|Day's range||1,236.20 - 1,248.50|
Other than a periodic short-covering rally due to profit-taking and position-squaring, we’re likely to see a test of the May bottom at $2.711 or lower. This week, investors are going to continue to focus on rising production and the weather.
The markets appear to have found support late last week after Wednesday’s steep sell-off. The warning by the IEA seems to have slowed down the selling and perhaps brought in a few new buyers. The IEA statement is likely to continue to underpin the markets while the news of labor disputes in Norway and Iraq is likely to attract new buyers. Any surprise announcements about increased supply could limit gains or even drive prices through last week’s lows. For example, an end to the strikes in Norway and Iraq could be the catalysts for such a move.
Based on last week’s price action and the close at .7425, the direction of the AUD/USD this week is likely to be determined by trader reaction to a downtrending Gann angle at .7437. Keep in mind that we are looking a weekly, short-term, counter-trend moves here. The longer-term trend is down and likely remain down due to the divergence in monetary policy between the Fed and the RBA. If you don’t want to play a counter-trend rally then use the upside targets to initiate new short positions if tested.
Based on last week’s close at 1.1687, the direction of the EUR/USD this week is likely to be determined by investor reaction to the pivot at 1.1680. The most important area to watch this week is the 50%/Gann angle combination at 1.1680 to 1.1675. Basically, look for an upside bias to develop on a sustained move over 1.1680 and for a downside bias to develop on a sustained move under 1.1675.
Gold markets continue to be very noisy overall, and I think that at this point we will more than likely see volatility. I believe that the $1225 level will offer support, just as the $1250 level will massive resistance. I believe that the market will continue to be very difficult over the short term, of course driven by news headlines.
The US dollar has turned sideways overall during the day on Friday, as we hover above the vitally important ¥112.50 level. This was a target for me previously, and I expect to see a lot of digestion of the gains in this area.
Based on the early price action, the direction of the September E-mini S&P 500 Index is likely to be determined by trader reaction to yesterday’s close at 2798.50. Keep an eye on 2798.50 all day and especially at the close. Settling below this level will form a closing price reversal top.
In the preceding parts of this series, we discussed how gold prices have remained weaker despite escalating trade war fears and geopolitical tensions. Many of these risks stem from the ongoing trade spats, which would create inflationary (TIP) pressures in the economy apart from uncertainty. Gold (GLD) is often seen as an inflation hedge.
Prices fell on Thursday despite the Energy Information Administration’s (EIA) weekly natural gas storage report showing a miss to the low side of most estimates. Improving weather conditions and relatively high production levels remain the primary drivers of the price action.
The CFTC (Commodity Futures Trading Commission) reports the position of major players in the futures market through its COT (Commitment of Traders) report. According to the COT report for the week ended June 26, 2018, money managers were barely net long on gold with just over 4,000 net speculative long contracts. According to Commerzbank, “Short positions, in particular, were built up, which means speculative financial investors are currently betting heavily on falling prices.” For the week ended June 3, money managers kept their positions almost unchanged, which implies the lowest levels of net long positioning since late 2015 when gold prices dipped below $1,050 per ounce.
Gold prices moved higher on Thursday rebounding from session lows, as stronger than expected U.S. CPI data buoyed prices of the yellow metal. Strong jobless claims, failed to buoy the greenback, which paved the way for higher gold prices. Resistance is seen near the 10-day moving average at 1,251. Support is seen near the July lows at 1,238. Momentum is neutral as the MACD (moving average convergence divergence) histogram prints in the black with a flat trajectory which points to consolidation.
Based on the early price action, the direction of the September E-mini NASDAQ-100 Index is likely to be determined by trader reaction to the pivot at 7270.00.
Based on the early trade, the direction of the September E-mini S&P 500 Index is likely to be determined by trader reaction to the short-term pivot at 2781.75.
Based on the early trade, the key level to watch is 1.1659. This support cluster is being formed by a combination of an uptrending Gann angle and the short-term 50% level. Watch the price action and read the order flow at 1.1659 all session. Trader reaction to this price cluster is controlling the direction of the market today. Look for volatility at 1230 GMT with the release of the U.S. consumer inflation report.
The US non-farm payroll figure for June improved at a marginally slower rate than in May. In June, 213,000 jobs were added compared to 244,000 in May. The data for June, however, beat the market expectation of 195,000 job additions. The broader market S&P 500 Index (SPY), the Dow Jones Industrial Average Index (DIA), and the NASDAQ Composite Index (QQQ) rose 0.85%, 0.41%, and 1.34%, respectively, on Friday, July 6, after the announcement of the non-farm payroll report. The US unemployment rate threw a surprise for June as it grew to 4.0% from 3.8% a month earlier.
We could see a repeat of Wednesday’s trade if today’s U.S. consumer inflation report comes in strong enough to support the Fed’s plans to raise interest rates in September and December. A steady to stronger-than-expected report should drive Treasury yields higher, which should make the U.S. Dollar a more attractive investment. This should be enough to pressure demand for dollar-denominated gold futures.
The WTI Oil price fell from $72.98 to $68.68 yesterday despite the inventories data showing a draw of -12.6M barrels which is the biggest since September 2016. Global stocks recover as investors continue to watch trade war developments.
The gold market drifted slightly lower during the Wednesday’s session reaching down to the $1250 level. If it breaks from here, then $1240 level will be the next important support level in the short term and on the top $1255 level and $1260 level will be the resistance point.
Crude oil market struggled a bit during the trading session on Wednesday, as it appears that some countries are starting to step away from Iranian crude, which while ironically should raise demand issues, it also has people concerned about the overall health of the market. Beyond that, if the US dollar starts to strengthen, and it’s threatening to do so, that could cause issues as well.
Natural gas markets rallied a bit during the day on Wednesday, recapturing the $2.80 level. This of course is a bullish move, and I think at this point it makes sense that we will probably continue to go a little bit higher as we have cleared the large round number. However, my longer-term analysis has not changed.
Based on the early price action on Thursday, the direction of the AUD/USD the rest of the session is likely to be determined by trader reaction to the short-term Fibonacci level at .7377. Essentially, the key to the next move in the AUD/USD is trader reaction to the short-term retracement zone at .7397 to .7376. Look for an upside bias to develop on a sustained move over .7397 and for the downside bias to continue on a sustained move under .7376.
According to the U.S. Labor Department, the producer price index for final demand climbed 0.3 percent last month. In the 12 months through June, the PPI advanced 3.4 percent, the largest gain since November 2011. Traders were looking for an increase of 0.2 percent and an annual gain of 3.2 percent.
Gold prices tumbled as the White House announced a list of tariffs on China that totals $200 billion. The list of 10% tariffs on $200 billion in Chinese goods, as the president’s recent threats to escalate a broadening trade war with Beijing came to fruition. A break of the July lows at 1,238 would lead to a test of the December lows at 1,236.
Gold prices have gone through a rough patch recently with prices closing near their seven-month lows. Gold is hitting lows despite many factors that are favoring its safe-haven status. Despite the escalation of trade war fears and political tensions in the European Union, gold prices have been trending lower. While these factors have helped gold, the US dollar is also attracting bids because of these factors, which has capped gold’s gains.
Based on the early price action, the direction of the September E-mini Dow Jones Industrial Average today is likely to be determined by trader reaction to the downtrending Gann angle at 24746 and the 50% level at 24698.