Technical Forecasts

Resistance:	0.9235-40	0.9258	0.9272	0.9286-07
Support:	0.9200	0.9175-80	0.9160	0.9126

BIAS:

This looks like we have seen the low and thus look for further gains - but take care in the short term…

MAIN ANALYSIS:

That didn't go quite to plan. The low at 0.9130 and move higher - that broke above retracement areas - has suggested that my original 0.9140 target was more accurate. While EURUSD has retraced its decline quite deeply price here has been subdued. It has also taken a structure that could keep today in a range and I'll cover this first. This will require the 0.9200 low to remain intact. We may well see some sideways ranging in the Asian session but which could then see gains that move above 0.9258 but take care at 0.9272-80. While this caps there is a risk of recycling back to the 0.9175-00 area. If all this is seen then we should see the larger rally resume from there.

COUNTER ANALYSIS:

If I have seen something too complicated then a break above 0.9380 would risk direct gains. There's still resistance at 0.9286-07 and further pivot resistance at 0.9334-45.
Directly below 0.9200 still see the 0.9175-80 area and should this break then look for a retest of yesterday's 0.9130 low. Breach would resurrect the move down to 0.9021 (and will need EURUSD to move up to 1.3170-83.
For more information concerning the support & resistance and medium term analysis please see the attached PDF file.
Good trading
Ian Copsey


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Market Review - 13/06/2013 22:22GMTYen rallies due to the sell off in Japanese equities and then falls in New York

The Japanese yen rose strongly against other currencies on Thursday as the selloff in Japan's Nikkei index triggered investors to unwind their previous short position of the yen.
Versus the Japanese yen, the greenback fell sharply in Asian morning due to the selloff in Japan's Nikkei index (down by more than 800 points), price dropped below last Friday's low at 94.98 to a fresh 10-week trough at 93.75 in European morning but then staged a brief recovery to 94.79 after the release of better-than-expected U.S. retail sales and a drop in jobless claim. Later, despite brief retreat to 93.92, short-covering contained its downside and the pair rose to 95.81 in Australian morning on Friday.

U.S. retail sales in May came in at 0.6% m/m, better than the forecast of 0.4%, whilst jobless claim came in at 334K, down from the prev. 346K.

Although the single currency edged higher in Asia and extended recent upmove to a fresh 3-1/2 month top at 1.3390 in European morning, active cross selling of euro versus sterling pressured the pair to a low of 1.3279 in New York morning before staging a strong rebound to 1.3380 near New York close.

The British pound ratcheted lower from Australian top at 1.5702 to 1.5645 in European morning. However, renewed buying interest emerged and active cross buying of sterling versus euro pushed the pair above said 1.5702 to a fresh 4-month top at 1.5738 in New York morning before retreating to 1.5670 in U.S. afternoon on profit-taking.

In other news, ECB's Draghi said 'decision on PMT bond buy programme was necessary, it was effective and it was in line with ECB mandate; need all decision-makers to take their responsibilities for the euro zone to move forward.' ECB's Weidemann said 'low interest rates in various economies lead to risks in longer term; all central banks face challenge to tighten loose monetary policy once danger to price stability emerges.' IMF said 'risks to Portugal reaching core bailout objectives "remains high"; Portugal economic outlook remains somber, public debt "very fragile"; Portugal has met all performance criteria, structural benchmarks underpinning seventh bailout review.'

Data to be released on Friday:

New Zealand business PMI, Euro zone CPI, employment, U.S. PPI, current account, industrial production, capacity utilization, manufacturing production and consumer confidence on Friday.



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The U.S. Comex gold futures jumped 1.09 percent on Tuesday, but tumbled back down the next day, ending at $1,377.80 on Thursday. During Asia’s Friday morning, the gold futures traded higher at around $1,385. The Dollar Index has fallen 1.12 percent week-to-Thursday as the Japanese Yen has surged 2.30 percent and the Euro has risen about 1 percent versus the dollar. The Euro Stoxx 50 index dropped for four consecutive days by 2.29 percent. The S&P 500 index rebounded 1.48 percent on Thursday although it has fallen 0.43 percent this week. Since the peak in early May, the U.S. high yield bond prices have fallen about 3 percent while the emerging market bond prices have dropped even more by 6 percent.
Slowing Growth Outside of the U.S.
The growth in the U.S. is holding up better than that in the rest of the world, and its stock market is outperforming this month. The latest U.S. weekly jobless claims dropped 12,000 to 334,000 while the May advance retail sales rose 0.6 percent compared to the expected 0.4 percent. The World Bank lowered this year’s world GDP growth forecast from 2.4 percent in January to 2.2 percent. In particular, it reduced its growth expectations in China and Brazil, expected the Euro economies to contract 0.6 percent, and revised up the growth in the U.S. and Japan. As the market increasingly expects the Fed to reduce its bond purchases, bond yields, especially in the emerging countries, have backed up, sending investors’ money out of global bonds.
Investors Feeling Bearish Again
Based on the Bloomberg survey, the number of bearish gold traders has increased the most since a month ago. The gold-backed ETP holdings fell to a two-year low of 2,117.96 metric tons on Thursday. The Chinese may lend support to the physical gold market after their three-day holiday. Import demand in India has dropped significantly in June after the government raised the import duty from 6 to 8 percent on 5 June and imposed further shipments restrictions. Gold prices will be under further pressure if investors continue to flee from the gold-backed ETPs without a big enough offset by the physical demand.
What to Watch
Next week, the important events to watch will include the U.S. May CPI and housing starts on 18 June, the U.S. FOMC rate decision and the Fed’s press conference on 19 June, the Eurogroup meeting on 20 June as well as the June “flash” PMI index for China, the E17 and the U.S. on the same day.


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Bullion Round Up

The US dollar index - DYX has crossed below its 200 DMA and breaking lower in its current downtrend channel. Further weakness in the index could happen as long as the US economic data came in mixed and the Fed continues to muddle through their decision on tapering the current QE programme. The lack of conviction and certainty has left the US dollar bulls exhausted, closing out their long positions for the moment. FOMC meets next week to discuss their decisions – meanwhile WSJ Jon Hilsenrath had already made it clear on his recent articles that tapering could be implemented with a possible reduction of $ 5 – $ 10 billion dollars as early as next week. Despite the assurance, investors decided to do profit taking than taking any chance of an unexpected decision.

Fed officials are keeping a close eye on all incoming economic data that may support their decision to do so. Others are arguing that the Fed is muddling through several ideas and unable to focus on their previous objectives – such as reducing QE programme when unemployment rate hits 6.5% (currently stands at 7.6%). In addition, the lack of stimulus from the ECB, BOE and BOJ latest policy meeting has strengthened the Euro, GBP and JPY. The previously strong US dollar index left the bull no choice but to bailout. However, we feel that the rally in the index needs this correction in order to remain healthy and continue in its current bull run. A better economic data and tapering will allow a stronger dollar as it provides the market with confidence and hope of a recovery. A quote from Bloomberg by Chris Green at First NZ Capital Ltd summed up that “Markets want stability in the economy but they also want unlimited stimulus. The two can’t continue to exist together”.

The short term outlook on gold is biased to the downside as the next minor support comes in at $ 1365 followed by $1354, $ 1339 and $ 1321. After the rejection on a move higher, it opens up more rooms for the bears to pressure for lower prices. Renewed short selling at or above $ 1400.00 indicate that the area is a strong resistance and only a break above $ 1425 will enable the bulls to aim for higher prices. In the meantime, we expect a period of consolidation but with a biased downside potential.

Gold Technical

Gold was range trading between another well found support at $ 1374.50 and $ 1387.00 area. After the better than expected US economic data, gold hit lower numbers – breaking below support at $ 1387 and $ 1380 on the back of the good data. The US dollar index rose slightly after the data but any rallies were sold hard given all the uncertainty on tapering. We continue to expect a sell in any rallies that gold made. A break pass $ 1373 will trigger lower prices around $ 1355 to $ 1345 area. The bears are clearly winning and have the intention to revisit $ 1321 level. However, the previous low at $ 1338 will be a strong support and only if that is given then we see a potential stop loss trigger scenario that could sent gold lower.

Resistance: $ 1395, $1400, $ 1423 Support: $ 1373, $ 1365, $ 1355
Traders Notes: Short gold as it breaks trend line at $ 1390 with an open target – stop loss stands at $ 1402.

Bearish – target $ 1340

Bearish – target $ 1280

Silver Technical

Once again, silver hit a high of $ 21.90 on the back of a weaker dollar index and sell off in equities. We remain disappointed at the lack of momentum to push for higher prices and this further indicate that the rebound in prices is minimal and rallies are to be sold. The metal put higher low but lower high which indicate further weakness ahead. In addition, silver prices are susceptible to dollar strength. Despite the current weakness in the index, silver is not able to mount higher prices. However, a potential inverted head and shoulder on the hourly chart could be in the making.

Resistance: $ 22.20, $ 23.35, $ 25.59 Support: $ 21.10, $ 19.66, $ 19.00



Traders Notes: Stay on the side line.

Bearish

Bullish – a potential bull run?

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The pair is trading along an downtrend.

The downtrend may be expected to continue while pair is trading below resistance level 1390, which will be followed by reaching support level 1359.An uptrend will start as soon, as the pair rises above resistance level 1390, which will be followed by moving up to resistance level 1403 and then 1418.
Supports: 1377, 1368, 1359
Resistances: 1390, 1403, 1418





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The pair is trading along an uptrend.The uptrend may be expected to continue while pair is trading above support level 1.5535, which will be followed by reaching resistance level 1.5800 and then 1.6000.
An downtrend will start as soon, as the pair drops below support level 1.5535, which will be followed by moving down to support level 1.5355 and if it keeps on moving down below that level, we may expect the pair to reach support level 1.5120.

Supports: 1.5622, 1.5535, 1.5355, 1.5120
Resistances: 1.5800, 1.6000





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The end of QE in United States is inevitable and – whats more – within sight. That has some serious long term implications. But for traders timing is a key.

US interest rates have a long distance to go and a direction – over a long term horizon – is only one, up. That has serious implications for most of the largest markets (we show how large sensitivity of US equities to rates at this stage really is in the equity part). Just check the impact on emerging markets on the chart below.



Here it’s the MXN market – credit premiums and the peso, but the relationship holds up for all fairly liquid EMs. As the US short term rates increase (we use 18x24 fra to cover a period when policy rates might be actually increased), the hot money leaves short USD – long EM trades, leading to higher risk premiums and weaker EM currencies.

The timing is the key though and traders needs to ensure they compare the pace of tightening that markets are pricing in with what is really feasible. In fact the pace markets were moving in the second half of May is clearly unsustainable and thus the reversal you may see on the chart. Since Bernanke underlined on many occasions that he did not want a run out of bonds, we expect him to pour a cold water on hot heads on Wednesday and thus market rates may backtrack a bit more. However, should the labor market continue delivering, the game will be restarted in July again.


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Bullion Round Up

Another uninspiring strt to the week as gold prices remains subdued below the psychological level of $ 1400.00. During the early Asian trading zone, prices remain strong at $ 1390.00 before giving back some grounds to trade below $ 1387 in the early European trading hours. Gold has been range trading after printing a low at $ 1365 but found higher lower over the course of last week at $ 1373 and $ 1378. Despite a positive environment of lower US dollar index and a minor sell off in global equities, gold were not able to capitalize and make a higher high. Investors are shunning away from the safe haven asset as ETFs outflow continue although the heavy selling days are over. The lack of physical demand out of Asia could only support prices but unable to take it higher. There were clear interests among the short sellers that gold below $ 1400.00 is the way forward – thus keeping the bear market well alive.

This week, we are watching closely the US economic data as well as FOMC statement whereby Chairman Bernanke will speak to send a clear message to the market about Fed decision on tapering. Continues talk on reducing the current asset purchase programme from $ 85 billion dollars every month have reached a certain level. Analysts are arguing that the Fed is creating asset bubbles in the US equity market as well as a new housing bubble. However, the Fed felt that the economy is recovering well and underway but there are clear signs of divisive Fed officials as pressure mounts to curb the current QE programme. We shall learn more about their decision tomorrow. Meanwhile, volatility in the market is expected to ratchet higher as we draw closer to the FOMC statement. Our advice is to have helmets on and trade lightly with a tight stop loss – otherwise stay on the side line.

The short term outlook on gold is biased to the downside as the next minor support comes in at $ 1365 followed by $1354, $ 1339 and $ 1321. After the rejection on a move higher, it opens up more rooms for the bears to pressure for lower prices. Renewed short selling at or above $ 1400.00 indicate that the area is a strong resistance and only a break above $ 1425 will enable the bulls to aim for higher prices. In the meantime, we expect a period of consolidation but with a biased downside potential.

Gold Technical

After a close at $ 1390.00 area, gold started well in early Asian trading hours holding the same area but the lack of demand to push prices higher was a disappointment. This indicates that the market is not ready to break above previous resistance at $ 1394.50. As per our last commentary, short sellers have strong interest to keep prices below the psychological level of $ 1400.00 and they have successfully done that. The bears remain in control and gold continue to range trade aimlessly before the release of the FOMC statement. Many traders are either on the side line or staying nimble. A break pass $ 1373 will trigger lower prices around $ 1355 to $ 1345 area. The bears are clearly winning and have the intention to revisit $ 1321 level. However, the previous low at $ 1338 will be a strong support and only if that is given then we see a potential stop loss trigger scenario that could sent gold lower.

Resistance: $ 1395, $1400, $ 1423 Support: $ 1373, $ 1365, $ 1355
Traders Notes: Short gold as it breaks trend line at $ 1390/$ 1395 with an open target – stop loss stands at $ 1403/$ 1425

Bearish – target $ 1340

Bearish – target $ 1280

Silver Technical

Silver has continued to trade a lower higher and lower low if we used previous high after the major sell off. Previous high of $ 24.71 was the peak and we draw a straight downtrend line which continues to play as a strong resistance line (see chart below). Technically, the oscillators suggest that the market is at an oversold territory but the lack of demand hampers any rally. There were no strong buyers at this price level, instead most are short term speculators dip buying on the market and sell when it spiked higher. Investors favour a lower silver prices and we may continue to see it weaken before any rebound rally.

Resistance: $ 22.51, $ 23.35, $ 25.59 Support: $ 21.10, $ 19.66, $ 19.00
Traders Notes: Stay on the side line.

Bearish

Bullish – a potential bull run?

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18th June:

Losses were seen, as expected, to complete an expanded flat Wave -b-, stalling between the 41.4% - 50% projection in Wave -v- at 80.50 and being very close to a 66.7% retracement in daily Wave -b-.
From this lower area we should now see a reversal higher. The first barrier has been tested at the pivot resistance area shown and soon we should see this break to generate gains to the Wave -b- of -v- and because this was brief we'll probably see a test of the Wave -iv- high at 82.09. I suspect this will form Wave (i) of daily Wave -c- / -iii-. Thus, look for a correction in Wave (ii) - possibly stalling at the pivot area - and then making stronger upward progress.
Good trading
Ian Copsey


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Bullion Round Up

Note to oneself – today FOMC meeting statement may shed more lights on who could be the next Fed Chairman rather than the topic on tapering. Nevertheless, the market has high anticipation on the result of the meeting that tapering will be in effect as early as September or by end of this year. Several articles from so called “fed-watchers” have moved market and the US equity especially did not take rumours or possible leak kindly. This indicate that the market remain on edge as the Fed could call time on the easy monetary policy that was in place after the financial crisis. A shift in the Fed policy regarding the well renowned QE programme will always make headline news and move market. This is true if we look at how the US dollar index has shed most of its gains made over the last few weeks as the bulls locked in their profit and sell the index after hitting a high at 84.46.

Despite a weaker dollar index, gold failed to capitalize to break previous resistance at $ 1425. It has repeatedly failed to hold above $ 1400.00 as strong selling interests always dominate. Buyers lack the conviction to hold for higher prices given the continuous outflow in gold backed ETFs (although the selling has decreased significantly). Alternative investment in the equity market has certainly exacerbated asset reallocation as the hot money find dividend elsewhere. With a prospect that the US economy is recovering well ahead of the EU and other counterparts, talk on tapering the current QE programme should only give it more positive boost as it suggest that the market can stand on its own. Equity market looks to be a safer bet where more returns can be made at the moment.

Meanwhile, volatility in the market is expected to ratchet higher as we draw closer to the FOMC statement. Our advice is to have helmets on and trade lightly with a tight stop loss – otherwise stay on the side line. The short term outlook on gold is biased to the downside as the next minor support comes in at $ 1365 followed by $1354, $ 1339 and $ 1321. After the rejection on a move higher, it opens up more rooms for the bears to pressure for lower prices. Renewed short selling at or above $ 1400.00 indicate that the area is a strong resistance and only a break above $ 1425 will enable the bulls to aim for higher prices. In the meantime, we expect a period of consolidation but with a biased downside potential.

Gold Technical

Within our previous commentary, we warned that “A break pass $ 1373 will trigger lower prices around $ 1355 to $ 1345 area”. At the moment, downside risk remains and further selling pressure is building up as we approach to the release of the FOMC statement. The bears are clearly winning and have the intention to revisit $ 1321 level. However, the previous low at $ 1338 will be a strong support and only if that is given then we see a potential stop loss trigger scenario that could sent gold lower. Otherwise, we felt that a major short covering could be on the cards if the price is right.

Resistance: $ 1395, $1400, $ 1423 Support: $ 1361, $ 1355, $ 1337
Traders Notes: Short gold as it breaks trend line at $ 1390 / $ 1395 with a target at $ 1361 / $ 1355 – stop loss stands at $ 1403 / $ 1425

Bearish – target $ 1340

Bearish – target $ 1280

Silver Technical

There is no escaping from the sellers as Silver traded lower as selling pressure continues to mount. The metal traded at $ 22.00 for a while but gave back all the gains made and traded lower at $ 21.54. A weak start to the week as silver made lower high and lower low with most trading contain in the range of $ 21.00 to $ 22.50 area. There were no strong buyers at this price level, instead most are short term speculators dip buying on the market and sell when it spiked higher. Investors favour lower silver prices and we may continue to see it weaken before any rebound rally.

Resistance: $ 22.51, $ 23.35, $ 25.59 Support: $ 21.10, $ 19.66, $ 19.00
Traders Notes: Stay on the side line.

Bearish

Bullish – a potential bull run?

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