Weekly Outlook: 2016, February 14 - 21

Why Most Investors Hate Gold

"We’ll be blunt: most financial asset investors really hate gold. Anything – even leaving money in the bank – is better than owning gold since at least society has access to your capital through the banking system. Once you buy physical gold, no one has access to that sliver of your portfolio."

"First, when the S&P 500 drops 5% or more in one day. Second, when the CBOE VIX Index tops 40. And third, when everything sells off for a few days and correlations for all equities approaches one. None of these events have yet occurred."

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GDP data from Japan, Draghi speaks before the European Parliament, Inflation data from the UK and the US, Employment data in the UK and in Australia, US Building permits, PPI and Philly Fed Manufacturing Index. These are this week’s top forex events. Join us as we explore these market movers coming our way.

1. Japan GDP data: Sunday, 23:50. The preliminary GDP estimate for the third quarter of 2015 showed a 0.2% contraction, despite the ultra-easing policy adopted by the BOJ. Domestic demand plunged 0.3%, while the major contraction occurred in the private non-residential investment, falling 1.3%. The public investment contracted 0.3%. On a yearly base, GDP fell by 0.8% against the forecasts of a 0.2% fall. This was the second consecutive quarter with a contraction in the Japanese economy, indicating renewed recession trend. The initial estimate for the fourth quarter is expected to be -0.2%.
2. Mario Draghi speaks: Monday, 14:00. ECB President Mario Draghi will testify before the European Parliament’s Economic and Monetary Affairs Committee, in Brussels. He may refer to the downside risks to the Eurozone’s economy from the slowdown in China, the mild inflation and growing geopolitical uncertainties. Market volatility is expected.
3. UK inflation data: Tuesday, 9:30. UK inflation rate edged up 0.2% in December, rising for the first month since January. The main rise occurred in transport costs, particularly air fares, and to a lesser degree motor fuels. While alcohol, tobacco, food and non-alcoholic beverages prices declined. Furthermore, house price inflation which is not included in the CPI index, surged 7.7 in the year. However, despite this rise, CPI remains at historically low levels. Economists expect CPI to rise 0.3% this time.
4. Eurozone German ZEW Economic Sentiment: Tuesday, 10:00. German analysts and investors’ confidence declined less than expected in January, as a slowdown in China and other emerging markets continued to weigh on the outlook for Europe’s largest economy.
5. Economic sentiment deteriorated to 10.2 points from 16.1 in December, the lowest reading since October. However, the score was higher than the market forecast for 8.2 points. Despite the growth trend in 2015, the economy is suffering from external headwinds such as China and emerging markets. Analysts’ confidence is predicted to increase by 0.1% in February.
6. UK Employment data: Wednesday, 9:30. UK unemployment rate fell to its lowest level in a decade during the last quarter of 2015. Unemployment rate posted 5.1% with 31.4 million people in work. Claims for jobless benefits decreased by 4,300 in December 2015 as the claimant remained unchanged at 2.3%. Meanwhile, wage growth excluding bonuses increased 1.9% on a yearly base, a slight decline from the 2% gain recorded in the previous quarter. Analysts expect wage growth to accelerate in the first half of 2016 triggering higher inflation. The number of jobless claims is expected to decline by 2,900 in January.
7. US Building Permits: Wednesday, 13:30. Building permits declined 3.9% in December to a 1.23 million-unit rate. The drop followed two months of sharp gains. Permits for the construction of single-family homes rose 1.8 percent in November. Multi-family building permits decreased 11.4%. Furthermore, U.S. housing starts also faltered, dropping 2.5% to a seasonally adjusted annual pace of 1.15 million units. The number of Building permits is expected to decline further to 1.21 million units.
8. US PPI: Wednesday, 13:30. U.S. producer prices plunged in December by 0.3%, recording their biggest fall in more than three years. The continued decline in energy costs were the main force behind this decline. Economists expect inflation to slow in the coming weeks. However, the energy-driven weakness is believed to be transitory and predict the next rate hike would occur in June. Producer prices are estimated to decline 0.2% in January.
9. FOMC Meeting Minutes: Wednesday, 19:00. Federal Reserve policymakers decided to raise interest rates after the majority was convinced inflation would rise. However, some voters were concerned about inflation dynamics, fearing it will stay at low levels. Another downside risk was the turmoil in foreign financial markets signaling economic weakness in China, and emerging countries.
10. Australian employment data: Thursday 0:30. The Australian employment market shed 1000 jobs in December. Full-time employment rose by 17,600 while 18,500 part-time jobs were lost. The reading was considerably better than the 11,000 job contraction estimated by analysts. Furthermore, the unemployment rate remained unchanged at 5.8% while expected to rise to 5.9%. But, the participation rate decreased from 65.3% to 65.1%, meaning there were less people in the labor market. Overall, there was a positive trend in the labor market compared to the same month a year ago. Australian job marlet is expected to gain 13,200 jobs while the unemployment rate is predicted to remain at 5.8%.
11. US Philly Fed Manufacturing Index: Thursday, 13:30. Manufacturing activity in the Philadelphia-region contracted for the second consecutive month in January, declining to -3.5 from -5.9 in the previous month. Analysts expected a more negative reading of -5.8. Shipments increased, but new orders and employment declined mildly. The price indexes suggest continued downward pressure on manufacturing prices. Manufacturing activity in the Philadelphia-region is expected to reach -3.1 points.
12. US Unemployment claims: Thursday, 13:30. The number of Americans filing new claims for unemployment benefits declined sharply last week, suggesting the labor market remains resilient despite tepid economic growth. The number of jobless claims dropped 16,000 to a seasonally adjusted 269,000. Analysts expected 287,000 new claims this week. The four-week moving average of claims fell 3,500 to 281,250 last week. Analysts believe that a part of the lukewarm economic data is related to temporary factors does not reflect the real situation. The number if jobless claims is forecasted to reach 275,000 this week.
13. US inflation data: Friday, 13:30. Jan 20 U.S. consumer prices fell unexpectedly in December by 0.1% following a flat reading in November. Energy prices continued to decline while services rose moderately. Despite this fall, the CPI increased 0.7% in the 12 months through December, the biggest increase in a year. Meanwhile, core CPI, excluding food and energy costs, edged up 0.1% after rising 0.2% for three straight months. On a yearly base, the core CPI rose 2.1%, the largest gain since July 2012, after climbing 2.0 percent in November. CPI is estimated to decline by 0.1%, while core CPI is expected to gain 0.2%.

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Weekly price is located between 100 period SMA (100-SMA) and 200 period SMA (200-SMA) for the primary bearish market condition: price is on secondary bear market rally since the middle of January this year with 100-SMA to be broken to above for the bearish ranging market condition to be started on the border between the primary bearish and the primary bullish trend on the chart.

The price is ranging within the following support/resistance levels:

• 1,300.00 psy resistance level located near and below 200-SMA on the border between the primary bearish and the primary bullish market condition on the chart, and
• 1,046.27 support level located far below 100-SMA/200-SMA area in the primary bearish trend on the chart.

RSI indicator is estimating the secondary ranging market condition.

• If the price will break 1,300.00 resistance level so the bullish reversal will be started.
• If price will break 1,046.27 support so the primary bearish market condition will be continuing.
• If not so the price will be ranging within the levels.

Resistance	Support
1,300.00	1,046.27
1,400.00	N/A

The Long-Term Strategy: watch close price to break 1,300.00 resistance level for possible buy trade.