Press review - page 320
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GBPUSD Fundamentals (based on dailyfx article)
Fundamental Forecast for British Pound: Neutral
"The BoE’s June 4 meeting may spur a limited market reaction as the central bank is widely expected to retain its current policy, and the lack of fresh central bank rhetoric may put greater emphasis on the U.S. data prints as Fed officials continue to see a rate hike in 2015. As a result, major economic developments coming out ahead of the Federal Open Market Committee’s (FOMC) June 17 interest rate decision may play an increased role in driving market volatility as BoE members show a greater willingness to normalize monetary policy in 2016."
USDJPY Fundamentals (based on dailyfx article)
Fundamental Forecast for Yen: Neutral
"Yet the S&P 500 continues near record-highs, and a true flight to safety across financial markets would likely lead to similar Japanese Yen gains as leveraged traders exit short positions. And therein lies the inconsistency: past episodes of sharp Yen declines (USDJPY gains) have coincided with similar rallies in the S&P 500 and the Japanese Nikkei 225. The fact that it hasn’t should be of some concern to USDJPY bulls. We’ll watch reactions to key data in the days ahead for further direction for the US Dollar and the USDJPY in particular."
AUDUSD Fundamentals (based on dailyfx article)
Fundamental Forecast for the Australian Dollar: Neutral
"Finally, in the US, a laundry list of high-profile activity indicators including the manufacturing- and service-sector ISM readings and the Fed’s Beige Book survey of regional economic conditions will pave the way for May’s Employment data. The economy is expected to have added 223,000 jobs, matching April’s outcome. Leading survey data points to a pickup in the pace of job creation however. In fact, the services industry (which accounts for close to three quarters of the employed) is tipped to have seen the strongest pace of hiring growth since June 2014."
GOLD Fundamentals (based on dailyfx article)
Fundamental Forecast for Gold: Neutral
"From a technical standpoint, gold broke back below the initial May opening range high at 1200 early in the week before coming into trendline support extending off the yearly low. Note that the decline has continued to trade within the confines of a well-defined descending channel formation off the monthly high with 3-waves down completing a 100% extension off the highs into 1183 (stretch low at 1180)."
Weekly Gold Market Review (adapted from goldsilverworlds article)
"China has announced the establishment of a new international gold fund with over 60 countries as members. The fund, which expects to raise 100 billion yuan ($16 billion), will develop gold mining projects across the economic region known as the New Silk Road. The project will facilitate the central banks of member states to acquire gold for their reserves more easily.
While the conventional wisdom holds that rising real rates would strengthen the dollar, which would in turn pressure gold, Cornerstone Macro believes otherwise. In a recent piece of research, it demonstrates how global growth determines the direction of the U.S. dollar, not the U.S. economy. Only when the U.S. economy briefly decouples, does the dollar strengthen, but this is rarer now as global trade is 60 percent of world GDP and emerging market currencies have a 69-percent weighting in the Trade-Weighted U.S. Dollar Index."
"2015 has been a busy year for acquisitions as the value of gold deals jumped more than 150 percent in the first quarter compared to a year earlier. Producers are seizing on a wave of mine sales and tumbling asset valuations to expand output or secure growth projects. This week Barrick Gold announced that it signed a strategic partnership with Zijin Mining Group which will take a stake in its Porgera Joint Venture gold mine in Papua New Guinea. Under the deal, Zijin will acquire 50 percent for $298 million in cash. It appears that Zijin received a very favorable price on this transaction as Barrick is hoping to bring in a partner on other South American assets which need a capital injection. Additionally, Evolution Mining has agreed to pay $550 million for Barrick’s Cowal mine in Australia’s New South Wales which went for considerably more than where we see the relative valuation of this asset."
EUR/USD May Swing to Downside This Week (based on wsj article)
The EUR/USD may swing toward the downside later this week, having failed to break through strong resistance around the 1.10 mark, says IG Securities market analyst Junichi Ishikawa in a morning note. Concerns about the Greek situation and possible upbeat U.S. data out later this week will likely keep a lid on any strong gains in the pair, he says. The focus is on whether the pair, now at 1.0950, can stay above the 1.08 level, its low of May 27. Still, should a surge of short positions kick in, the pair may be able to finally break through the upside resistance, but that kind of upside momentum will likely be capped around 1.1145, the 21-day moving average, he adds.
Gold Trades in Narrow Range in Asian Trade - says Gnanasekar Thiagarajan, director of Commtrendz Research (based on wsj article)
Gold prices are trading in a narrow range in Asian trade.
The precious metal has largely been taking cues from the expected timing of Federal Reserve’s interest rate increase. Data issued late last week showed the U.S. GDP fell 0.7% in the first quarter, which traders are interpreting to mean that a rate increase may come only late this year.
However, the dollar has held steady resulting in little price impact on gold as the two typically have an inverse relation with each other.
“The only trigger for gold could be Greece, if it signals a debt default,” says Gnanasekar Thiagarajan, director of Commtrendz Research. Investors typically buy the precious metal during times of geo-political uncertainty. Spot gold is currently trading up 65 cents at $1,190/oz.
Gold Market To Remain Range Bound Ahead Of Employment Report (adapted from kitco article)
According to the weekly Kitco gold survey, both Wall Street and Main Street are expecting to see higher prices in the near-term; however, the analysts surveyed have a stronger upside bias.Sean Lusk, director commercial hedging division at Walsh Trading said that gold has the potential to pop higher this week but prices will remain within the $100 range between resistance at $1,230 an ounce and $1,130 an ounce. “Right now there is a lack of conviction to take gold either way; I don’t think that is going to change,” he said.
Bart Melek, head of commodity strategy at TD Securities, said that although there is a lot of important economic reports to be released this week, unless the data is widely outside of expectations, it won’t change the perception that the Fed will still hike rates in the second half the of year. “I just don’t think we will see a break out next week,” he said. “So long as the data is not horrible the expectations will remain that the Fed will raise interest rates in September,” he added.
George Gero, senior vice president at RBC Wealth Management, said that he is slightly bullish on gold as the market has already priced in higher interest rates, limiting gold’s downside; however an increase in wage, in Friday’s employment report could be seen as positive for gold because it is considered inflationary.
Ronald-Peter Stoeferle, fund manager at Incrementum AG and author of the In Gold We Trust report, agreed that the wage data in the employment report will be an important indicator for the gold market in the near-term.
if actual > forecast (or previous data) = good for currency (for USD in our case)
[USD - Core PCE Price Index] = Change in the price of goods and services purchased by consumers, excluding food and energy.
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"Personal income increased $59.4 billion, or 0.4 percent, and disposable personal income (DPI) increased $48.8 billion, or 0.4 percent, in April, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) decreased $2.6 billion, or less than 0.1 percent. In March, personal income increased $4.0 billion, or less than 0.1 percent, DPI increased $0.5 billion, or less than 0.1 percent, and PCE increased $65.6 billion, or 0.5 percent, based on revised estimates.
Real DPI increased 0.3 percent in April, in contrast to a decrease of 0.2 percent in March. Real PCE decreased less than 0.1 percent, in contrast to an increase of 0.4 percent."