pressured by a drop in demand for higher risk currencies that is being fueled by a plunge in global equity markets.

The Aussie and Kiwi are being underpinned, however, by a weaker U.S. Dollar. Meanwhile, the Covid situation in Australia is worsening, raising fears that the country will experience another virus-related contraction during the third quarter.

At 08:00 GMT, the AUD/USD is trading .7391, down 0.0002 or -0.03% and the NZD/USD is at .7006, down 0.0003 or -0.03%.

Global Stock Market Weakness Fueling Lower Demand for Risky Currencies

Futures contracts tied to the major U.S. stock indexes fell early Friday as a soft earnings report from Amazon threatened to dampen an otherwise strong month ahead of July’s final day of trading.

European stocks retreated Friday as investors reacted to another deluge of corporate earnings and economic data.

Shares in Asia-Pacific declined again on Friday, heading for their worst month since March 2020, as volatile trading continued for Chinese tech stocks and Hong Kong’s Hang Seng index tumbled.

The S&P/ASX 200 in Australia closed 0.33% down to 7,392.60. Markets will be tracking the Covid situation in Sydney, which reported a record daily rise in Covid cases Thursday despite an extended lockdown. Reuters reported that authorities have requested help from the military in enforcing the lockdown.

New Zealand Building Consents Rise in June

The number of new dwelling consents approved in New Zealand rose a seasonally adjusted 3.8 percent in June compared with a 2.4 percent drop in the previous month, data from Statistics New Zealand showed on Friday.

Excluding apartments, flats, and retirement village units, the number of consents for new houses was up 0.1 percent.

Building consents were 24.0 percent higher than the same month a year ago.

Australian Economic Data

Australia’s Q2 Producer Price Index (PPI) rose 0.7% on a quarterly basis, beating the 0.4% growth in Q1. The Private Sector Credit rose 0.9% in June.

US Set to Release Slew of Economic Reports

At 12:30 GMT, traders will get the opportunity to react to U.S. reports on Core PCE Prices, Personal Income and Personal Spending. These reports can move the U.S. Dollar.

Core PCE Inflation is expected to show a 0.6% rise for the month. Personal Income is expected to have declined by 0.4%, while Personal Spending is expected to have risen 0.7%.

At 13:45, the Chicago PMI report is expected to come in at 64.2, down from 66.1.

At 14:00 GMT, Revised University of Michigan Consumer Sentiment is expected to come in unchanged at 80.8.

The direction of the AUD/USD and NZD/USD on Friday will be determined by whether risk sentiment is on or off.

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

Bitcoin Lacks Momentum As Resistance At $40,000 Stays Strong

Resistance At $40,000 Is A Major Obstacle On The Way Up For Bitcoin

Bitcoin is still trying to settle above the key resistance level at $40,000, but it looks that the world’s leading cryptocurrency lacks momentum for the move.

Meanwhile, other cryptocurrencies are gaining some ground during the current trading session. Ethereum is currently testing the $2,400 level while Dogecoin has managed to settle above $0.2050.

Yesterday, MicroStrategy announced that it planned to deploy additional capital to its digital asset strategy, which means that the company will buy more Bitcoin. However, this news had no impact on Bitcoin, and it looks that many traders have decided to take some profits off the table near the key resistance level at $40,000.

As a result, Bitcoin Dominance, which measures the market capitalization of Bitcoin as a percentage of total market capitalization, pulled back towards the 48% level as some capital moved from Bitcoin into altcoins.

Technical Analysis

bitcoin july 30 2021

The technical picture for Bitcoin has not changed in recent trading sessions. Bitcoin needs to settle above the key resistance level at $40,000 to have a chance to continue its upside move. RSI remains close to the overbought territory, but there is plenty of room to gain additional upside momentum in case the right catalysts emerge.

A move above the $40,000 level will push Bitcoin towards the resistance at June highs at $41,300. If Bitcoin manages to settle above this level, it will gain additional upside momentum, and speculative traders will likely rush to buy the world’s leading cryptocurrency.

On the support side, the nearest significant support level for Bitcoin is located at $38,000, but Bitcoin remains glued to the $40,000 level, and several attempts to gain some downside momentum yielded no results.

A successful test of the support at $38,000 will push Bitcoin towards the next support level near the 50 EMA at $36,000. The 20 EMA is located in the nearby so Bitcoin will likely receive significant support near this level.

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

Will Silver Outperform Gold In Q3 2021?

Sentiment towards the precious metals complex turned bullish after Fed Chair Jerome Powell stated that the rising cases of the Delta variant may weigh on a recovery in the labour market and that the central bank was still “along away” from considering raising interest rates.

The main takeaway from the Federal Reserve’s July policy meeting was that the central bank remains firmly committed to their massive quantitative easing program, while allowing inflation to run hotter than usual, for some time yet.

Currently, Silver prices are trading near $25 an ounce, which presents an incredible opportunity for traders to gain exposure in the metal before it really takes off.

Silver is not only an excellent inflation hedge, but it’s also a key component in everything from electric vehicles, renewable energy to 5G technology. Based on our proprietary research, photovoltaic demand for silver could exceed 3000 tonnes in 2021, while the 5G rollout – which is only just beginning – will be a major driver of demand for years to come.

Goldman Sachs see silver prices rising to $33 an ounce in H2 2021, boosted both investment and industrial demand for the precious metal – and our research suggests similar.

In my opinion, Silver is still definitely the best trade right now and any substantial pullbacks should be viewed as buying opportunities heading into August.

Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions:

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

Natural Gas Price Fundamental Daily Forecast – Despite Bullish Fundamentals, the Market is Lower for the Week

Natural gas futures are trading lower early Friday amid profit-taking and position-squaring ahead of the weekend. According to NatGasWeather, the heat is expected to taper some in the coming days, which may be one of the reasons for the early weakness.

“National demand will be much lighter this weekend and next week as a series of weather systems over Canada advance aggressively across the eastern half of the U.S. with comfortable highs of 70s to mid-80s,” the firm noted.

At 06:57 GMT, September natural gas futures are trading $3.970, down $0.089 or -2.19%.

On Thursday, the futures contract jumped 2.32%, helped by strong fundamentals and a bullish government storage report. The storage surprise reminded investors that there is a supply/demand imbalance that could create problems this winter.

Weekly US Energy Information Administration Storage Report

The U.S. Energy Information Administration (EIA) reported Thursday that domestic supplies of natural gas rose by 36 billion cubic feet for the week-ended July 23. Ahead of the report, NGI wrote that this week’s EIA storage report was expected to show an injection into storage in the low 40s Bcf.

NGI also reported a Reuters poll found projections ranging from a build of 33 Bcf to 52 Bcf, with a median injection of 42 Bcf. Results of a Bloomberg survey showed estimates spanning 34 Bcf to 49 Bcf, with a median of 41 Bcf and a Wall Street Journal survey produced estimates from 39 Bcf to 47 Bcf with an average of 43 Bcf. The NGI model predicted a 49 Bcf injection.

Total stocks now stand at 2.714 Tcf, down 523 Bcf from a year ago and 168 Bcf below the five-year average, the government said.

Daily Forecast

Today’s early weakness has turned the market lower for the week. Given the bullish fundamentals including tight supply, low production and solid liquefied natural gas (LNG) demand, this move suggests that traders think the market is overpriced and may be due for a short-term pullback.

Daily September Natural Gas

Technically, the main trend is up, but momentum has been trending lower since Monday. A trade through $4.165 will signal a resumption of the uptrend. The main trend will change to down on a move through $3.154. This is highly unlikely however.

The minor trend is down. This is controlling the momentum. A trade through $3.837 will indicate the selling pressure is getting stronger.

The nearest support zone is $3.869 to $3.799. This zone stopped the selling on Wednesday at $3.837.

On the upside, the resistance comes in at $4.001 to $4.040. Trader reaction to this zone could determine the direction of the market on Friday. Look for a strong tone to develop on a sustained move over $4.040, and this week’s weak tone to continue on a sustained move under $4.001.

Buyers could return if the price is right, especially with NatGasWeather predicting heat intensifying August 6-11 with most of the Lower 48 warming back above normal with highs of mid-80s to 100s for a return to strong national demand.

“The big picture still looks bullish” for futures “and could be aided by any hotter weather shift,” Bespoke Weather Services said. “We say it over and over again, but until production can get to 2021 highs, it is difficult to see enough loosening in supply/demand balances to make the market more comfortable with the storage situation.”

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

EUR/USD Daily Forecast – Euro Stays Strong Ahead Of The Weekend

Euro Continues To Move Higher

EUR/USD is currently trying to settle above the resistance at 1.1880 while the U.S. dollar is mostly flat against a broad basket of currencies.

The U.S. Dollar Index managed to stay above the 50 EMA at 91.90 but failed to settle above the nearest resistance level at 92. In case the U.S. Dollar Index declines below the 50 EMA, it will gain additional downside momentum which will be bullish for EUR/USD.

Today, foreign exchange market traders will focus on the economic data from EU. Flash reading of the second-quarter Euro Area GDP Growth Rate report is projected to show that Euro Area GDP Growth Rate increased by 1.5% quarter-over-quarter. On a year-over-year basis, Euro Area GDP Growth Rate grew by 13.2%.

Traders will also have a chance to take a look at preliminary Euro Area inflation data for July. Euro Area Inflation Rate is forecast to decline by 0.3% month-over-month. On a year-over-year basis, Euro Area Inflation Rate is projected to grow by 2%. Euro Area Core Inflation Rate is expected to increase by 0.8% year-over-year. Euro Area Unemployment Rate is expected to remain unchanged at 7.9%.

It remains to be seen whether these reports will have a major impact on euro’s trading dynamics as no surprises are expected on the inflation front.

Technical Analysis

eur usd july 30 2021

EUR/USD continues its attempts to settle above the resistance at 1.1880. If EUR/USD manages to settle above this level, it will get to the test of the next resistance level which is located at the 50 EMA at 1.1900.

A successful test of the resistance at the 50 EMA will open the way to the test of the resistance at 1.1925. If EUR/USD gets above this level, it will move towards the resistance at 1.1945. A move above this level will open the way to the test of the resistance at 1.1965.

On the support side, a move below 1.1880 will push EUR/USD back towards the support at 1.1860. In case EUR/USD declines below this level, it will head towards the support at the 20 EMA at 1.1840. A successful test of this level will lead to the test of the next support at 1.1830.

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

Ferrari’s Revenue to More Than Double in Q2; Target Price $238

The luxury sports car maker Ferrari is expected to report earnings of $1.26 per share for the second quarter, representing a 3,050% increase over $0.04 per share a year earlier.

The company, known for its prancing horse logo, would post revenue growth of over 107% to around $1.3 billion. According to ZACKS Research, the company has beaten earnings per share (EPS) estimates in three of the last four quarters.

The U.S. listed Ferrari shares have slumped about 6% so far this year. The stock closed 1.88% higher at $216.21 on Thursday.

Analyst Comments

“Growth potential and strong execution. Global shipments of >11k units in 2021, growing at a 9.1% CAGR to 2030 ending at ~22k shipments. Adj. EBITDA margins rise to 35% in 2021 on improved mix and pricing after launching 5 new models in 2020 and 2 in 2021,” noted Adam Jonas, equity analyst at Morgan Stanley.

Ferrari trades at a justified premium to luxury brands, in line with luxury leader, Hermes, albeit with more opportunity to grow organically via: new customers, new segments and geographically in China & Asia-Pac, as well as exhibiting a unique moat with a world-renowned brand and a 12+ month customer order book.”

Ferrari Stock Price Forecast

Nine analysts who offered stock ratings for Ferrari in the last three months forecast the average price in 12 months of $238.63 with a high forecast of $281.00 and a low forecast of $202.00.

The average price target represents a 10.35% change from the last price of $216.24. From those nine analysts, four rated “Buy”, four rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave the stock price forecast of $265 with a high of $350 under a bull scenario and $160 under the worst-case scenario. The firm gave an “Overweight” rating on the luxury automaker’s stock.

Several other analysts have also updated their stock outlook. BofA slashed the price objective to $281 from $287. UBS Group cut their price objective to $238 from $247 and set a buy rating.

GBP/USD Daily Forecast – U.S. Dollar Gains Ground After Yesterday’s Sell-Off

British Pound Is Moving Lower Against U.S. Dollar

GBP/USD is currently trying to settle back below the support at 1.3950 while the U.S. dollar is gaining some ground against a broad basket of currencies.

The U.S. Dollar Index failed to settle below the support level at the 50 EMA at 91.90 and is trying to get back above the 92 level. In case this attempt is successful, the U.S. Dollar Index will move towards the resistance at 92.15 which will be bearish for GBP/USD.

There are no important economic reports scheduled to be released in the UK today so foreign exchange market traders will focus on the economic data from U.S.

Analysts expect that Personal Income declined by 0.3% month-over-month in June after falling by 2% in May. Meanwhile, Personal Spending is projected to grow by 0.7%.

Traders will also have a chance to take a look at the final reading of Consumer Sentiment report for July which is projected to show that Consumer Sentiment declined from 85.5 in June to 80.8 in July.

Technical Analysis

gbp usd july 30 2021

GBP/USD is testing the nearest support level which is located at 1.3950. In case this test is successful, GBP/USD will move towards the next support at 1.3920.

In case GBP/USD gets below the support at 1.3920, it will head towards the next support at 1.3900. A successful test of this level will open the way to the test of the support which is located at the 50 EMA at 1.3880.

On the upside, GBP/USD needs to get back above 1.3950 to have a chance to develop upside momentum in the near term. The next resistance level for GBP/USD is located at the recent highs at 1.3980.

If GBP/USD manages to settle above the resistance at 1.3980, it will move towards the next resistance level at 1.4000.

A move above the resistance at 1.4000 will push GBP/USD towards the resistance at 1.4020. In case GBP/USD gets above this level, it will head towards the next resistance level at 1.4040.

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

Silver Price Prediction – Prices Surge Following Rise in Jobless Claims

Silver prices surged higher as the dollar dropped following a softer than expected Q2 GDP report. Jobless claims also increased more than expected while pending home sales declined. These reports followed the Fed’s decision on Wednesday to keep interest rates unchanged.

[fx-broker slug=fxtm]

Technical analysis

Silver prices surged higher on Thursday, increasing slightly more than 2.6%.  Support is seen near the 10-day moving average at 25.21. Resistance is seen near the former breakdown line which comes in near 25.74. Momentum is positive as the fast stochastic generated a crossover buy signal.  Medium-term momentum is positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This signal occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram also generated a crossover buy signal pushing through the zero-index with a rising trajectory which points to higher prices.

Jobless Claims Rise More than Expected

According to the Labor Department, jobless claims eased to 400,000 for the week ended July 24. That level is nearly double the pre-pandemic norm and was above the 380,000 estimates. However, it was a decrease from the previous week’s 424,000. Continuing claims edged higher to 3.27 million.