GDX, HUI: Will Paradise Turn into a Dystopia?

With the GDX ETF punching a hole through its glass ceiling, the senior miners are now witnessing an environment that’s beyond their wildest dreams: sunshine, clear skies and a utopia that’s eluded them since the beginning of the New Year. However, while leaving paradise is often more difficult than arriving, the GDX ETF’s recent vacation is likely coming to an end. And with the senior miners about to resume the daily grind of real life, their optimism will likely fade with the tropical sun.

To explain, while the GDX ETF remains on cloud nine, the HUI Index (a proxy for gold mining stocks ) has already left the resort. With the latter’s long-term outlook still intact and its broad head & shoulders pattern remaining on schedule, I wrote previously that the right shoulder would likely form after the HUI Index reaches 300. And after closing at 301.72 on May 7, the BUGS (after all, HUI is called the Gold Bugs Index) are currently living up to expectations.

Please see below:

Moreover, while corrective short-term upswings within a medium-term downtrend can feel discouraging, it’s important to remember that similar instances occurred in 2008 and 2012. Remember: Tom Petty & The Heartbreakers warned us that the waiting is the hardest part. However, in the end, the wait should be more than worth it.

To explain, note that the 2007 – 2008 and the 2009 – 2012 head and shoulders patterns didn’t have the right shoulders all the way up to the line that was parallel to the line connecting the bottoms. I marked those lines with green in the above-mentioned formations. In the current case, I marked those lines with orange. Now, in both cases, the final top – the right shoulder – formed close to the price where the left shoulder topped. And in early 2020, the left shoulder topped at 303.02.

That’s why I previously wrote that “it wouldn’t be surprising to see a move to about 300 in the HUI Index”. And that’s exactly what we saw. To clarify, one head-and-shoulders pattern – with a rising neckline – was already completed, and one head-and-shoulders pattern – with a horizontal neckline – is being completed, but we’ll have the confirmation once miners break to new yearly lows.

For more context, I wrote previously:

The recent rally is not a game-changer, but rather a part of a long-term pattern that’s not visible when one focuses on the short-term only.

The thing is that the vast majority of individual investors and – sadly – quite many analysts focus on the trees while forgetting about the forest. During the walk, this might result in getting lost, and the implications are no different in the investment landscape.

From the day-to-day perspective, a weekly – let alone monthly – rally seems like a huge deal. However, once one zooms out and looks at the situation from a broad perspective, it’s clear that:

“What has been will be again, what has been done will be done again; there is nothing new under the sun.” (-Ecclesiastes 1:9)

The rally is very likely the right shoulder of a broad head and shoulders formation. “Very likely” and not “certainly”, because the HUI Index needs to break to new yearly lows in order to complete the pattern – for now, it’s just potential. However, given the situation in the USD Index (i.a. the positions of futures traders as seen in the CoT report , and the technical situation in it), it seems very likely that this formation will indeed be completed. Especially when (not if) the general stock market tumbles.

In addition, three of the biggest declines in the mining stocks (I’m using the HUI Index as a proxy here), all started with broad, multi-month head-and-shoulders patterns. And in all three cases, the size of the decline exceeded the size of the head of the pattern.

Can we see gold stocks as low as we saw them last year? Yes.

Can we see gold stocks even lower than at their 2020 lows? Again, yes.

Of course, it’s far from being a sure bet, but the above chart shows that it’s not irrational to expect these kind of price levels before the final bottom is reached. This means that a $24 target on the GDX ETF is likely conservative.

In addition, mining stocks are currently flirting with two bearish scenarios:

  1. If things develop as they did in 2000 and 2012-2013, gold stocks are likely to bottom close to their early 2020 high.
  2. If things develop like in 2008 (which might be the case, given the extremely high participation of the investment public in the stock market and other markets), gold stocks could re-test (or break slightly below) their 2016 low.

I know, I know, this seems too unreal to be true… But wasn’t the same said about silver moving below its 2015 bottom in 2020? And yet, it happened.

Keep in mind though: scenario #2 most likely requires equities to participate. In 2008 and 2020, the sharp drawdowns in the HUI Index coincided with significant drawdowns of the S&P 500 . However, with the words ‘all-time high’ becoming commonplace across U.S. equities, the likelihood of a three-peat remains relatively high.

Circling back to the GDX ETF, on May 7, the senior miners inched closer to their May 2020 high. And while the development may seem bullish on the surface, the price action actually creates symmetry between the GDX ETF’s left and right shoulders. With May 2020’s peak occurring at nearly the same level, a move lower from here would only enhance the validity of the GDX ETFs H&S pattern.

On top of that, this is the third time that the GDX ETF has poked its head above the upper trendline of its roughly one-and-a-half-month channel. An ominous sign, the GDX ETF’s swoon in late 2020/early 2021, occurred precisely after the senior miners delivered their third act. Furthermore, a small breakout without confirmation is akin to a promise from a friend that can’t keep his word. Thus, with the GDX ETF still underperforming gold on a relative basis, it’s important to analyze the recent price action within its proper context.

Please see below:

For more context, I wrote on May 5:

The history might not repeat itself, but it does rhyme, and those who insist on ignoring it are doomed to repeat it. And there’s practically only one situation from more than the past four decades that is similar to what we see right now.

It’s the early 2000s when the tech stock bubble burst. It’s practically the only time when the tech stocks were after a similarly huge rally. It’s also the only time when the weekly MACD soared to so high levels (we already saw the critical sell signal from it). It’s also the only comparable case with regard to the breakout above the rising blue trend channel. The previous move above it was immediately followed by a pullback to the 200-week moving average, and then the final – most volatile – part of the rally started. It ended on significant volume when the MACD flashed the sell signal. Again, we’re already after this point.

The recent attempt to break to new highs that failed seems to have been the final cherry on the bearish cake.

Why should I – the precious metals investor care?

Because of what happened in the XAU Index (a proxy for gold stocks and silver stocks ) shortly after the tech stock bubble burst last time.

What happened was that the mining stocks declined for about three months after the NASDAQ topped, and then they formed their final bottom that started the truly epic rally. And just like it was the case over 20 years ago, mining stocks topped several months before the tech stocks.

Mistaking the current situation for the true bottom is something that is likely to make a huge difference in one’s bottom line. After all, the ability to buy something about twice as cheap is practically equal to selling the same thing at twice the price. Or it’s like making money on the same epic upswing twice instead of “just” once.

And why am I writing about “half” and “twice”? Because… I’m being slightly conservative, and I assume that the history is about to rhyme once again as it very often does (despite seemingly different circumstances in the world). The XAU Index declined from its 1999 high of 92.72 to 41.61 – it erased 55.12% of its price.

The most recent medium-term high in the GDX ETF (another proxy for mining stocks) was at about $45. Half of that is $22.5, so a move to this level would be quite in tune with what we saw recently.

And the thing is that based on this week’s slide in the NASDAQ that followed the weekly reversal and the invalidation, it seems that this slide lower has already begun.

“Wait, you said something about three months?”

Yes, that’s approximately how long we had to wait for the final buying opportunity in the mining stocks to present itself based on the stock market top.

The reason is that after the 1929 top, gold miners declined for about three months after the general stock market started to slide. We also saw some confirmations of this theory based on the analogy to 2008. Consequently, we might see the next major bottom – and the epic buying opportunity in the mining stocks – about three months after the general stock market tops. The NASDAQ might have already topped, so we’re waiting for the S&P 500 to confirm the change in the trend.

The bottom line?

New lows are likely to complete the GDX ETF’s bearish H&S pattern and set the stage for an even larger medium-term decline. And if the projection proves prescient, medium-term support (or perhaps even the long-term one) will likely emerge at roughly $21.

But why ~$21?

  1. The target aligns perfectly with the signals from the GDX ETF’s 2020 rising wedge pattern. You can see it in the left part of the above chart. The size of the move that follows a breakout or breakdown from the pattern (breakdown in this case) is likely to be equal (or greater than) the height of the wedge. That’s what the red dashed line marks.
  2. The target is also confirmed when applying the Fibonacci extension technique. To explain, if we take the magnitude of the GDX ETF’s recent peak-to-trough decline and extrapolate it by multiplying it by the Fibonacci sequence, the output results in a target adjacent to $21. I used the Fibonacci retracement tool to show that in the above chart. Interestingly, the same technique was useful in 2020 in order to time the March bottom.
  3. The broad head-and-shoulders pattern with the horizontal neckline at about $31 points to the $21 level as the likely target.

Likewise, when analyzing the situation through the lens of the GDXJ ETF, the junior miners are eliciting the same bearish signals. If you analyze the chart below, you can see that despite the recent strength, the GDXJ ETF is still trading below its medium-term rising support line (the thick black line below). More importantly, though, with the junior miners failing to reclaim this key level, their bearish H&S pattern remains intact.

Even more ominous, the GDXJ ETF remains a significant underperformer of the GDX ETF. Despite sanguine sentiment and a strong stock market creating the perfect backdrop for the junior miners, the GDXJ ETF has failed to live up to the hype.

To explain, I wrote previously:

GDXJ is underperforming GDX just as I’ve been expecting it to. Once one realizes that GDXJ is more correlated with the general stock market than GDX is, GDXJ should be showing strength here, and it isn’t. If stocks don’t decline, GDXJ is likely to underperform by just a bit, but when (not if) stocks slide, GDXJ is likely to plunge visibly more than GDX.

Expanding on that point, the GDXJ/GDX ratio has been declining since the beginning of the year, which is remarkable because the general stock market hasn’t plunged yet. However, once the general stock market suffers a material decline, the GDXJ ETF’s underperformance will likely be heard loud and clear.

Please see below:

So, how low could the GDXJ ETF go?

Well, absent an equity rout, the juniors could form an interim bottom in the $34 to $36 range. Conversely, if stocks show strength, juniors could form the interim bottom higher, close to the $42.5 level. For context, the above-mentioned ranges coincide with the 50% and 61.8% Fibonacci retracement levels and the GDXJ ETF’s previous highs (including the late-March/early-April high in case of the lower target area). Thus, the S&P 500 will likely need to roll over for the weakness to persist beyond these levels.

Moreover, the HUI Index/S&P 500 ratio has recorded a major, confirmed breakdown. And with the ratio nowhere near recapturing its former glory, it’s another sign that a storm is brewing. Moreover, after moving back and forth for the last few months, not only has the HUI Index/S&P 500 ratio broken below its rising support line (the upward sloping black line below), but the ratio has also broken below the neckline of its roughly 12-month H&S pattern (the dotted red line below). As a result, given the distance from the head to the neckline, the HUI Index/S&P 500 ratio is on a collision course back to (at least) 0.050.

Please see below:

When the ratio presented on the above chart above is rising, it means that the HUI Index is outperforming the S&P 500. When the line above is falling, it means that the S&P 500 is outperforming the HUI Index. If you analyze the right side of the chart, you can see that the ratio has broken below its rising support line. For context, the last time a breakdown of this magnitude occurred, the ratio plunged from late-2017 to late-2018. Thus, the development is profoundly bearish.

Playing out as I expected, a sharp move lower was followed by a corrective upswing back to the now confirmed breakdown level (which is now resistance). Mirroring the behavior that we witnessed in early 2018, after breaking below its rising support line, the HUI Index/S&P 500 ratio rallied back to the initial breakdown level (which then became resistance) before suffering a sharp decline. And with two-thirds of the analogue already complete, the current move lower still has plenty of room to run. Likewise, the early-2018 top in the HUI Index/S&P 500 ratio is precisely when the USD Index began its massive upswing. Thus, with history likely to rhyme, the greenback could spoil the miners’ party once again.

In addition, the HUI to S&P 500 ratio broke below the neck level (red, dashed line) of a broad head-and-shoulders pattern, and it verified this breakdown by moving temporarily back to it. The target for the ratio based on this formation is at about 0.05 (slightly above it). Consequently, if the S&P 500 doesn’t decline, the ratio at 0.05 would imply the HUI Index at about 196. However, if the S&P 500 declined to about 3,200 or so (its late-2020 lows) and the ratio moved to about 0.05, it would imply the HUI Index at about 160 – very close to its 2020 lows.

All in all, the implications of mining stocks’ relative performance to gold and the general stock market are currently bearish.

But if we’re headed for a GDX ETF cliff, how far could we fall?

Well, there are three reasons why the GDX ETF might form an interim bottom at roughly ~$27.50 (assuming no big decline in the general stock market ):

  1. The GDX ETF previously bottomed at the 38.2% and 50.0% Fibonacci retracement levels. And with the 61.8% level next in line, the GDX ETF is likely to garner similar support.
  2. The GDX ETFs late-March 2020 high should also elicit buying pressure.
  3. If we copy the magnitude of the late-February/early-March decline and add it to the early-March bottom, it corresponds with the GDX ETF bottoming at roughly $27.50.

Keep in mind though: if the stock market plunges, all bets are off. Why so? Well, because when the S&P 500 plunged in March 2020, the GDX ETF moved from $29.67 to below $17 in less than two weeks. As a result, U.S. equities have the potential to make the miners’ forthcoming swoon all the more painful.

In conclusion, with gold, silver and mining stocks staying at the same springtime resort, their departure from reality implies plenty of jet lag at the end of their trip. And with the clock ticking, passengers boarding and their flight nearing takeoff, a return to real life is just around the corner. Moreover, with the USD Index long overdue for some R & R, a reversal of fortunes could leave the precious metals suffering severe envy. Thus, while gold, silver and mining stocks have enjoyed nothing but sun, sand and surf over the last few weeks, the pile of work that awaits them will likely keep them swamped over the medium term.

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

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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.

Price of Gold Fundamental Weekly Forecast – Rebounding Yields Could Weigh on Gold Prices

Gold futures surged last week because a drop in U.S. Treasury yields pressured the U.S. Dollar. Lower interest rates decrease the opportunity cost of holding non-yielding bullion, while a weaker U.S. Dollar tends to drive up foreign demand for dollar-denominated gold.

Last week, June Comex gold settled at $1831.30, up $63.60 or +3.60%.

The catalysts behind the movement in Treasury yields and the dollar were dovish chatter from Federal Reserve officials and a weaker-than-expected U.S. jobs report.

Over the near-term, it will be hard to convince a number of the dovish Fed officials to make any changes to policy before all the boxes are checked, but the fallback from the weaker-than-expected employment report can be easily offset as soon as this week with higher-than-expected consumer inflation data, or next month with a blowout Non-Farm Payrolls report.

As far as yields are concerned, they already bounced back from Friday’s plunge which suggests the move may have been an overreaction to the jobs report miss.

Friday’s Recap

Non-Farm Payrolls Surprise

Non-Farm Payrolls increased by only 266,000 jobs last month after rising by 770,000 in March, the Labor Department reported.

Economists polled by Reuters had forecast payrolls advancing by 978,000 jobs. The unexpected slowdown in job growth was likely due to shortages of workers and raw materials as the economy recovers from the coronavirus pandemic.

‘Knee-jerk Reaction’ in Treasury Yields

The benchmark 10-year yield, which dropped to 1.46%, the lowest since March 4, was last up 1.60 basis points on the day at 1.5771%, holding below a 14-month high of 1.776% reached on March 30.

The 30-year yield tumbled to its lowest level since March 1 at 2.158%. It was last 4.4 basis points higher at 2.28%.

The yield drop was a “knee-jerk reaction” that faded as the session wore on and the market digested the data, according to analysts.

The most closely watched part of the yield curve that measures the gap between yields on two- and 10-year Treasury notes was about 2 basis points steeper at 143.20 basis points.

U.S. interest rate futures indicated that traders pushed out expectations of a Fed rate hike by roughly three months after the payrolls report’s release.

Weekly Outlook

Gold traders will continue to monitor the movement in U.S. Treasury yields this week for direction. The headline employment data may have missed, but the news didn’t derail the economic recovery. Jobs are likely to continue to be added monthly with the pace of hirings picking up as the number of workers seeking jobs improves and more raw materials become available.

Despite a huge miss, which it was, it’s still employment going in the right direction,” said Andrew Richman, senior fixed income strategist at Sterling Capital Management.

In the U.S. this week, the key reports are Tuesday’s JOLTS Job Openings, a favorite of the Fed. The Consumer Price Index will be released on Wednesday and on Thursday, data on Retail Sales.

A jump in the consumer price index could make traders forget about Friday’s disappointing U.S. Non-Farm Payrolls report.

Traders will also get to hear the reactions to Friday’s jobs report from several Federal Open Market Committee (FOMC) members.

Any strong economic news from the United States is likely to underpin U.S. Treasury yields. This could make the U.S. Dollar a more attractive investment and weaken gold prices.

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

Oil Price Fundamental Weekly Forecast – All Eyes on Pipeline Shutdown, Gasoline Inventory Numbers

U.S. West Texas Intermediate and Brent crude oil futures posted a choppy two-sided trade, but still managed to close over 2% higher for the week. Traders set aside most worries about the raging pandemic in India by surmising that the end of lockdowns in the United States and parts of Europe would offset any drop in demand from the Coronavirus-ravaged country.

Last week, June WTI crude oil futures settled at $64.90, up $1.32 or +2.08% and July Brent crude oil closed at $68.28, up $1.52 or +2.23%.

Prices rose to their high of the week after the American Petroleum Institute (API) reported larger than expected across the board draws in crude oil, gasoline and distillates on Tuesday. However, a mixed U.S. Energy Information Administration (EIA) report on Wednesday showed an unexpected build in gasoline inventories and this paused the buying and may have brought in a few sellers.

American Petroleum Institute Weekly Inventories Report

The American Petroleum Institute (API) reported late Tuesday that U.S. crude supplies fell by 7.7 million barrels for the week ended April 30. Ahead of the report, traders were pricing in at 3.9 million barrel draw.

The API also reported that gasoline stockpiles fell by 5.3 million barrels versus pre-report estimates of a 500,000 barrel drawdown.

Meanwhile, distillate inventories declined by nearly 3.5 million barrels. Traders were looking for a 1.6 million barrel drawdown.

Energy Information Administration Weekly Inventories Report

According to the U.S. Energy Information Administration (EIA), crude inventories fell by 8 million barrels in the week to April 30 to 485.1 million barrels, compared with analysts’ expectations in a Reuters poll for a 2.3 million-barrel drop.

U.S. gasoline stocks rose by 737,000 barrels in the week to 235.8 million barrels, the EIA said, compared with analysts’ expectations in a Reuters poll for a 652,000-barrel drop.

Distillate stockpiles, which include diesel and heating oil, fell by 2.9 million barrels in the week to 136.2 million barrels, versus expectations for a 1.1 million-barrel drop, the EIA data showed.

Weekly Outlook

Gasoline inventories will probably drive the price action this week as the U.S. moves closer to the summer driving season. But there is a major snag at the start of the week that the market has overcome: ransom-seeking hackers have broken into Colonial Pipeline, prompting the company to shut one of America’s major arteries for fuel delivery.

We don’t know how crude oil will be affected because it will depend on whether the ransomware made its way into the company’s operational technology network, which interfaces with the pipeline itself, Reuters wrote.

While we expect to see a jump in gasoline and distillate prices because it is the country’s top fuel pipeline network, crude oil prices could actually fall if there is less-demand from the refineries. At this time, we’re just going to have to wait and see if the situation can be rectified in a few days.

Setting aside the pipeline issue, the direction of the crude oil market this week is likely to be determined by the API and EIA gasoline inventory numbers.

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

Natural Gas Price Fundamental Weekly Forecast – Favorable Weather Capping Gains, but Bulls Eyeing Summer Heat

Natural gas futures finished higher last week helped by a friendly weekly government storage report, strong European demand for U.S. liquefied natural gas (LNG) and elevated demand from Asia. Weather conditions continue to remain favorable for this time of year, but some traders are already starting to price in greater demand due to expectations of a hot summer.

Last week, June natural gas futures settled at $2.958, up $0.027 or +0.92%.

Weekly Weather Forecast

According to NatGasWeather for May 10 – 16, “Weather systems and associated cool shots with showers and thunderstorms will continue across the Plains, Midwest and Northeast this week with highs of 40s to 60s and lows of 30s and 40s. Cooling will also push into Texas, the South/Southeast after Monday with highs of 70s to low 80s for light demand. The Northwest will be nice with highs of 60s and 70s, while very warm to hot California and the Southwest with 80s and 90s. The central and northern U.S. will warm next weekend into the 70s to lower 80s for lighter demand. Overall, moderate demand through Thursday – Friday, then low.”

Energy Information Administration Weekly Storage Report

The EIA reported last Thursday that domestic supplies of natural gas rose by 60 billion cubic feet (Bcf) for the week ended April 30.

Ahead of the report, Natural Gas Intelligence (NGI) reported that a Bloomberg survey showed a median estimate for a 66 Bcf injection. Estimates generated by a Reuters poll showed a median of 65 Bcf. The Wall Street Journal’s weekly survey showed an average of 62 Bcf.

Total stocks now stand at 1.958 trillion cubic feet (Tcf), down 345 Bcf from a year ago and 61 Bcf below the five-year average, the government said.

Daily Forecast

Continued strong LNG and pipeline exports along with the onset of summer cooling demand looming are likely to underpin prices this week and could even launch another surge to the upside.

EBW Analytics Group CEO Andy Weissman said solid exports and other fundamentals support higher prices by summer. Seasonal “peaks in power demand, record LNG and Mexico exports, and a robust domestic economy – all set against flat production – create growing fundamental imbalances,” Weissman said.

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

USD/JPY Fundamental Weekly Forecast – Traders Eyeing US Consumer Inflation, Treasury Yields

The Dollar/Yen finished sharply lower last week with most of the loss occurring on Friday following a steep drop in U.S. Treasury yields in reaction to a disappointing U.S. employment report. The move helped tighten the spread between U.S. Government bonds and Japanese Government bonds, making the U.S. Dollar a less-attractive asset.

Last week, the USD/JPY settled at 108.603, down 0.731 or -0.67%.

Despite the weak jobs data, many traders feel that the news doesn’t represent a trend and that the jobs market will bounce back in the near future as labor and material shortages are reduced. They conclude that Friday’s steep drop in U.S. Treasury yields was an overreaction and so was the plunge in the USD/JPY.

The Forex pair could bounce back this week if U.S. Consumer Inflation and Retail Sales come in better-than-expected, perhaps offsetting last week’s poor jobs market report.

This Week’s Outlook

There are a series of reports out of Japan this week, but none are major enough to move Japanese Government bond yields and the Japanese Yen.

The reports this week include Household Spending, Leading Indicators, Bank Lending, Current Account and Economy Watchers Sentiment.

Household spending is an important report, but not necessarily a market moving event. It is expected to rise by 1.7%, up from the previously reported -6.6%.

As far as the BOJ Summary of Opinions is concerned, look for central bankers to reiterate that Japan’s economy is picking up but any recovery is likely to be modest due to lingering caution over the coronavirus pandemic. Japan’s economy was likely to improve thanks to a rebound in global demand and the boost from the government’s massive fiscal spending.

Stateside, the key reports are Tuesday’s JOLTS Job Openings, a favorite of the Fed. The Consumer Price Index will be released on Wednesday and on Thursday, data on Retail Sales.

A jump in the consumer price index could make traders forget about Friday’s disappointing U.S. Non-Farm Payrolls report.

Traders will also get to hear the reactions to Friday’s jobs report from several Federal Open Market Committee (FOMC) members.

Any strong economic news from the United States is likely to underpin U.S. Treasury yields. This could make the U.S. Dollar a more attractive investment.

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

AUD/USD and NZD/USD Fundamental Weekly Forecast – Traders Hoping Aussie Government Leaves Spending Tap Open

The Australian and New Zealand Dollars hit multi-month highs last week, supported by surging commodity prices and a plunge in U.S. Treasury yields, following the release of a weaker-than-expected U.S. employment report that likely dampened the possibility of an earlier tightening by the U.S. Federal Reserve.

Last week, the AUD/USD settled at .7844, up 0.0133 or 1.72% and the NZD/USD finished at .7283, up 0.0120 or 1.68%.

The early support for the Aussie last week was provided by a sharp rise in prices of Australia’s top export earner, iron ore. According to Reuters, futures of the key steel making ingredient vaulted to a record high last Friday pushing spot prices to the highest-ever above $200 a tonne.

Reuters also reported the antipodean currencies, traded as a liquid proxy for the Chinese yuan, were also boosted by impressive trade data from China which showed import growth hitting a decade high. China’s imports of iron ore are up 6.7% this year so far while those of natural gas has surged more than 22%. Both commodities are Australia’s top export earners.

Earlier in the week, the Reserve Bank of Australia (RBA) upgraded forecasts for the country’s economy, though inflation and wages growth are seen lagging in a sign monetary policy will remain highly accommodative for years to come.

This Week’s Outlook

Australia’s government will release its 2021/22 budget outlook on Tuesday where it will unveil a record deficit but is still likely to keep its spending tap open to help support jobs and growth.

Out of Australia, economic reports include retail sales, NAB Business Confidence and MI Inflation Expectations. New Zealand will offer up data on FPI and BusinessNZ Manufacturing.

Stateside, the key reports are Tuesday’s JOLTS Job Openings, a favorite of the Fed. The Consumer Price Index will be released on Wednesday and on Thursday, data on Retail Sales.

A jump in the consumer price index could make traders forget about Friday’s disappointing U.S. Non-Farm Payrolls report.

Traders will also get to hear the reactions to Friday’s jobs report from several Federal Open Market Committee (FOMC) members.

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

Bitcoin and Ethereum – Weekly Technical Analysis – May 10th, 2021

Bitcoin

Bitcoin, BTC to USD, rose by 2.96% in the week ending 9th May. Following on from a 15.22% gain from the previous week, Bitcoin ended the week at $58,276.0.

A mixed start to the week saw Bitcoin rise to a Monday high $58,945.0 before hitting reverse.

Falling well short of the first major resistance level at $60,344, Bitcoin slid to a Wednesday intraweek low $52,960.0.

Steering clear of the first major support level at $50,849, Bitcoin bounced back to a Saturday intraweek high $59,450.0.

Continuing to fall short of the first major resistance level at $60,344, Bitcoin eased back to end the week at sub-$59,000 levels.

4 days in the green that included a 7.95% rally on Wednesday delivered the upside for the week. A 6.82% slide on Tuesday had put Bitcoin under pressure early in the week, however.

For the week ahead

Bitcoin would need avoid a fall through the $56,895 pivot to support a run the first major resistance level at $60,831.

Support from the broader market would be needed for Bitcoin to break back through to $60,000 levels.

Barring an extended crypto rally, the first major resistance level and resistance at $62,000.0 would likely cap any upside.

In the event of an extended breakout, Bitcoin could test resistance at the April swing hi $64,829.0 before any pullback. The second major resistance level sits at $63,385.

Failure to avoid a fall through the $56,895 pivot would bring the first major support level at $54,341 into play.

Barring another extended sell-off, Bitcoin should steer clear of the 23.6% FIB of $50,473 and the second major support level at $50,405.

At the time of writing, Bitcoin was up by 0.81% to $58,748.7. A mixed start to the week saw Bitcoin fall to an early Monday low $58,080.0 before rising to a high $58,999.0.

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

BTCUSD 100521 Daily Chart

Ethereum

Ethereum surged by 33.07% in the week ending 9th May. Following on from a 27.11% breakout from the previous week, Ethereum ended the week at $3,928.44.

It was a particularly bullish week. Ethereum rallied from a Monday intraweek low $2,952.08 to a Sunday intraweek high and a new swing hi $3,984.00.

Steering clear of the first major support levels, Ethereum broke through the first major resistance level at $3,190 and the second major resistance level at $3,428.

4-days in the green that included a 16.32% rally on Monday and a 12.41% gain on Saturday delivered the upside in the week.

For the week ahead

Ethereum would need to avoid a fall through the pivot at $3,614 to bring the first major resistance level at $4,277 into play.

Support from the broader market would be needed, however, for Ethereum to break through to $4,100 levels.

Barring an extended crypto rally, the first major resistance level and resistance at $4,500 would likely cap any upside.

In the event of an extended breakout, Ethereum could test resistance at $5,000 before any pullback. The second major resistance level sits at $4,625.

Failure to avoid a fall through the pivot at $3,614 would bring the first major support level at $3,266 into play.

Barring an extended sell-off in the week, Ethereum should steer clear of the 23.6% FIB of $3,047. The second major support sits at $2,604.

At the time of writing, Ethereum was up by 0.51% to $3,948.42. A mixed start to the week saw Ethereum fall to an early Monday low $3,893.01 before rising to a high $3,968.72.

Ethereum left the major support and resistance levels untested at the start of the week.

ETHUSD 100521 Daily Chart

Earnings to Watch Next Week: Marriott, Electronic Arts, Alibaba and Walt Disney in Focus

Earnings Calendar For The Week Of May 10

Monday (May 10)

IN THE SPOTLIGHT: MARRIOTT

Marriott International, an American multinational diversified hospitality company, is expected to report its first-quarter earnings of $0.03 per share, which represents a year-over-year decline of over 88% from $0.26 per share seen in the same quarter a year ago.

The U.S. hotel operator’s revenue would slump about 50% to $2.36 billion. However, in the last quarter, the company has delivered an earnings surprise of over 20%.

“Largest hotel brand company globally creates economies of scale, but the spread of COVID-19 will pressure unit growth. With the stock trading near its historical average multiple, we see too wide a risk-reward to justify recommending, with upside/downside driven by how severe and quick business trends return to normal post-COVID-19,” noted Thomas Allen, equity analyst at Morgan Stanley.

Tuesday (May 11)

IN THE SPOTLIGHT: ELECTRONIC ARTS

Electronic Arts, one of the world’s largest video game publishers, is expected to report its fiscal fourth-quarter earnings of $1.04 per share, which represents a year-over-year decline of over 3% from $1.08 per share seen in the same quarter a year ago.

The world’s largest video game publishers would post revenue growth of about 15% to around $1.39 billion. However, in the last four quarters, the company has delivered an earnings surprise of over 500%.

“For the fourth quarter of fiscal 2021, EA expects GAAP revenues of $1.317 billion, cost of revenues to be $302 million, and operating expenses of $837 million. EA anticipates a loss per share of 7 cents for the fourth quarter. Net bookings are expected to be $1.375 billion, which indicates an increase of $75 million over the prior guidance. For fiscal 2021, EA expects revenues of $5.6 billion, cost of revenues to be $1.477 billion, and earnings per share of $2.54,” noted analysts at ZACKS Research.

Wednesday (May 12)

Ticker Company EPS Forecast
WEN Wendy’s $0.15
WIX WIX -$0.68
DT Dynatrace Holdings $0.14
WWW Wolverine World Wide $0.40
LITE Lumentum Holdings Inc $1.42
DOX Amdocs $1.13
JACK Jack In The Box $1.29
GOCO Gocompare.Com $0.00
SONO Sonos Inc -$0.22
PAAS Pan American Silver USA $0.30
MAURY Marui ADR $0.15
TM Toyota Motor $3.67
AEG Aegon $0.17
BRFS BRF $0.02
EBR Centrais Eletricas Brasileiras $0.27
BAYRY Bayer AG PK $0.73
TCEHY Tencent $0.53
DM Dominion Midstream Partners -$0.13
FLO Flowers Foods $0.37

Thursday (May 13)

IN THE SPOTLIGHT: ALIBABA, WALT DISNEY

ALIBABA: China’s Alibaba Group Holding, the largest online and mobile e-commerce company in the world, is expected to report its fiscal fourth-quarter earnings of $1.82 per share, up over 40% from the same quarter a year ago. China’s biggest online commerce company’s revenue to surge more than 70% to $27.7 billion.

“Heightened investments in Taobao Deal and Grocery for user acquisition in less-affluent regions in China, should support long-term growth in core e-commerce business. Merchants’ marketing budgets will continue to shift online given rising reliance on e-commerce and better conversion. Alibaba’s ad resources remain under-monetized,” noted Gary Yu, equity analyst at Morgan Stanley.

“Digitalization trend in China will also sustain AliCloud’s growth potential. Gradual margin expansion will be a long-term profit driver. We see limited near-term catalysts but F22e P/E valuation remains attractive. We also see further downside support from additional disclosure to separate losses from new investments from profitable core e-commerce businesses.”

WALT DISNEY: The world’s leading producers and providers of entertainment and information is expected to report its fiscal second-quarter earnings of $0.27 per share, which represents a year-over-year decline of over 50%. The Chicago, Illinois-based family entertainment company’s revenue would slump over 10% to $ 16.1 billion.

Disney is building content assets that enable it to take advantage of the significant direct-to-consumer streaming opportunity ahead. Disney’s underlying IP remains best-in-class, supporting long-term content monetization opportunities,” noted Benjamin Swinburne, equity analyst at Morgan Stanley.

“During this period of FCF pressure from Parks closures, ESPN’s FCF generation is key to driving down leverage. Historical cycles suggest a potential return to above prior peak US Parks revenues in FY23.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MAY 13

Ticker Company EPS Forecast
CELH Celsius $0.00
HAE Haemonetics $0.69
BABA Alibaba $11.80
BAM Brookfield Asset Management USA $0.87
TAC TransAlta USA $0.06
UTZ Utz Brands $0.15
VERX Vertex Inc. Cl A $0.05
FTCH Farfetch -$0.28
DIS Walt Disney $0.27
AMAT Applied Materials $1.50
DDS Dillards $1.20
VNET 21Vianet -$0.02
TEF Telefonica $0.16
PBR Petroleo Brasileiro Petrobras $0.12
NICE Nice Systems $1.50
TYOYY Taiyo Yuden ADR $2.09
IX Orix $1.97
SGAMY Sega Sammy ADR -$0.02
SOMLY Secom ADR $0.27
OJIPY Oji ADR $1.57
SBS Companhia De Saneamento Basico $0.15

Friday (May 14)

Ticker Company EPS Forecast
MFG Mizuho Financial $0.06
CIG Companhia Energetica Minas Gerais $0.08
HMC Honda Motor $0.41
SMFG Sumitomo Mitsui Financial $0.12
RDY Drreddys Laboratories $0.52

 

The Week Ahead – Economic Data, Central Bank Chatter, and COVID-19 Vaccine News in Focus

On the Macro

It’s a quieter week ahead on the economic calendar, with 50 stats in focus in the week ending 14th May. In the week prior, 57 stats had been in focus.

For the Dollar:

In the 1st half of the week, JOLT’s job openings and inflation figures are due out.

Expect inflation figures for April on Wednesday to have the greatest impact on the Dollar.

Later in the week, wholesale inflation and jobless claims figures will be in focus on Thursday.

While wholesale inflation figures will draw interest, the markets will be looking for another fall in jobless claims. Avoiding a return to 500k levels would give riskier assets a boost.

At the end of the week, retail sales, industrial production, and prelim consumer sentiment figures wrap things up.

Expect the retail sales and consumer sentiment figures to be the key drivers.

In the week, the Dollar ended the week down by 1.15% to 90.233.

For the EUR:

It’s a quieter week on the economic data front.

On Tuesday, German and Eurozone ZEW economic sentiment figures for May will provide the EUR with direction.

Expect the numbers to influence.

The focus will then shift to industrial production figures for the Eurozone on Wednesday. With little else for the markets to consider, we can expect some EUR sensitivity to the numbers.

Through the 2nd half of the week, finalized inflation figures from Germany, France, and the Eurozone are also due out. Barring marked revision from prelim numbers, however, we don’t expect too much influence on the EUR.

From the ECB, the ECB’s monetary policy meeting minutes will also draw interest.

The EUR ended the week up by 1.21% to $1.2166.

For the Pound:

It’s a relatively busy week ahead on the economic calendar.

Retail sales figures for April are due out on Tuesday ahead of a busy Wednesday.

The markets will be looking for another jump in spending as the UK economy reopens.

On Wednesday, 1st quarter GDP numbers are due out along with industrial and manufacturing production and trade data.

While we expect the GDP numbers to be key, March manufacturing production and trade figures will also draw attention.

On the monetary policy front, BoE Governor Bailey is also scheduled to speak in the week. Any comments on the economy or monetary policy will provide the Pound with direction.

The Pound ended the week up by 1.17% to $1.3984.

For the Loonie:

It’s another quiet week ahead on the economic calendar.

Economic data is limited to manufacturing sales and wholesale sales figures due out on Friday.

On the monetary policy front, BoC Governor Macklem is scheduled to speak on Thursday.

With little else for the markets to consider, we can expect crude oil inventory numbers and OPEC and IEA monthly reports to also provide direction.

The Loonie ended the week up 1.26% to C$1.21000 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s another relatively quiet week ahead.

Key stats include business confidence and retail sales figures on Monday and consumer sentiment figures on Wednesday.

With the RBA looking for business investment and consumer spending to support the recovery, expect the numbers to influence.

Late in the week, wage growth figures for the 1st quarter will also provide direction.

The Aussie Dollar ended the week up by 1.66% to $0.7844.

For the Kiwi Dollar:

It’s a relatively quiet week ahead.

On Wednesday, electronic card retail sales are due out ahead of business PMI numbers on Friday.

Following some positive numbers from March, the markets will be looking for further improvement to support the Kiwi.

The Kiwi Dollar ended the week up by 1.62% to $0.7278.

For the Japanese Yen:

It is a quiet week ahead. Household spending figures for March will be in focus on Tuesday.

Another jump in spending would provide some hope of a speedier economic recovery that should support the Yen.

The Japanese Yen rose by 0.65 to ¥108.60 against the U.S Dollar.

Out of China

It’s a quieter week ahead.

Inflation figures for April are due out on Tuesday. While the numbers tend to influence market risk sentiment, the markets are expecting a pickup in inflationary pressures. This should, therefore, limit the impact on the global financial markets.

The Chinese Yuan ended the week up by 0.64% to CNY6.4332 against the U.S Dollar.

Geo-Politics

While there are no major risks to consider, the markets will need to continue to eye U.S – China relations.

There’s also the progress towards a new Iran nuclear agreement to track in the week.

Mortgage Rates at sub-3% for a Third Consecutive Week

Mortgage rates fell for a 4th week in 5-weeks in the week ending 6th May. Reversing a 1 basis point rise from the week prior, 30-year fixed rates fell by 2 basis points to 2.96%.

Compared to this time last year, 30-year fixed rates were down by 30 basis points.

30-year fixed rates were still down by 198 basis points since November 2018’s last peak of 4.94%.

Notably, mortgage rates remained below prior the 3% mark for a 3rd consecutive week.

Economic Data from the Week

It was busy first half of the week on the U.S economic calendar.

Key stats included private sector PMI numbers for April, factory orders and trade data, and ADP nonfarm employment change figures.

The stats were skewed to the negative, with the market’s favored ISM Non-Manufacturing PMI falling from 63.7 to 62.7.

Manufacturing sector growth also softened in April, with the ISM Manufacturing PMI falling from 64.7 to 60.7

In March, the U.S trade deficit widened from $70.5bn to $74.4bn, while factory orders rose by a weaker than expected 1.1%.

Also falling short of forecasts was a 742k increase in nonfarm employment according to the ADP. Economists had forecast an 800k rise.

The weaker stats coupled with the FED’s assurances of low for longer pegged back Treasury yields and mortgage rates.

Freddie Mac Rates

The weekly average rates for new mortgages as of 6th May were quoted by Freddie Mac to be:

  • 30-year fixed rates fell by 2 basis point to 2.96% in the week. This time last year, rates had stood at 3.26%. The average fee fell from 0.7 to 0.6 points.
  • 15-year fixed decreased by 1 basis point to 2.30% in the week. Rates were down by 43 basis points from 2.73% a year ago. The average fee decreased from 0.7 points to 0.6 points.
  • 5-year fixed rates rose by 6 basis points to 2.70%. Rates were down by 47 points from 3.17% a year ago. The average fee remained unchanged at 0.3 points.

According to Freddie Mac,

  • Mortgage rates have remained under 3% for 3 consecutive weeks.
  • Consumer income and spending are on the rise, leading to a pickup in economic growth.
  • The combination of low and stable rates, together with an improving economy, is good for homebuyers.
  • This is also a positive for homeowners who may have missed previous opportunities to refinance and increase monthly cash flow.

Mortgage Bankers’ Association Rates

For the week ending 30th April, the rates were:

  • Average interest rates for 30-year fixed to conforming loan balances increased from 3.17% to 3.18%. Points increased from 0.30 to 0.34 (incl. origination fee) for 80% LTV loans.
  • Average 30-year fixed mortgage rates backed by FHA increased from 3.12% to 3.13%. Points fell from 0.24 to 0.21 (incl. origination fee) for 80% LTV loans.
  • Average 30-year rates for jumbo loan balances increased from 3.28% to 3.31%. Points decreased from 0.30 to 0.27 (incl. origination fee) for 80% LTV loans.

Weekly figures released by the Mortgage Bankers Association showed that the Market Composite Index, which is a measure of mortgage loan application volume, declined by 0.9% in the week ending 30th April. In the week prior, the index had fallen by 2.5%.

The Refinance Index rose by 0.1% and was 17% lower than the same week a year earlier. The Index had fallen by 1.0% in the week prior.

In the week ending 30th April, the refinance share of mortgage activity increased from 60.6% to 61.0%. The share had risen from 60.0% to 60.6% in the previous week.

According to the MBA,

  • Mortgage rates were slightly higher last week, leading to a fall in purchase applications for a second straight week.
  • Refinance applications were essentially unchanged in the final week of April.
  • Average loan sizes were on the rise, driven by a competitive purchase market, attributable to low housing inventories and high demand.

For the week ahead

It’s a quieter first half of the week on the U.S economic calendar. JOLTs job openings and inflation figures are in focus.

Following last week’s disappointing nonfarm payroll figures, however, the markets may be desensitized to any pickup in inflationary pressures.

That should leave mortgage rates at sub-3% levels for a 4th consecutive week.

Weekly Technical Market Insight: 10th – 14th May 2021

Charts: Trading View

US Dollar Index (Daily Timeframe):

April’s end-of-month recovery gain—movement trimming a three-week decline—failed to motivate further USD outperformance in the first full week of May. According to the US dollar index (ticker: DXY), a gauge of USD value against six major currencies, the greenback shed 1.2 percent and settled at weekly lows.

For those who read the previous week’s technical market insight, you may recall the following (italics):

The space between the 200-day simple moving average at 91.98 (91.92) and resistance from 91.36 (previous Quasimodo support) delivers a potential ceiling to be mindful of this week, strengthened on the back of a clear-cut downtrend since early 2020.

As evident from the chart, 91.98/91.36 proved effective resistance, with the latter half of the week underlining a vigorous bearish phase and shaking hands with trendline support, taken from the low 89.20 (arranged just north of support coming in from 90.00). Territory south of 90.00 shines the technical spotlight on another bed of support at 89.34.

 

In terms of trend, as highlighted in previous writing, long-term price action has been underwater since topping ahead of 103.00 in March 2020—many analysts likely refer to this downward movement as a primary trend on the daily scale. Also of technical relevance is the 93.43 31st March peak. April’s slide, along with last week’s additional losses, echoes seller strength within the current downtrend.

As measured by the RSI indicator, momentum levelled off a stone’s throw below the 50.00 centreline and settled the week around 35.00. This week, therefore, may witness a test of oversold space, targeting support at 21.36.

  • The combination of trendline support and nearby support at 90.00 unearths a potential bullish scenario this week. However, downside risks remain evident, given the longer-term trend favours sellers. 90.00 support giving way, therefore, perhaps opens the door for an approach to 89.34 support.

EUR/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Following a three-month retracement, support at 1.1857-1.1352 made an entrance and inspired a bullish revival in April, up 2.4 percent at the close. Month-to-date action for May also currently trades higher by 1.2 percent.

April upside—alongside May’s gains—throws light on the possibility of fresh 2021 peaks in the months ahead, followed by a test of ascending resistance (prior support [1.1641]).

Based on trend studies, the primary uptrend has been underway since price broke the 1.1714 high (Aug 2015) in July 2017. Additionally, price also breached trendline resistance, taken from the high 1.6038, in July 2020.

Daily timeframe:

Europe’s single currency clocked two-month highs against the greenback on Friday, powered by miserable US jobs data.

Mid-week technical trading observed price bottom north of the 200-day simple moving average at 1.1944, with recent trade testing Quasimodo resistance at 1.2169. Additional progress this week would bring light to another Quasimodo formation at 1.2278.

Latest out of the RSI reveals the value recoiled from support at 51.36, threatening a possible visit to overbought space this week—in particular resistance at 80.39.

As for trend, despite the 2021 retracement, the overall bias remains to the upside.

H4 timeframe:

Mid-week action on the H4 also saw trade explore support at 1.1990 and a Fibonacci cluster between 1.1971 and 1.1986 (a defined area on a price chart where Fib retracement levels converged).

EUR/USD bulls, as you can see, entered an offensive phase from 1.1971/1.1990 and, with the help of Friday’s bullish energy, scaled resistance at 1.2108 (now set as possible support) and shined the headlights on Quasimodo resistance drawn from 1.2180 (set just above the daily Quasimodo resistance at 1.2169).

H1 timeframe:

Clearance of Quasimodo resistance at 1.2135 (now labelled support) on Friday—and having noted limited active (potentially consumed) supply to the left of price (see late February)—could have the 1.22 figure call for attention this week (not visible on the chart). Price action traders will also note supply at 1.2239-1.2216 shelters the aforementioned round number.

However, before climbing to the 1.22 neighbourhood, traders are urged to pencil in the possibility of a 1.2135 retest.

From the RSI, momentum registered overbought status on Friday and touched gloves with resistance at 78.97. This suggests a dip in upside momentum early week, possibly triggering a retest of H1 price support noted above at 1.2135.

 

Observed levels:

Long term:

The vibe out of the monthly timeframe shows price extending recovery gains from demand at 1.1857-1.1352, consequently placing a question mark on the daily timeframe’s Quasimodo resistance this week at 1.2169.

Short term:

With the daily timeframe’s Quasimodo unlikely to deliver much to write home about, a retest of H1 support at 1.2135 is a bullish theme that could unfold early trading this week and attract dip-buyers. Upside targets from this area are seen at H4 Quasimodo resistance from 1.2180, followed by the 1.22 figure on the H1 and nearby H1 supply at 1.2239-1.2216.

AUD/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Since the beginning of 2021, buyers and sellers have been battling for position south of trendline resistance (prior support – 0.4776 high) and supply from 0.8303-0.8082. However, with May trading 1.7 percent in positive territory, visiting the aforesaid areas could be on the table.

Should a bearish scenario unfold, on the other hand, demand at 0.7029-0.6664 (prior supply) is featured to the downside.

Trend studies (despite the trendline resistance [1.0582] breach in July 2020) show the primary downtrend (since mid-2011) remains in play until breaking 0.8135 (January high [2018]).

Daily timeframe:

Amidst intensified USD downside Friday—fuelled by disappointing non-farm payrolls—the Australian dollar flexed its financial muscle and marginally overthrew familiar resistance from 0.7817 (now labelled support). Note the currency pair has been consolidating beneath 0.7817 since mid-April.

Settling north of 0.7817 stirs a possible bullish scenario this week, with limited resistance visible until reaching supply at 0.8045-0.7985 (stationed just south of monthly supply mentioned above at 0.8303-0.8082).

The RSI value trekked above the 50.00 centreline last week—a sign of a strengthening trend—and appears poised to reach trendline resistance, extended from the high 80.12.

With respect to trend, despite a two-month retracement, we have been decisively higher since the early months of 2020.

H4 timeframe:

Friday adopting a bullish phase, as you can see, not only established demand at 0.7759-0.7791 (decision point to break resistance at 0.7816 [now labelled support]), we can also see price advanced into the walls of demand-turned supply at 0.7848-0.7867.

Removing the aforesaid supply shifts attention to resistance at 0.7899, though before an attempt to take hold of 0.7848-0.7867 is seen, a retest at 0.7816 support may materialise.

H1 timeframe:

Thanks to Friday’s ascent, the H1 scale shows demand at 0.7775-0.7787 took shape, with subsequent upside breaking/retesting the 0.78 figure to touch 0.7850 resistance into the close (fixed within H4 supply at 0.7848-0.7867).

Similar to the EUR/USD H1 chart (see above), the AUD/USD demonstrates limited active supply above 0.7850 (see late February action) until resistance at 0.7891 (previous Quasimodo support) and the 0.79 figure.

The RSI tested resistance at 80.85 on Friday and exited overbought space. Any downside from here is likely to approach trendline support, drawn from the low 24.50.

Observed levels:

Long term:

In addition to the uptrend present on the daily timeframe since 2020, price climbing resistance at 0.7817 on Friday perhaps clears the river north for further buying this week, targeting supply from 0.8045-0.7985.

Short term:

The US session connecting with 0.7850 resistance on the H1 scale Friday ignited mild bearish flow.

The weak bearish presence could have H4 buyers probe supply at 0.7848-0.7867 this week and trigger a bullish wave to the 0.79ish neighbourhood.

Short-term bulls, therefore, would likely welcome a 0.7850 break/retest scenario.

USD/JPY:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

Following January’s bullish engulfing candle and February’s outperformance, March concluded up by 3.9 percent and marginally cut through descending resistance, etched from the high 118.66.

Although April finished lower by 1.3 percent and snapped the three-month winning streak, May is attempting to hold the breached descending resistance, echoing potential support.

Daily timeframe:

Supply at 109.97-109.18 entertained price action last week, triggering bearish activity on Friday. The leg lower—which shook hands with trendline support, extended from the low 102.59—was accompanied by a decline in US Treasury yields and lower-than-forecast US jobs data.

Pushing beyond the aforementioned trendline support this week not only warns of upside weakness, it underlines demand at 107.58-106.85 (prior supply) and a 38.2% Fib level from 107.73 as potential downside objectives. North of 109.97-109.18, however, casts light towards longer-term resistance at 110.94-110.29, stationed under supply at 111.73-111.19.

Trend studies show the unit has been trending higher since the beginning of 2021.

The RSI indicator crossed paths with resistance at 57.00 last week and ducked back under the 50.00 centreline into the close. This suggests additional downside momentum could be on the cards.

H4 timeframe:

NFP-induced selling on Friday pulled the currency pair through support at 108.99 (now labelled resistance) to join support between 108.20 and 108.50 (made up of demand from 108.20-108.43, a 1.618% Fib expansion at 108.36, a 1.272% Fib projection at 108.48, and support at 108.50).

Unseating the aforementioned support area this week emphasises continuation selling to support priced in at 107.44 (dovetails with a 1.272% Fib projection at 107.41).

H1 timeframe:

109 and Quasimodo support at 108.80 suffered a heavy blow in the wake of Friday’s employment data.

The spirited decline had price action bump heads with a support area at 108.15-108.34 (glued to the underside of H4 demand at 108.20-108.43), extended from early March 2020, and subsequently retest the lower side of the breached Quasimodo support as resistance. Below 108.15-108.34, traders are likely to have the 108 figure pinned on the board.

Momentum, based on the RSI, unwrapped a rebound from oversold space at the closing stages of the week. RSI resistance at 39.97 is nearby; RSI support, however, can be seen fixed around 18.76.

Observed levels:

Long term:

The monthly and daily timeframes display converging signals, thanks to Friday’s dip.

Monthly action is attempting to ignite support off the breached descending resistance, while daily flow recently touched base with trendline support.

Short term:

Lower on the curve, H4 and H1 technical structure—in line with the bigger picture—shows price responding from demand/support areas between 108.15 and 108.43.

The above, therefore, points the spotlight to a potential bullish theme early week, with the 109 figure (H1) arranged as an upside objective (links with H4 resistance at 108.99).

GBP/USD:

Monthly timeframe:

(Technical change on this timeframe is often limited, though serves as guidance to potential longer-term moves)

The pendulum swung in favour of buyers following December’s 2.5 percent advance, stirring major trendline resistance (2.1161). February subsequently followed through to the upside (1.7 percent) and refreshed 2021 highs at 1.4241, levels not seen since 2018. Contained within February’s range, however, March and April witnessed decreased volatility.

The first full week of May finished on the front foot—within striking distance of April highs (1.4009)—up by 1.2 percent.

Despite the trendline breach (which could serve as possible support if retested), primary trend structure has faced lower since early 2008, unbroken (as of current price) until 1.4376 gives way (April high 2018).

Daily timeframe:

Resistance at 1.4003, as aired in recent writing, has proved a stubborn hurdle since March, capping bullish attempts on multiple occasions. Notably, sterling accelerated to the upside on Friday as dismal US jobs data weighed on its US counterpart, consequently forming a near-full-bodied bullish candle that paved the way for a 1.4003 test.

Any downside from 1.4003 this week throws light on 1.3670 bottoms, arranged north of Quasimodo support at 1.3609. However, should buyers extend Friday’s bullish showing and override current resistance, Quasimodo resistance at 1.4250 could enter the frame.

From the RSI indicator, the value recoiled from trendline support, pencilled in from the low 36.14, and cemented 50.00+ status into the close last week (a sign of a strengthening uptrend). In conjunction with this, GBP/USD has remained entrenched within a long-term uptrend since early 2020, despite the recent two-month retracement.

H4 timeframe:

Drawing price action northbound, we can see Friday’s ascent toppled resistance at 1.3919 (now labelled support) and came within touching distance of Quasimodo resistance at 1.4007 in the shape of a shooting star candlestick pattern (bearish signal).

Interestingly, rupturing 1.4007, according to price action specifics, could have the currency pair advance as far north as the 1.4200 neighbourhood. Though a bearish wave unfolding south of 1.4007 shines light on support from 1.3919.

H1 timeframe:

The technical stage on the H1 watched Fibonacci resistance at 1.4013-1.3988 (houses the key figure at 1.40, along with H4 Quasimodo resistance at 1.4007 and daily resistance at 1.4003) welcome price action on Friday. The technical confluence around 1.40 saw upside momentum smooth off, underlining a potential retracement to support from 1.3929 early week.

Out of the RSI, we can see the value spiked overbought terrain on Friday and—albeit leaving RSI resistance at 84.66 unchallenged—settled around 63.53.

Observed levels:

Long term:

Despite hesitation within February’s range, the monthly timeframe shows a trendline resistance breach occurred late 2020. Should the 1.4376 top move aside, longer-term buying may become a key theme in this market.

Resistance at 1.4003, however, remains noteworthy on the daily timeframe this week.

Short term:

H1 Fibonacci resistance at 1.4013-1.3988, alongside additional technical levels (holds the 1.40 figure [H1], H4 Quasimodo resistance at 1.4007 and daily resistance at 1.4003), is likely on the radar for many traders this week. Bearish flow from this region has H1 support at 1.3929 to target, followed by H4 support at 1.3919 and then the 1.39 figure.

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The Weekly Wrap – Economic Data and Market Risk Sentiment Sink the Greenback

The Stats

It was a busy week on the economic calendar, in the week ending 7th May.

A total of 57 stats were monitored, following 61 stats from the week prior.

Of the 57 stats, 33 came in ahead forecasts, with 24 economic indicators coming up short of forecasts. There were no stats that were in line with forecasts in the week.

Looking at the numbers, 30 of the stats reflected an upward trend from previous figures. Of the remaining 27 stats, 26 reflected a deterioration from previous.

For the Greenback, it was back in the red. In the week ending 7th May, the Dollar Spot Index slid by 1.15 % to 90.233. In the previous week, the Dollar had risen by 0.48% to 91.207.

Out of the U.S

It was a mixed set of numbers from the U.S.

Both the manufacturing and services sector saw slower growth in April, according to the market’s preferred ISM surveys.

Ahead of Friday’s nonfarm payroll figures, however, labor market numbers had been upbeat.

In April, nonfarm payrolls increased by 742k in April according to the ADP. Payrolls had risen by 565k in March.

The weekly jobless claims figures were also upbeat. In the week ending 30th April, initial jobless claims fell from 590k to 498k.

At the end of the week, however, it was nonfarm payrolls and unemployment figures that were key.

In April, nonfarm payrolls rose by just 266K, falling well short of a forecasted 978k rise. The participation rate ticked up from 61.5% to 61.7%, contributing to a rise in the unemployment rate from 6.0% to 6.1%.

In the equity markets, the NASDAQ fell by 1.51%, while the Dow and the S&P500 saw gains of 2.67% and 1.23% respectively.

Out of the UK

It was a relatively busy week.

Finalized private sector PMIs were in focus in the week. At the end of the week, April’s construction PMI was in focus but had a muted impact on the Pound.

The stats were skewed to the positive in the week.

In April, the manufacturing PMI increased from 58.9 to 60.9, coming in ahead of a prelim 60.7.

The services PMI increased from 56.3 to 61.0, coming in ahead of a prelim 60.1.

As a result of the upward revisions, the composite PMI rose from 56.4 to 60.7, which was up from a prelim 60.0.

While the stats were positive, the BoE monetary policy decision on Thursday was the main event, however.

On Thursday, the BoE left rates and the QE total unchanged, which was in line with market expectations.

There was no dissent, with all in favor of standing pat on policy.

While standing pat, the BoE announced slower bond purchases in response to a sharp upward revision to growth forecasts for 2021.

The BoE revised up growth for 2021 from 5.0% to 7.25%.

In the week, the Pound rose by 1.17% to end the week at $1.1.3984. In the week prior, the Pound had fallen by 0.39% to $1.3822.

The FTSE100 ended the week up by 2.29%, following a 0.45% gain from the previous week.

Out of the Eurozone

It was a busy week on the economic data front.

Through the 1st half of the week, private sector PMI figures for April were in focus.

Manufacturing sector activity continued to lead the way. The Eurozone’s Manufacturing PMI rose from 62.5 to 62.9. Service sector activity across the Eurozone also returned to growth, with the Eurozone services PMI rising from 49.6 to 50.5.

Other stats in the week included German retail sales, industrial production, and trade data.

These stats were also positive EUR and the European majors. While Germany’s trade surplus narrowed, both retail sales and industrial production were on the rise in March.

Even the narrowing of the trade surplus was positive. A larger jump in imports over exports pointed to increased demand.

From the ECB, the Economic Bulletin was also in focus. While talking of uncertainty near-term, there was optimism over the medium term, which was EUR positive.

For the week, the EUR rose by 1.21% to $1.2166. In the week prior, the EUR had fallen by 0.64% to $1.2020.

The CAC40 rose by 1.85%, with the DAX30 and EuroStoxx600 ended the week up by 1.74% and by 1.69% respectively.

For the Loonie

It was a busier week.

In the 1st half of the week, building permits and trade data were in focus.

Canada’s trade balance fell from C$1.04bn surplus to a C$1.14bn deficit in March.

At the end of the week, employment figures and the Ivey PMI for April also provided direction.

In April, employment fell by 207.1k, partially reversing a 303.1k jump in March. As a result, the unemployment rate increased from 7.5% to 8.1%.

The Ivey PMI fell from 72.9 to 60.6 in the month of April. Economists had forecast a decline to 60.5.

Despite the stats, the markets were in a forgiving mood followed the BoC’s more hawkish outlook.

In the week ending 7th May, the Loonie rose by 1.26% to C$1.2100. In the week prior, the Loonie had jumped by 1.51% to C$1.2288.

Elsewhere

It was a bullish week for the Aussie Dollar and the Kiwi Dollar.

In the week ending 7th May, the Aussie Dollar rallied by 1.66% to $0.7844, with the Kiwi Dollar ending the week up by 1.62% to $0.7278.

For the Aussie Dollar

It was a relatively quiet week.

In the 1st half of the week, manufacturing and trade data were in focus. It was a mixed set of numbers.

While manufacturing sector activity picked up, a fall in exports led to a marked narrowing in the trade surplus in March. The surplus narrowed from A$7.529bn to A$5.574bn. Economists had forecast a widening to A$8.000bn.

In the 2nd half of the week, building approvals were in focus, which had a muted impact on the Aussie Dollar.

On the monetary policy front, the RBA was also in action in the week.

The RBA left the cash rate unchanged at 0.1% on Tuesday, which was in line with expectations. There was a more hawkish tone within the RBA Rate Statement, however.

Growth forecasts for 2021 were revised up from 3.5% in February to 4.75% in the latest statement. The RBA also projected that unemployment will fall to a 2008 low 4.5% next year.

In spite of the revisions, the RBA stood by its policy outlook, with the cash rate to remain unchanged until 2024. The RBA did state, however, that it would decide whether to extend its government bond purchases at the July meet.

At the end of the week, the RBA’s Statement of Monetary Policy was also in focus on Friday. Upward revisions to economic growth and unemployment forecasts for 2021 were key takeaways from the statement.

For the Kiwi Dollar

It was a quiet week.

Employment figures for the 1st quarter were in focus along with March building consents and business confidence.

In the 1st quarter, employment increased by 0.6%, following a 0.6% rise in the 4th quarter of last year. As a result of the pickup in employment, the unemployment rate eased from 4.9% to 4.7%.

Business confidence figures were also positive, with the ANZ Business Confidence Index rising from -2 to +7 in May.

All the sub-components were on the rise in May. Export, investment, and employment intentions all saw strong increases as did capacity utilization and profit expectations.

For the Japanese Yen

It was a quiet week.

Finalized private sector PMIs for April were in focus in the week.

In April, the services PMI rose from 48.3 to 49.5, with firms optimistic over the ongoing vaccination programs globally.

The Japanese Yen rose by 0.65% to ¥108.60 against the U.S Dollar. In the week prior, the Yen had fallen by 1.33% to ¥109.31.

Out of China

It was a busier week on the data front.

The market’s preferred Caixin survey private sector PMIs and trade data were in focus in the week.

For April, the services PMI increased from 54.3 to 56.3. New orders grew at the fastest pace in 5-months, with the pace of job creation also accelerating. The pickup in the pace of hiring was supported by elevated optimism across the sector.

Trade data was also market risk positive, with imports (+43.1%) and exports (+32.3%) seeing marked increases in April. The U.S Dollar trade surplus widened from $13.80bn to $42.86bn.

In the week ending 7th May, the Chinese Yuan rose by 0.64% to CNY6.4332. In the week prior, the Yuan had risen by 0.33% to CNY6.4749.

The CSI300 fell by 2.49%, with the Hang Seng ended the week down by a more modest 0.40%.

European Equities: A Week in Review – 07/05/21

The Majors

It was a bullish week for the European majors in the week ending 7th May, with the EuroStoxx600 closing out at a record high on Friday.

The CAC40 rose by 1.85%, with the DAX30 and the EuroStoxx600 ended the week up by 1.74% and by 1.69% respectively.

Corporate earnings and a pickup in the vaccination rate across the EU provided the European majors with support.

Private sector PMIs from member states and the Eurozone and economic data from Germany were also positive, adding to the upside in the week.

The Stats

Through the 1st half of the week, private sector PMI figures for April were in focus.

Manufacturing sector activity continued to lead the way. The Eurozone’s Manufacturing PMI rose from 62.5 to 62.9. Service sector activity across the Eurozone also returned to growth, with the Eurozone services PMI rising from 49.6 to 50.5.

Other stats in the week included German retail sales, industrial production, and trade data.

These stats were also positive for the European majors. While Germany’s trade surplus narrowed, both retail sales and industrial production were on the rise in March.

Even the narrowing of the trade surplus was positive. A larger jump in imports than exports pointed to increased demand.

From the ECB, the Economic Bulletin was also in focus. While talking of uncertainty near-term, there was optimism over the medium term, which was market positive.

From the U.S

It was a mixed set of numbers from the U.S.

Both the manufacturing and services sector saw slower growth in April, according to the market’s preferred ISM surveys.

Ahead of Friday’s nonfarm payroll figures, however, labor market numbers were upbeat.

In April, nonfarm payrolls increased by 742k in April according to the ADP. Payrolls had risen by 565k in March.

The weekly jobless claims figures were also upbeat. In the week ending 30th April, initial jobless claims fell from 590k to 498k.

At the end of the week, market optimism overshadowed disappointing official nonfarm payrolls and unemployment figures.

In April, nonfarm payrolls rose by just 266K, falling well short of a forecasted 978k rise. The participation rate ticked up from 61.5% to 61.7%, contributing to a rise in the unemployment rate from 6.0% to 6.1%.

The Market Movers

From the DAX, it was a mixed week for the auto sector. Volkswagen slid by 2.65%, with Daimler falling by 1.19%. BMW and Continental found support, however, rising by 0.67% and by 1.56% respectively.

It was also a mixed week for the banking sector. Deutsche Bank slipped by 0.43% after the previous week’s 18.43% jump, while Commerzbank rose by 2.19%.

From the CAC, it was a bullish week for the banks. Soc Gen led the way, rallying by 5.24%, with BNP Paribas gaining 2.60%. Credit Agricole ended the week flat, however.

It was another bullish week for the French auto sector. Stellantis NV rallied by 8.18%, with Renault ending the week up by 1.85%.

Air France-KLM slipped by 0.15%, with Airbus falling by 1.57%.

On the VIX Index

It was back into the red for the VIX in the week ending 7th May. Marking a 7th weekly fall in 10-weeks, the VIX fell by 10.32%. Reversing a 7.39% gain from the previous week, the VIX ended the week at 16.69.

4-days in the red from 5 sessions, which included a 9.24% fall on Friday, delivered the downside in the week for the VIX.

For the week, the Dow and the S&P500 ended the week up by 2.67% and by 1.23% respectively, while the NASDAQ fell by 1.51%.

VIX 080521 Weekly Chart

The Week Ahead

It’s a quieter week ahead on the Eurozone economic calendar.

On Tuesday, German and Eurozone ZEW economic sentiment figures for May will provide the EUR with direction.

Expect the numbers to influence.

The focus will then shift to industrial production figures for the Eurozone on Wednesday. With little else for the markets to consider, we can expect some sensitivity to the numbers.

Through the 2nd half of the week, finalized inflation figures from Germany, France, and the Eurozone are also due out. Barring marked revision from prelim numbers, however, we don’t expect too much influence on the majors.

From the U.S, inflation figures for April should have a muted impact on the majors following the FED’s latest reassurances.

Wholesale inflation and jobless claims figures will be in focus on Thursday.

While wholesale inflation figures will draw interest, the markets will be looking for another fall in jobless claims. Avoiding a return to 500k levels should support riskier assets.

At the end of the week, retail sales, industrial production, and prelim consumer sentiment figures wrap things up.

Expect the retail sales and consumer sentiment figures to be the key drivers.

S&P 500 Weekly Price Forecast – Stock Markets Have Fallen a Week but End on Strength

The S&P 500 initially pulled back a bit during the course of the week to reach down towards the 4100 level. The 4100 level has been supportive more than once, and therefore I think it is only a matter of time before buyers come back in, just as we have seen. By rallying the way we have, it looks like we are going to clear the 4200 level finally and continue to go much higher. With that being the case, the market is more than likely going to go looking towards the 4400 level which makes sense as this market does tend to move in 200 point increments.

S&P 500 Video 10.05.21

With the wave liquidity seemingly never-ending, traders will continue to bet on stock markets going higher. I have no interest in shorting this market, and quite frankly never do. The 4000 level underneath is the “floor the market”, so if we were to break down below there then I will be a buyer of puts more than anything else. I have no interest whatsoever in trying to short this market, and therefore I am simply looking for a buying opportunity on pullbacks. All things been equal, the market is likely to continue to see value hunting every time we fall. The market is likely to extend the overall uptrend that we have seen and therefore I think it is only a matter of time before we see higher levels. In fact, with the way the markets are manipulated it is very difficult to imagine a scenario where I could short.

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

Crude Oil Weekly Price Forecast – Crude Oil Markets Continue to Threaten Breakout

WTI Crude Oil

The West Texas Intermediate Crude Oil market has rallied a bit during the course of the week to pierce the top of the ascending triangle, but at the end of the week we are struggling to continue going higher. I think will continue to see a lot of choppy behavior, but in more of an upward tilt than anything else. With that being the case, I think it is only a matter of time before we break towards the upside, based mainly upon the idea of more demand down the road. There was a little bit of a pullback, perhaps based upon the jobs report but all things being equal we should continue to find buyers on dips.

WTI Oil Video 10.05.21

Brent

Brent markets rallied as well but found the $70 level to be a bit too much to overcome. With that being the case, the market is likely to try to break out to the upside but there is a lot of noise in the short term that will continue to cause some issues. I have no interest in shorting this market, and it is obvious that we have a major uptrend line that the market is paying close attention to. Ultimately, I do think that we will find buyers to reach towards the $70 level, which is a large, round, psychologically significant figure. If we can break above there, then the overall attitude of the market should continue to be bullish. I have no interest in shorting this market anytime soon, because it seems like it just will not rollover.

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

Silver Weekly Price Forecast – Silver Markets Have Explosive Growth for The Week

Silver markets have had a strong week as we approached the $28 level. The $28 level is a large, round, psychologically significant figure, and as a result we have seen a little bit of selling pressure. Ultimately, if we can break above the $28 level, then I think the market is probably going to go looking towards the $30 level. Ultimately, the $30 level will be very difficult to get above, but if we do it will open up a fresh leg higher. At that point, I think silver becomes more of a “buy-and-hold” type of situation.

SILVER Video 10.05.21

Silver is rallying based upon the idea of the industrial reopening trade, and of course the massive amount of silver that will be necessary for that type of scenario. Underneath, I see the $26 level as support and the uptrend line comes into play as well. The 50 week EMA is sitting at the $24 level, an area that has been important for some time, so I do think at this point we are more than likely going to continue to see buyers on dips from a longer-term standpoint. The US dollar falling of course could have a role to play in this market so keep an eye on that as well.

All things been equal, I think that the uptrend is very much in play, and therefore I have no interest whatsoever in trying to short this market, as it has been so bullish. Ultimately, I think that we do see the market smash through that $30 level, but it may take several attempts.

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

Natural Gas Weekly Price Forecast – Natural Gas Markets Continue to Struggle With Big Handle

Natural gas markets have gone back and forth during the course of the week, showing signs of choppiness. All things being equal, the market is going to continue to show resistance at the $3.00 level, which of course is a large, round, psychologically significant figure, and therefore it does make a certain amount of sense that we would stall here. At this point in time, I think that if we break down will more than likely will go looking to fill the gap underneath which is something that futures markets do quite often. Furthermore, we also have to take a look at the demand equation which of course will start to drop as temperatures rallied.

NATGAS Video 10.05.21

The market continues to be very sideways, which I think more than anything else is related to the idea of commodities being in a bit of a super cycle, because quite frankly natural gas has no business being this high as we head into warmer temperatures. All things being equal, it is likely that we could go down towards the $2.50 level underneath, which shows a significant amount of support. All things being equal, this is a market that is showing signs of exhaustion, and it does make a certain amount of sense that we would see a continuation of the overall consolidation for the last several months. All things been equal, I am a seller as this market is one that is far too oversupplied in general and is simply seeing some residual effects from other markets. It has been a cooler than usual spring, but at this point it looks like temperatures are going to start picking up.

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

Gold Weekly Price Forecast – Gold Markets Have Strong Week

Gold markets have rallied a bit during the course of the week to break above the $1835 level. At this point in time, the market is likely to see the $1850 level as a resistance barrier, so I think this trend line matches up quite nicely. Nonetheless, the market is likely to go looking towards the $1950 level. The size of the candlestick is very bullish obviously, so I think this continues to show signs of strength that people will focus on. All things being equal, this is a market that I think gold is ready to take off again, especially as the US dollar is getting ready to get hammered.

Gold Price Predictions Video 10.05.21

Underneath, we have the 50 week EMA sits at the $1782 level and should cause a bit of trouble. With this being the case, the market is likely to see a lot of upward pressure given enough time, but it is also worth noting that this is a market that does tend to be very volatile, see you may look for the occasional pullback in order to take advantage of value. The market will continue to be very noisy based upon the bond market yields and of course the value of the greenback, which is being thrown around by overspending in America, and of course the overall risk appetite around the world.

Gold has seen a significant pullback over the last several months, but I think that is a nice buying opportunity. After forming that double bottom at the $1700 level, it does make sense that a certain amount of longer-term investors are willing to get involved and take advantage of this value.

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

USD/JPY Weekly Price Forecast – US Dollar Continues to Show Choppiness

The US dollar has gone back and forth during the course of the week to show signs of magnetism towards the ¥109 level. That being said, the market is likely to see this candlestick as a sign of slight confusion after the massive shot higher from the previous week. The ¥109 level has been important in the past, so should not be a huge surprise to see it act a bit like a magnet now. Furthermore, the Friday session ended up seeing a horrible jobs number which of course played havoc with the bond yields coming out the United States. That has a massive influence on this market, so the volatility on Friday would have been expected.

USD/JPY Video 10.05.21

To the upside, it appears that the ¥110 level is a bit of a resistance barrier, but at this point I think that we will continue to try to get there. If we break down below the ¥107.50 level, then it is possible that we could go to the ¥107 level. The 38.2% Fibonacci retracement level has showed itself to be supportive, especially as the 200 week EMA has come into play as well. At this point, this is a market that is trying to determine whether or not it can continue the massive and impulsive move previously, and therefore it makes sense that we have to chop around this area to figure out where we go next. Ultimately, this is a market that I think will be positive in general but noisy to say the least.

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

GBP/USD Weekly Price Forecast – British Pound Reaches Towards the Crucial Resistance Barrier

The British pound has rallied a bit during the course of the trading week to see bullish pressure, but to me it looks as if we continue to see the 1.40 level as a difficult wall to break through. If we do get a daily close above there, then based upon the weekly candlesticks I would be looking for a move to the 1.42 handle. In general, the fact that we closed towards the top of the range suggest that we are going to go higher as well. The market also seems to have quite a bit of support underneath near the 1.38 handle.

GBP/USD Video 10.05.21

The market is likely to continue to form a bit of a bullish flag as we continue to go sideways, so the question is whether or not we can break out to the upside? Nonetheless, the Bank of England has suggested in the last few days that they are looking to taper off on purchases in the bond market, and as a result it is likely that we are going to continue to go to the upside. Underneath, I do think that there are plenty of buyers but if we get a sudden “shock to the system”, which could have people rushing to the dollar albeit very temporarily. With this being the case, I think will continue to look at short-term dips as buying opportunities. I have no interest in selling this pair until we break down below the 1.35 handle, something that we are not going to see anytime soon.

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