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Technical Forecasts

This is a discussion on Technical Forecasts within the Forex Trading forums, part of the Trading Forum category; Bullion Round Up Over the past few days, we have read several pieces of reports and articles that try to ...

          
   
  1. #1
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    Technical Forecasts

    Bullion Round Up

    Over the past few days, we have read several pieces of reports and articles that try to justify the overdone sell off in gold. In addition, the selloff has sparked a buying frenzy at an alarming rate. Jewellers around the world are hammered with unprecedented demand from gold investors that come from various backgrounds. The huge demand came as prices drop and buyers deemed such event as rare and a one-off huge discount to buy the yellow metal. The sentiment is at these prices, you are a fool not to buy and hold for the long term. Such strong demand in the physical market may soon drive higher prices as premiums on gold bars have been raised and there is already a supply constraint. One could then assume that the large short sellers have in fact helped many would-be investors to own a piece of gold at a reasonable price – what a god sent!
    However, we are here to analyse what has caused the buying frenzy? From the price point of view, gold above $ 1500 was too expensive for the general public to buy physical bars. One could question why are we not witnessing a higher demand on ETF market during this price fall? ETF is a financial product that was supposed to help investors to join in the market at entry level. Is it because of a growing distrust of owning paper gold? We are still witnessing large outflow of gold backed ETFs and one way of explaining this is that hedge funds and retail investors are leaving ETFs but long term gold investor’s remains steadfast. Therefore, we could argue that hot money is out of the ETF community and possibly move to equities.
    Could this be a game changer as physical demand may soon outpace supply and raise concern of the availability on physical gold? Physical gold is coming in short supply and World Gold Council confirmed gold mined has decreased on a year to year basis. The speculators may soon find themselves in deep trouble to unwind their short position if the physical demand persists. Sooner or later, supply and demand equilibrium will put a fair value on gold. Hence, owning physical bars as a long term investment and avoid paper gold is the theme going forward.
    Gold Technical

    Gold face several resistance at $ 1397 and $ 1402.50 (yesterday's high) but once we break past $ 1405, gold could retrace higher to test the 31.8% retracement line at $ 1424 area. Meanwhile, the 4 hourly charts show a tightening Bollinger band that indicates a potential breakout. The stochastic fast line is trading higher while the RSI continue upwards which indicate buying interest. However, the MACD remain weak as it continues to roll in the negative zone.
    Supports are at $1377, $ 1369 and $ 1361 but a break below $ 1369 is bearish and we should aim to short the market again. Asian market could be volatile and we advise traders to be extra cautious in their stop loss. The resurgent in physical demand might be able to push prices to retest $1400 area sooner or later.
    A rebound is underway after the sharp sell but faced with strong resistance at $ 1424 (31.8%) and $ 1465 (50%) retracement line. Should prices break higher, short sellers will look to add to their position. We felt that the market will resume lower after this rebound to test the previous low before rebuilding a higher price.

    Resistance: $ 1424, $ 1456, $ 1487 Support: $ 1371, $ 1366, $ 1325

    Silver Technical

    Silver prices continue to struggle higher. Instead, it was subject to retest the low at $ 22.419 on the back of a poor Asian equities number. The market sentiment did not help silver prices because investors are generally worried of a possible recession. As an industrial metal, a recovery in the global economy favours a higher silver price. Prices remain capped and unable to break resistance at $ 23.66 and $ 23.74. However, a break above $ 24.03 will give enable silver to retrace higher. The prospect of the white metal to rally seems unlikely but a bottom is due. It is impossible to suggest where the bottom will be but staying on the side-line is a better option.

    Resistance: $ 28.35, $ 28.87, $ 29.50 Support: $ 22.91, $ 22.00, $ 19.00


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    Shifting the Attention from Gold to Equities

    The U.S. Comex gold futures rose on Thursday by 0.71 percent to $1,392.50. Week-to-Thursday, the gold futures are down 7.25 percent while year-to-date, the prices are down 16.91 percent. Gold has returned 17 percent per year in the previous ten years. However, the gold futures entered into a bear market on 12 April as the big sell-off began. The S&P 500 index fell 2.09 percent in the past two days while the Euro Stoxx 50 index also dropped 2.06 percent. The Dollar Index rose 0.30 percent this week with the Euro/Dollar dropping 0.47 percent and the Yen rising 0.20 percent against the Dollar. The CRB Commodity index suffered a loss of 1.50 percent this week.
    Stocks Declined as Gold Rebounded
    Market’s concerns have shifted to equities after the gold’s downturn. Bloomberg highlighted that the U.S. stocks peaked in April in the past three years and declined for the next two to six months. The sentiment towards stocks and commodities has been weak as economic data from the U.S. and China were weaker than expected while some earnings results were disappointing. The U.S. leading indicators index, a gauge for the economy in the next three to six months, dropped 0.1 percent in March compared to an expected increase of 0.1 percent. The expansion at both the Philadelphia and the New York regions cooled in April with inventories plunging.
    Debates on Gold

    After the gold price plunge, the Chinese, Indian and Thai retail buyers rushed to buy gold. The April U.S. Mint sales more than doubled from March to April while the Australia’s Perth Mint saw its sales doubled in one week. Central banks are watching closely the price level to re-enter even though some bank analysts are calling for gold prices to go towards $1,000. The gold-backed ETP holdings declined by 2.41 percent this week to 2,348 metric tons and dropped 10.8 percent this year. A stronger dollar remains a danger for gold.
    What to Watch

    The important events and data to watch next week will include the April “Flash” manufacturing PMI from China, the E17 and the U.S. on 23 April, the April Germany IFO business climate index and the March U.S. durable goods orders on 24 April, and the Bank of Japan policy rate meeting on 26 April.


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    The euro recovered across the board

    Good morning. The euro recovered across the board but pulled back against the dollar yesterday, so the question now is whether current decline is corrective or not. Let’s take a look at a few interesting charts
    EURUSD

    Yesterday’s decline suggests that Euro’s recovery is corrective. See the daily chart below.
    Market sentiment: intraday – bearish, short-term – slightly bullish
    Potential trade strategy: to sell on rally to 1.3100, stop above 1.3170, target at 1.2850


    Here’s the 4-hrs chart, where I highlighted the dynamic resistance range formed by the moving average lines. As long as it holds below 1.31, downside is favored


    GBPUSD

    Cable also recovered in the past few days and managed to breach the resistance around 1.5230, which became support and is now being tested. My plan is to buy on strength, after confirming the support around 1.5230
    Market sentiment: intraday – bearish, short-term – bullish
    Potential trade strategy: to buy on rally above 1.5300, stop below 1.5230, target at 1.5600


    EURAUD

    Euro’s recovery against the Aussie dollar is healthy so far and I believe that 1.2550 will provide support on pullback, hence a buying opportunity
    Market sentiment: intraday – bullish, short-term – bullish
    Potential trade strategy: to buy dips on pullback to 1.2570, stop below 1.2520, target at 1.2800+


    CADJPY

    Former resistance around 94.30 is providing support and there’s a good chance that the CAD will hold above the said barrier.
    Market sentiment: intraday – bullish, short-term – bullish
    Potential trade strategy: to buy around current levels, stop below 94.00, target at 97.70



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    Gold & Silver; Watch Out!

    Bullion Round Up

    Last week, we witnessed some unprecedented events that happened to gold. The main highlight is the major bloodbath as prices broke below the pivotal level at $ 1525 that sparked huge selloff, liquidation and margin calls which eventually take gold to a low of $ 1325. Then we witnessed the frenzy buying as the huge discount in price attracted the general public to buy physical. Gold backed ETFs continue to see outflow as investors are looking to offload their old positions and locked in whatever profit they can obtain. There are many nervous investors who barely made it out before the margin calls. Those who are still holding on their long gold position at $ 1300 or below will see the rebound as an opportunity to offload and take profit. The current sentiment seems to weigh down on gold to move lower and we will not be surprise if the selling starts to escalate again after the rebound hit its peak. We envisage more selling as prices are close to the following resistance level - $ 1425, $ 1456 and $ 1487.
    If prices continue to rebound, investors could potentially lock in their profit and start shorting the market for short term gains. The fundamental argument for a higher gold price in the long run has not change. However, the short term sentiment does not support higher gold prices as we enter a correction mode. There is a strong argument which suggests that the 2 day selloff was overdone and a rebound is due. Physical demand is holding prices up for now but the continuous outflow from ETFs and the large short position in the future market said otherwise. The aftermath has left a bitter taste and investors are now more cautious in terms of buying the yellow metal. Most are bruised and confused at the current state which may not bode well for a recovery in ETFs and the futures market that dictate the current price. In case you are wondering, there is a clear disconnect between physical demand and the futures market.
    We advise caution this week as we envisage lower prices after this rebound. This is an opportunity for those who were not liquidated to cut loss as well as for the investors to add shorts as the next strategy. Physical buying may ease the price drop but any hope to recover above $ 1500 seems far fetch for now.
    Gold Technical

    As per our last commentary, if prices break above $ 1405 gold can jump higher to test the 31.8% retracement line at $ 1424 (it reached as high as $ 1425). It did just that and then gave back most of its gain. It dropped back to a low of $ 1398 and prices started to consolidate between $ 1400 to $ 1404 areas. There are several supports at $ 1391, $ 1380 and $ 1370 which we keep a close eye on. A break below $ 1370 will give the short sellers more ammunition to push prices lower and possible to retest the medium term support level at $ 1350.
    A rebound is underway after the sharp sell but faced with strong resistance at $ 1424 (31.8%) and $ 1456 (50%) retracement line. Should prices break higher, short sellers will look to add to their position. We felt that the market will resume lower after this rebound to test the previous low before rebuilding a higher price.

    Resistance: $ 1424, $ 1456, $ 1487 Support: $ 1398, $ 1371, $ 1366, $ 1325

    Silver Technical

    Technically, silver is consolidating after the big selloff and at the moment a short term bottom has been established. However, we fear that the selling could continue further down the line as the silver prices are heavily influenced by gold. This week, silver retested resistance at $ 23.79 and failed three times in a row which indicate a possible cap. The resistance level after the selloff are at $ 24.22 (31.8%), $ 24.91 (50%) and $ 25.59 (61.8%) but the current silver price failed to come close. The lack of demand is a major concern and that there are more rooms to the downside for now. The prospect of the white metal to rally seems unlikely but a bottom is due.

    Resistance: $ 24.22, $ 24.91, $ 25.59 Support: $ 22.91, $ 22.00, $ 19.00


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    Weekly and Daily Analysis Euro and Cable

    £/$ Weekly Analysis 22-04-2013

    Our analysis of cable this week indicates that the price will be heading lower in the following week. Platinum Investments will be looking to short any spikes to the upside with the view that this trade will deliver 100 pips and over. We will begin shorting at 1.5280 and also look to take advantage of any quick moves further up to give a better average short position, our first level to unwind some of our open position will be 1.5190, whilst letting the rest of the position play out. Any sharp moves upwards to retest 1.5280 and we shall again add a fresh short.*
    The bearish wedge formation is in play on cable on the daily chart, and our feelings basis Friday nights close is that we are headed lower. On a closing basis as long as the market closes below 1.5280 then our analysis shows that a retracement back to mid March’s lows of near 1.4800 is on the cards, those with short positions already open should look to take profit at this level to maximise returns. It will be interesting to see if cable gains a little strength will the feel good factor of Mark Carney taking over at the Bank of England in the coming weeks.
    Euro/$ Daily Analysis 22-04-2013*

    Our analysis on the Euro-Dollar confirms that the diamond formation is in play on the daily chart. From current levels we are looking to take advantage of breakouts above 1.3225 where will would open a long position with a target of 1.3350 as our close out level. A breakdown below 1.2980 signals to us that the pair will be heading lower and Platinum will open a short position through this level with a target of the recent lows of 1.2740, at this point we would close the position and realise profit. Euro-Dollar’s recent rally was short lived and the pair does seem to want to come lower, we expect the bearish side of this analysis to bear some fruit, however with market moving comments being made at random times during the trading day from various people, one can never be sure. ***

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    Gold & Silver; Where is the demand?

    Bullion Round Up

    A slower than expected Chinese PMI numbers added more selling pressure on Silver. The industrial metal depends heavily on a better set of economic data to determine a higher demand. Meanwhile, Gold retested $ 1433 before giving back all its gain in the early Asian trading hours. The recent price rally was sustained by a strong physical demand as well as short covering rather than any real buying interest. This argument is further supported by the continuous outflow of gold backed ETFs. Reuters reported that the holdings on SPDR gold trust fell 1.63% to 1104.71 tonnes from the previous standing of 1123.06 tonnes. We have highlighted in our previous commentary the distortion between the strong physical demands against those on the outflow of money in ETFs. A probable explanation regarding the distortion is the growing distrust of ETF among long term investors who may have opted for physical product.
    The battle between the bulls and bears continue to intensify. Gold bulls have retreated after the sharp selloff but bargain hunting at the low price has lifted the oversold market above the 38.2% Fibonacci retracement line. Prices have been consolidating after hitting a high of $ 1439. Meanwhile, the gold bear’s objective is to add selling pressure in an attempt to drag the price below $ 1400.00. After the recent selloff, the market is poised to break lower and technically, it continues to thread in a bear market. The recent rally is more of a short covering by the sellers and possibly relief long term investors to cut their previous holdings or initiate a new short position.
    Gold Technical

    After a disappointing Chinese PMI numbers, gold headed lower and has been trading in a downtrend (see chart below). Prices did not manage to retest previous high at $ 1439; instead it only managed $ 1433 and went lower. There was a brief moment where gold retested the upper range of the downtrend before selling pressure took it lower. Technically, gold has retested the 38.2% Fibonacci retracement line and it may have had a good run. In many of our last commentaries, we have cautioned that prices may break higher but the market will resume lower after this rebound. At the moment, we are in the midst of this tight range and a break below $ 1404 will give the sellers more ammunition to push it lower.
    The current support now stands at $ 1394, $ 1380 and $ 1366 with resistance sitting firmly at $ 1421 and $ 1433. Only a break above $ 1440 will give gold a good chance to retest $ 1456 and $ 1487 area. We felt that gold could go lower on this basis unless physical demand managed to sustain the current selling pressure.

    Resistance: $ 1424, $ 1456, $ 1487 Support: $ 1398, $ 1371, $ 1366, $ 1325.

    Silver Technical

    The worse than expected Chinese PMI data sent silver prices lower and it found support at $ 22.64 but put in a negative close. In our previous commentary, we warned - There is a lack of buying momentum to push the white metal higher. It is still consolidating after the major sell off but the lack of interest from new money may hinder any real progress. Given the recent weakness, we fear that silver could go much lower in search for a good support. We are not sure where the bottom lies but felt that it may retest previous low at $ 22.06.
    Resistance: $ 24.22, $ 24.91, $ 25.59 Support: $ 22.65, $ 22.00, $ 19.00


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    The Shorts in Gold are Exiting

    After rebounding for three consecutive days, the U.S. Comex gold futures fell 0.87 percent on Tuesday and ended at $1,408.08. As of Wednesday Asian morning, the gold futures surged close to one percent. The Dollar Index traded above 83 on Tuesday and was up 0.40 percent in the past two days. The S&P 500 index and the Euro Stoxx 50 Index shot up 1.51 percent and 3.41 percent this week after falling 2.11 percent and 2.21 percent respectively last week. The CRB Commodity Index continued to fall in the past two days by 0.77 percent after dropping 1.40 percent last week.
    Grimmer Global Growth Outlook

    China kicked off with a weaker-than-expected April flash manufacturing PMI at 50.5 compared to 51.6 in March. According to Deutsche Bank, the slower growth is related to the anti-corruption campaign, the policy tightening in the real estate sector and the onset of the bird flu crisis. However, investment should reaccelerate in 2H of 2013. The April Eurozone composite PMI contracted for the fifteenth month at 46.5, likely pressuring the ECB to boost stimulus. The Bundesbank also projects that Germany’s recovery will be delayed past Q1 due to the weaker industrial production growth and the extreme weather. The April U.S. Markit Preliminary PMI also was weaker than expected at 52 compared to the projected 53.9.
    Commodities’ Actions

    Weaker growth data from the U.S., China and Europe have caused the commodities to sell off. Industrial commodities were particularly hard hit. The market also fears a further slowdown in China, which does not bode well for the demand for gold. Year-to-date, the CRB Commodity Index dropped 4.75 percent. Goldman Sachs lowered its expectation on commodities in the next three and twelve months although it closed its well-timed recommendation to short-sell gold. Barclays pointed out that the net gold-backed ETP redemptions have reached 117 tonnes in April, the weakest month on record. Barclays calculated that about 270 tonnes of gold holdings were bought above the current prices, posing further downside risks on gold prices. However, the net short positions in gold have decreased, indicating that short-covering has taken place. India and China’s physical demand has also responded very well to the cheaper gold prices. Gold volumes in the Shanghai Gold Exchange broke record for three consecutive days. High inflation, growing wealth and the gold culture in these emerging countries mean that gold will continue to be bought for the longer-term. In the words of Grant Williams, a fund manager, you have to distinguish between “the gold price”, which reflects the paper gold futures prices and has collapsed, and “the price of gold”, which represents the physical price of gold and has remained well-supported.


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    Time to Sell EURAUD....Finally?

    Despite a month which has largely been devoid of legitimate trading opportunities thus far, we identified a sell opportunity on the cross-pair EURAUD last night with good profit potential.
    On the Daily chart, Tuesday’s a bar closed as bearish engulfing pin bar reversal *which rejected the soft level @1.2738. This was further supported by short-term divergence on the RSI
    We also had seasonality supporting a stronger bullish move in the Aussie Dollar in comparison to the Euro.
    Therefore, we placed our sell orders to capture the break ofTuesday’s low (with a stoploss above its high (plus spread, plus 1 pip) and trail for every second seller bar.


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    Gold & Silver; Bear Flag!

    Bullion Round Up

    Anthony Grisanti of GRZ Energy said “Gold still has room on the downside”. He added that there was a seismic shift in traders’ sentiment, as they are looking more likely to sell in the rallies rather than buying the dips. Other supportive evidence came from Barclay’s recent report stating that there were 270 tonnes of gold holdings bought above the current price which could pose further downside risks on gold. In our previous commentary, we have also highlighted our concern that a rebound is due but the downside risk remains. We cannot discount the fact that gold is out of the woods, instead we fear a retest of $ 1327 as a high possibility in the near future. We draw our reasons mainly from the continuous outflow of gold backed ETF which suggest more selling pressure, loss of confidence among investors who are still holding gold and the current market is in correction mode. Buyers remain wary and many analysts fear that the rebound is more likely due to short covering rather than any long term interest to hold a higher price.
    The price drop in paper gold has sparked a buying frenzy in physical gold. Continuous outflow of ETF money seems to suggest that long term investors are substituting paper gold with physical bars. Bloomberg report confirmed that “there is evidence of some switching from the ETFs to the allocated bullion accounts”. Such buying frenzy has caused supply shortages of physical bars and analysts predicted a possible short squeeze. Meanwhile, gold price is stabilising and trade in the range of $ 1404 to $ 1434 area. A break either way will determine the short term direction on gold. Break above $ 1440 could give the bulls strength to target the 50% retracement line at $ 1456 while a break below $ 1403 will add selling pressure and potentially revisit the previous low of $ 1325.
    Gold Technical

    Gold continue to consolidate above $ 1400 level and there is a real struggle for the rebound to head higher. It briefly hit the high of $ 1439 on Monday and have since made several attempt but failed. There was strong resistance at $ 1434 level followed by $ 1439 (see chart below). The 4 hour chart shows that gold is stuck in a bit of a limbo after hitting the upper trend line while trading above the 20 DMA as well as the 55 DMA. The current trading trend seems to suggest that gold could either head higher or break lower but need a significant commitment to either break pass $ 1440 or $ 1400.
    Support still stands at $ 1394, $ 1380 and $ 1366 with resistance sitting firmly at $ 1434 and $ 1439. Only a break above $ 1440 will give gold a good chance to retest $ 1456 and $ 1487 area. We felt that gold could go lower on this basis unless physical demand managed to sustain the current selling pressure.

    Resistance: $ 1439, $ 1456, $ 1487 Support: $ 1398, $ 1371, $ 1366, $ 1325

    Silver Technical

    There is no denying that silver continue to lose its allure as prices traded lower this week. Global economic sentiment has not improved but in a decline, thus adding more pressure on silver. In addition, silver is usually treated as a substitute of gold for investment purposes but the current price has hardly moved higher despite strong physical demand for bars and coins. It continues to amaze us the distortion between physical demands against the paper market which dictate the current price. Given the recent weakness, we fear that silver could go much lower in search for a good support. We are not sure where the bottom lies but felt that it may retest previous low at $ 22.06.

    Resistance: $ 24.22, $ 24.91, $ 25.59 Support: $ 22.65, $ 22.00, $ 19.00


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    The Hunger for (Cheaper) Gold Continues Unabated

    The U.S. Comex gold futures surged 4.76 percent to $1,462.0 on Thursday, about 6.6 percent below the closing level of 11 April before the rout occurred. During Asian Friday morning, the gold futures reached as high as 1,484.80. Gold prices have recovered roughly half of what they lost. The Dollar Index barely budged this week and ended at 82.744 on Thursday. The S&P 500 index, the Euro Stoxx 50 index and the CRB Commodity Index rebounded 1.92 percent, 5.02 percent and 1.39 percent respectively this week.
    Lining up to Buy Gold

    After gold has fallen into a bear market on 12 April, physical demand has soared. According to Bloomberg, the U.S. Mint sold 196,500 ounces of gold coins this month through 24 April, more than three times the volume in March. Demand for gold is un-abating at both the U.S. Mint and the U.K.’s Royal Mint. The physical gold sold to India exceeded its highest record by 20 percent, reported by Standard Chartered. The gold premiums in Hong Kong and Singapore reached $3 an ounce, an eighteenth-month high. The World Gold Council in the Far East remarked that the Asian’s hunger for the cheaper gold has exceeded the expectation of global investors. In the past ten days in the Shanghai Gold Exchange, the daily volume of the benchmark contract was more than four times of the 2012’s daily average. Before the latest rout in gold, Russia’s central bank boosted gold by 4.7 metric tons in March while Kazakhstan bought 1.2 tons. The emerging countries’ central banks will likely take advantage of the gold price plunge to continue to add to gold, which is seen as an alternative currency and an inflation hedge. Bloomberg reported that hedge fund managers turned into buyers and net added gold for two consecutive weeks. As the global economic data have turned softer recently, central banks such as the ECB are likely to continue to ease rather than terminate the ease prematurely.
    What to Monitor Next Week

    Lots of events to watch next week including the April Germany unemployment change on 29 April, the U.S. April consumer confidence index on 30 April, the U.S. FOMC meeting decision and the April U.S. ISM manufacturing index on 1 May, the ECB interest rate decision on 2 May and the U.S. April non-farm payrolls on 2 May.


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