Press review - page 168
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GOLD (XAUUSD) Fundamentals (based on dailyfx article)
Fundamental Forecast for Gold: NeutralGold prices are virtually unchanged on the week with prices off by a mere 0.1% to trade at $1291 ahead of the New York close on Friday. Prices have continued trade within a tight range despite ongoing strength in the US dollar and broader equity markets. Nevertheless, gold remains at a critical juncture and the technical picture continues to suggest that a break of a multi-week consolidation pattern is imminent as we head into the close of May trade.
In light of the recent strong demand for US Treasuries, it’s disconcerting that although gold has largely moved in tandem Treasuries since the start of the year, it has been unable to participate in the bond rally since April. This condition suggests that the gold market remains vulnerable in the near-term and with the long bond coming off key near-term resistance at the 61.8% retracement from the decline off the 2012 record highs, further weakness in Treasuries could put added downside pressure on gold prices.
Looking ahead, the preliminary 1Q GDP print highlights the biggest event risk for the week ahead with consensus estimates calling for a downward revision to reflect an annual contraction of 0.5% q/q. With that said, a dismal growth read may dampen the appeal of the US Dollar and spur increased demand for gold as interest expectations get pushed out. Watch for developments in the bond market and the greenback for guidance with the recent price action in gold warning of a decisive move heading into the monthly close.
From a technical standpoint, our outlook remains unchanged from last week. “Gold has continued to trade into the apex of a multi-week consolidation pattern off the April highs and a break-out ahead of the May close is in focus. A break below 1260/70 is needed to put the broader bearish trend back into play targeting $1216/24 and the 2013 lows at $1178. Interim resistance and our near-term bearish invalidation level stands at $1307/10 with a move surpassing $1327/34 shifting our broader focus back to the long-side of gold. Bottom line: look for a decisive break of this pattern next week with a move surpassing the May opening range to offer further clarity on our medium-term directional bias. The broader outlook remains weighted to the downside sub $1334.
The silver markets fell during the course of the week, testing the absolute lows that the market has had recently. With that being the case, silver really looks weak here, and as a result we don’t really feel comfortable buying it at this point in time. If we got a supportive candle down there, we can’t think of a better place to do so, but we just don’t have it so therefore we are more than comfortable just sitting on the sidelines as this market looks far too dangerous to be on the long side of. However, fresh new lows could lead to a nice selling opportunity for a move down to about $15.
Gold markets fell rather hard during the week, testing the $1250 level. It’s obvious to us know that the market has a bit of support in that general vicinity, and there is certainly a lot of support down near the $1200 level. With that, we are a bit hesitant to sell this market, especially with a longer-term mindset. If we get below the $1200 level, we feel that this market then will head to the $1000 level. As far as buying is concerned, we do not have a buy signal at this point in time.
The USD/JPY pair had a back-and-forth week, ultimately settling on a negative candle. However, this candle is shaped a bit like a hammer, so we feel that the market will ultimately go higher from here. On top of that, we are in a larger consolidation area and as a result we expect that to continue. The market should hit the 103 level fairly soon, and therefore we think buying as appropriate. We also recognize that there is a significant amount of support at the 101 level, extending all the way down to the 100 level.
The USD/CAD pair fell slightly during the course of the week, as we continue to press against the 1.08 level. This area has been supportive lately, but ultimately we believe that the real support is lower. A supportive candle below this current area would be reason enough to start buying, and as you can see on the chart we also have an uptrend line that we are nowhere near yet. That being the case, we feel that this market will probably fall, but quite frankly are not very interested in it at the moment.
The NZD/USD pair went back and forth in a fairly wild week over the last 5 sessions, ultimately settling near the 0.85 handle. It appears that we are finding enough support in this general vicinity to keep the market somewhat afloat, but we recognize that the support goes all the way down to the 0.84 handle. Down there, things could get ugly, but at the end of the day we believe that the buyers will continue to step in and push the market higher. With that, we are bullish on a supportive candle.
The GBP/USD pair went back and forth during the course of the week with a slightly negative tone to it. At the end of the day though, the market seems to have found a little bit of support at the 1.67 level, so we think that this market will continue to go higher, and ultimately test the 1.70 level yet again. That area getting broken to the upside would be very bullish, and as a result it would become a buy-and-hold market at that point in time. The “floor” in this market is down at the 1.65 level.
The EUR/USD pair went back and forth during the course of the week, essentially settling nothing. We are finding the 1.36 level to be somewhat supportive though, and that is a positive sign. Ultimately though it appears that the real support probably closer to the 1.35 handle, therefore it is not possible by with any type of real confidence at this moment in time. However, if we broke above the 1.37 handle, at that point in time we feel that this market and its tone would be changing.
The dollar moved lower against the euro on Friday but still notched up weekly gains against the single currency amid widespread expectations for monetary easing by the European Central Bank at its upcoming policy meeting.
EUR/USD rose to 1.3633 late Friday from a three month trough of 1.3585 on Thursday, trimming the week’s losses to 0.13%. For the month, the euro dropped 1.69% against the dollar.
Data on Friday showing that the annual rate of inflation in Italy and Spain slowed in May underlined expectations that the ECB will take steps to tackle low consumer price growth, which its threatening the fragile recovery in the euro zone.
The dollar eased on Friday after data showed that U.S. consumer spending fell 0.1% in April from a month earlier, missing forecasts for a 0.2% increase. Personal income rose 0.3%, in line with forecasts.
Separately, the final reading of the University of Michigan's consumer-sentiment index for May came in at 81.9, up slightly from a preliminary reading of 81.8, but falling short of forecasts for 82.5.
The dollar was almost unchanged against the yen late Friday, with USD/JPY settling at 101.76, down 0.14% for the week.
The euro pushed higher against the yen on Friday, with EUR/JPY rising 0.22% to 138.76, up from Thursday’s four month lows of 137.95, but lost 0.27% for the week.
Elsewhere, the dollar was lower against the pound, with GBP/USD up 0.22% to 1.6722 late Friday, but the pair still ended the week 0.54% lower. Sterling’s losses were held in check by the view that the deepening economic recovery in the U.K. will prompt the Bank of England to raise interest rates ahead of other central banks.
The Canadian dollar slid against the U.S. dollar on Friday after official data showed that the rate of economic growth in Canada slowed sharply in the first three months of the year.
Statistics Canada reported that gross domestic product expanded 0.3% in the first quarter, slowing from growth of 0.7% in the preceding three months. The Canadian economy grew at an annualized rate of 1.2%, well below forecasts of 1.8%.
USD/CAD touched session highs of 1.0868 before pulling back to 1.0844 at the close.
In the week ahead, investors will be looking to Friday’s U.S. nonfarm payrolls report for May for further indications on the strength of the labor market, while Tuesday’s euro zone inflation report will also be in focus, ahead of the ECB policy meeting and press conference on Thursday.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, June 2
- Markets in China are to remain closed for a national holiday.
- Japan is to publish data on capital spending.
- Australia is to release data on building approvals and company operating profits.
- In
the euro zone, Germany is to release preliminary data on consumer price
inflation, while Spain and Italy are to produce data on manufacturing
activity.
- Elsewhere in Europe, Switzerland is to
publish its SVME index while the U.K. is to release what will be a
closely watched manufacturing report. The U.K. is also to release data
on net lending and mortgage approvals.
- Later Monday, the Institute of Supply Management is to publish a report on U.S. manufacturing activity.
Tuesday, June 3- China is to publish data on service sector activity, as well as the final reading of the HSBC manufacturing index.
- Japan is to publish a report on average cash earnings.
- Australia
is to release data on the current account and retail sales, the
government measure of consumer spending, which accounts for the majority
of overall economic activity.
- The Reserve Bank of
Australia is to announce its benchmark interest rate and publish its
rate statement, which outlines economic conditions and the factors
affecting the monetary policy decision.
- The U.K. is to publish data on construction sector activity, as well as private sector data on house price inflation.
- The
euro zone is to release preliminary data on consumer inflation as well
as a report on the unemployment rate. Spain is also to publish data on
the change in the number of people employed.
- The U.S. is to produce data on factory orders.
Wednesday, June 4- Australia is to publish the monthly report on gross
domestic product, the broadest indicator of economic activity and the
leading indicator of economic growth.
- The U.K. is to produce data on service sector activity.
- In the euro zone, Spain and Italy are to release data on service sector activity.
- The
U.S. is to release the ADP report on private sector job creation, which
leads the government’s nonfarm payrolls report by two days. Also
Wednesday, both the U.S. and Canada are to publish data on the trade
balance.
- Later in the day, the Bank of Canada is to
announce its benchmark interest rate and publish its rate statement,
which outlines economic conditions and the factors affecting the
monetary policy decision.
- The ISM is to publish a report on U.S. service sector activity.
Thursday, June 5- Australia is to publish data on the trade balance, the difference in value between imports and exports.
- China is to release its HSBC services index.
- The euro zone is to release data on retail sales, while Germany is to produce data on factory orders.
- The BoE is to announce its benchmark interest rate.
- Later
in the day, the ECB is to announce its benchmark interest rate. The
announcement is to be followed by a press conference with President
Mario Draghi.
- Meanwhile, Canada is to release data on
building permits and the Ivey PMI and the U.S. is to publish the weekly
report on initial jobless claims.
Friday, June 6The dollar ended Friday’s session almost unchanged against the yen, after slipping lower earlier in the day following the release of some soft U.S. data on personal spending and consumer confidence.
USD/JPY touched session lows of 101.51 before pulling back to 101.76 late Friday. For the week, the pair slid 0.14%.
The pair is likely to find support at 101.25 and resistance at 102.13.
The dollar eased after data showed that U.S. consumer spending fell 0.1% in April from a month earlier, missing forecasts for a 0.2% increase. Personal income rose 0.3%, in line with forecasts.
Separately, the final reading of the University of Michigan's consumer-sentiment index for May came in at 81.9, up slightly from a preliminary reading of 81.8, but falling short of forecasts for 82.5.
The yen was also boosted by falls in U.S. 10-year Treasury yields. U.S. bonds have rallied in recent sessions as buying in 10-year Treasury notes pushed yields to the lowest levels since January. Profit taking by investors on Friday pulled the yield on 10-year notes back up to 2.48% late Friday.
Elsewhere, the euro pushed higher against the yen on Friday, with EUR/JPY rising 0.22% to 138.76, up from Thursday’s four month lows of 137.95.
The shared currency remained under pressure amid mounting expectations for monetary easing by the European Central Bank at its upcoming policy meeting this week.
Data on Friday showing that the annual rate of inflation in Italy and Spain slowed in May underlined expectations that the ECB will take steps to tackle low consumer price growth, which its threatening the fragile recovery in the euro zone.
Demand for the yen continued to be underpinned by diminished expectations for more stimulus by the Bank of Japan, after the bank said earlier this month that its stimulus program has been working as intended.
In the week ahead, investors will be looking to Friday’s U.S. nonfarm payrolls report for May for further indications on the strength of the labor market, while Tuesday’s euro zone inflation report will also be in focus, ahead of the ECB policy meeting and press conference on Thursday.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, June 2
- Japan is to publish data on capital spending.
- Later Monday, the Institute of Supply Management is to publish a report on U.S. manufacturing activity.
Tuesday, June 3- Japan is to publish a report on average cash earnings.
- The U.S. is to produce data on factory orders.
Wednesday, June 4- The U.S. is to release the ADP report on private sector
job creation, which leads the government’s nonfarm payrolls report by
two days. The U.S. is also to publish data on the trade balance.
- The ISM is to publish a report on U.S. service sector activity.
Thursday, June 5- The ECB is to announce its benchmark interest rate. The
announcement is to be followed by a press conference with President
Mario Draghi.
- The U.S. is to publish the weekly report on initial jobless claims.
Friday, June 6