Gold and Forex Technical Update
EURUSD : EURUSD has broken the levels of 1.40 twice and aiming close to next important support at 1.3763 levels. Be cautious incase 1.4100 levels break confidently again. (EURUSD–1.3935) Bearish
Sterling : GBPUSD is currently trading at 1.6130 levels and and is having a strong resistance of 1.6250 level (trendline Resistance). Downside correction is expected near 1.60 levels. Since Euro is leading the show with further bearishness we could test 1.5800 levels.(GBPUSD – 1.6130) Bearish
Yen : The JPY is currently trading at 89.90 levels and is having a strong resistance of 91.20 levels. Yen is holding bullishness and targeting 88.40 levels and even lower due to increased risk aversion. (USDJPY- 89.90) Bullish
Aud : The Australian dollar is correcting due to increased risk aversion and gold selling . Good support is located close to 0.8900 levels. Buying close to 0.8900 levels is recommended.(AUDUSD-0.8900) Cautious Bullish
Gold : GOLD is currently trading around $1081 levels and is having immediate resistance near $1100 which if broken then could see strong resistance near $1118 where shorts can be initiated for the target of 30 dollars, stoploss above $1128 levels. Resist shorts at spot. (Gold- $1081) Bullish.
Dollar Index: Dollar Index is currently trading near 79.01 levels. We expected further bullish scenario towards 80 levels. Bias remains bullish only if sustained trading above 78.50 levels otherwise Rangebound.
Natural gas storage dropped -86 bcf to 2521 bcf in the week ended January 22. At current level gas inventory was +120 bcf higher than the same period year and +87 bcf (+3.6%) higher than 5-year average. The benchmark contract for natural gas slid for 4 consecutive days from Monday to Thursday, losing almost -12%.
Weather forecasters in the US indicate that temperature will rise above normal, in the coming 6-10 days to 11-15 days, from the Midwest to the East. In December as well as the past 2 weeks, we saw rather strong bids in gas futures as the market speculated cold weather in the Northern hemisphere would increase consumption. However, as weather gets warmer, demand will subsides. Together with the fact that gas storage remains ample and LNG imports are poised to surge this year, gas price should remain under pressure.
Decline in base metals accelerated in recent days amid worries about potential impacts of monetary policy tightening, stricter lending from banks and slowdown in global economic recovery. LME copper for 3-month delivery plummeted -7.4% to 6898 Thursday, following a -2% fall a day ago. Nickel outperformed the complex with +0.85% gain yesterday. On weekly basis, the metal will probably close flat. Near-term trading momentum should remain skewed to the downside as step-up in tightening in China and unwinding of stimulus measures in the US and the Eurozone should dampen expectation for demand growth.
Gold price trades narrowly around 1083 in European session, there's high risk for the yellow metal to weaken further as traders are dumping the euro, sending it below 1.4 against USD. Crude oil also gyrates around yesterday's close at 73.64. Investors prefer to standstill ahead of the US GDP report.
In Iran, 2 people were sentenced to death after leading demonstrations against Iran's elections. The executions triggered condemnation from the US. President Obama said that action would 'only serve to further isolate' Iran. However, elevated geopolitical tensions between the US and Iran failed to stimulate demand for gold and oil, whose prices normally surge during political unrests.
Gold :
Gold is still declining sharply under the negative pressure obtained from TEMA and DEMA indicators, seen on the provided four-hour chart. The bearish candlestick formation proves the strong bearish trend, which still has downside targets to be reached to complete the IM (impulsive) wave of our detected Elliott sequence.
The trading range for today is among the key support at 1052.00 and key resistance now at 1122.00.
The general trend is to the upside as far as 865.00 remains intact with targets at 1249.00.
Support: 1080.00, 1074.00, 1066.00, 1060.00, 1058.00
Resistance: 1088.00, 1092.00, 1097.00, 1102.00, 1107.00
Recommendation: Based on the charts and explanations above our opinion is, selling gold from 1083.00 targeting 1060.00 and stop loss above 1102.00 might be appropriate
appropriate.
Daily Report: Euro Weakens on Greece Concern. Dollar Firm ahead of GDP
Euro weakens further against dollar and yen today as concern on Greece intensified. Germany and France denied a report of an imminent EU bailout of Greece and sent Greece CDS up to 414 record 414 level which was the same as Dubai's CDS when it got a $10b bailout in December. The yield on 10-year Greek bonds rose to 7.15 percent yesterday, the highest level since October 1999 and up from 4.99 percent on Nov. 30. Euro is also additionally pressured as Portugal reported higher than expected budget deficit of 9.3% of GDP is 2009, even though it's still better than Greece's budget deficit of 13% of GDP. Sterling is also soft after S&P said they "no longer classify the United Kingdom (AAA/Negative/A-1+) among the most stable and low-risk banking systems globally," Asian stocks are also broadly down, following weakness in US equities, and saw Nikkei down more than -2% to 10198 level. Yen maintains overnight strength in Asian today while commodity currencies are soft. Dollar continues to remain firm in general after Bernanke was confirmed for a second term as Fed Chairman by the Senate on 70-30 vote.
Data released in Asia saw Japan Manufacturing PMI dropped to 52.5 in Jan, signaling lower pace of recovery. Unemployment rate unexpectedly improved to 5.1% in December. Household spending rose more than expected by 2.1% yoy in December. National CPI dropped -1.7% yoy in December with core CPI down -1.3% yoy. INdustrial production rose 2.2% mom, 5.3% yoy in December. Housing starts dropped -15.70% in December. Deflation should still be the main worry of BoJ. BoJ Governor Shirakawa said the bank is "prepared to act swiftly and decisively should concerns that financial market stability might be hampered reemerge."
Looking ahead, Eurozone CPI is expected to climbed to 1.2% yoy in January. Unemployment rate is also expected to rise to 10.1% in December, which should then be higher than US's 10.0%. M3 money is supply is expected to drop -0.5% yoy in December. Swiss KOF Leading indicator is expected to rise slightly to 1.71 in January. US Q4 GDP will be the main focus today and is expected to expand at 4.5% annualized rate. Canadian GDP is expected to rise 0.3% mom in November.
Dollar index continues to benefit from a weak Euro as well as risk aversion and rises further to as high as 79.14 today so far. We'd continue to expect further rise to 61.8% projection of 74.19 to 78.45 from 76.60 at 79.23. Break there will set the stage for next medium term target at 38.2% retracement of 89.62 to 74.19 at 80.08. Nevertheless, note that upside momentum is not too convincing so far. A break below 78.54 support will indicate that a short term top is in place and bring deeper pull back before staying another rally.
EUR/JPY Daily Outlook
Daily Pivots: (S1) 124.77; (P) 125.92; (R1) 126.76; More.
EUR/JPY fall resume by breaking 125.22 and reaches as low as 124.80 so far. At this point, intraday bias remains on the downside and further fall is still expected to be seen to 124.35 medium term support and then 100% projection of 138.47 to 126.88 from 134.36 at 122.77 next. However, considering mild bullish convergence condition in 4 hours MACD, a break above 127.08 minor resistance will indicate that a short term bottom is formed and bring stronger recovery before staging another fall.
In the bigger picture, the break of 126.88 support revives that case that medium term rebound from 112.10, which is treated as correction to long term down trend from 169.96, has completed last year at 139.21. Break of 124.35 support will further affirm this case. By then, we'll expect such long term down trend to resume for a new low below 112.10. On the upside, break of 134.36 resistance is needed to invalidate this bearish view and suggest that EUR/JPY is still in consolidation to rise from 112.10 only. Otherwise, outlook will remain bearish.
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