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Gold Prices May Extend Loss Streak on US Durables Data, Fed-Speak

Talking Points:

  • Gold prices touch seven-month low but intraday momentum fizzles
  • Crude oil extends advance on inventory data, swell in risk appetite
  • US durables figures, Fed commentary may weigh on commodities

Gold prices continued to make progress downward after breaking three-month support, modestly bolstering the likelihood for bearish follow-through. The yellow metal pared intraday losses after dropping to a seven-week low however as disappointing US Markit PMI figures crossed the wires and poured cold water on Fed rate hike bets. Indeed, prices rebounded as front-end bond yields traded lower.

Meanwhile, crude oil pushed upward for a second consecutive day after the weekly EIA inventories report showed stockpiles fell by -4.23 million barrels, topping consensus forecasts calling for a -1.66 million barrel draw-down and making good on foreshadowing in the analogous API data set. Swelling risk appetite may have also helped the sentiment-linked WTI contract.

Looking ahead, US economic data and Fed-speak are once again in focus. The Durable Goods Orders report is expected to show an increase of 0.5 percent in April compared with a 1.3 percent gain in the prior month. US economic news-flow has increasingly improved relative to consensus forecasts over the past two weeks, opening the door for an upside surprise.

Comments from Fed Governor Jerome Powell take top billing on the speaking schedule. Members of the Governing Board outside of Chair Yellen and Vice Chair Fischer have seemed visibly more dovish than Presidents of regional Fed branches in recent months. If Mr. Powell’s remarks mirror the recent hawkish shift the central bank’s communication, traders may read this as a sign of firming agreement on near-term rate hike resumption.

Taken together, upbeat data and saber-rattling from the Fed are likely to make for another inward shift on the markets’ expected timeline for stimulus withdrawal. That such an outcome would be negative for gold prices seems relatively straight-forward. The implications for crude oil seem more clouded considering sentiment’s inconsistent relationship with policy bets, though a US Dollar rally on the back of an improved rates outlook may deliver de-facto selling pressure.

What does retail traders’ gold positioning say about where prices are going? Find out here!

GOLD TECHNICAL ANALYSISGold prices continue to face selling pressure, falling for a sixth consecutive session. Breaking below the 38.2% Fibonacci retracementat 1205.30 on a daily closing basis targets the 50% level at 1174.93. Alternatively, a move back above channel floor support-turned-resistance at 1229.91 sees the next upside barrier at 1242.88, the 23.6% retracement.

Gold Prices May Extend Loss Streak on US Durables Data, Fed-Speak

CRUDE OIL TECHNICAL ANALYSISCrude oil prices continue to push upward, hitting the highest level since mid-October 2015. A daily close above the 61.8% Fibonacci expansion at 50.13 exposes the 76.4% level at 51.82. Alternatively, a move back below the 50% Fibat 48.77 targets the 38.2% expansion at 47.41.

Gold Prices May Extend Loss Streak on US Durables Data, Fed-Speak

— Written by Ilya Spivak, Currency Strategist for DailyFX.com

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USD/CAD Continues to Pare May Advance as BoC Endorses Wait-and-See

Talking Points:

- USD/CAD Continues to Pare May Advance as BoC Endorses Wait-and-See Approach.

- USDOLLAR Struggles as Mixed Data Continues; Durable Goods Orders on Tap.

Avoid the pitfalls of trading by steering clear of classic mistakes. Review these principles in the Traits of Successful Traders series.

USD/CAD

USD/CAD Daily Chart

Chart – Created Using FXCM Marketscope 2.0

  • USD/CAD may continue to pare the advance from the May low (1.2460) as the pair struggles to retain the bullish trend from the start of the month, with the Relative Strength Index (RSI) highlighting a similar dynamic as it comes up against trendline support.
  • Even though the Bank of Canada (BoC) sees real GDP contracting in the second-quarter, it seems as though Governor Stephen Poloz and Co. will continue to endorse a wait-and-see approach in 2016 as the central bank argues that the current policy is ‘appropriate’ with the inflation outlook ‘roughly balanced.’
  • The failed attempts to a break/close above 1.3210 (78.6% expansion) may spur a near-term pullback in the exchange rate, with the first area of interest coming in around 1.2930 (61.8% expansion) to 1.2990 (23.6% retracement) followed by 1.2740 (50% expansion).

DailyFX SSI

  • The DailyFX Speculative Sentiment Index (SSI) shows increased volatility in retail positioning, with the FX crowd flipping net-long going into the BoC interest-rate decision.
  • The ratio currently sits at +1.00 as 50% of traders are long, while open interest stands 5.4% below the monthly average during the last full-week of May.

Why and how do we use the SSI in trading? View our video and download the free indicator here

USDOLLAR(Ticker: USDollar):

USD/CAD Continues to Pare May Advance as BoC Endorses Wait-and-SeeUSDOLLAR Daily Chart

Chart – Created Using FXCM Marketscope 2.0

  • Even though the USDOLLAR appears to be making a broader attempt to break out of the downward trend from earlier this year, the rebound appears to be losing steam amid the slew of mixed data prints coming out of the U.S. economy; will keep a close eye on the U.S. Durable Goods Orders report as forecasts are calling for another 0.5% expansion in demand for large-ticket items.
  • The Federal Open Market Committee (FOMC) appears to be on course to implement higher borrowing-costs in 2016 as the central bank remains upbeat on the economy, but the majority may retain the highly accommodative policy stance throughout the summer months as Fed officials look for a ‘consumer-led’ recovery.
  • The USDOLLAR may face a near-term pullback as it largely struggles to make a more convincing attempt to break/close above the Fibonacci overlap around 11,951 (38.2% expansion) to 11,965 (23.6% retracement), with the first downside region of interest coming in around 11,898 (50% retracement).

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Read More:

USD/CHF Rally? It Just MAY

Gold Bulls Look to CPI, Fed Minutes for Solace

DailyFX Technical Focus: Short Term S&P and Gold Analysis

USD/CAD Technical Analysis: Time For Bulls To Prove Their Worth

— Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

To be added to David’s e-mail distribution list, please follow this link.

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Positive News Flow Past 24-hours Boosts Risk, Holds Back US Dollar

Talking Points:

- BOE Governor Carney instilled confidence in the GBP yesterday.

- Strong US housing data and the Greek aid news boost risk mood.

- Higher volatility in FX markets should have implications for your trading strategies.

Good news from across developed economies is proving to be a shot in the arm for higher yielding currencies and risk-correlated assets the past 24-hours. In turn, even as USD/JPY has stayed elevated, the reach for yield has pushed the US Dollar to the sidelines, part

The positive news cycle kicked off yesterday morning when Bank of England Governor Mark Carney made clear the extent of damage a Brexit would do to the UK economy. With voters looking less likely to opt out of the EU on June 23, the risk of another full blown existential crisis for the Euro-Zone seems less likely.

Then, yesterday’s April US New Home Sales report was the best in eight years, which in turn sent US equities higher: the strengthening housing market should bode well for consumption trends (we’ll look for evidence in upcoming Durable Goods Orders reports).

Capping off the good news the past 24-hours was the preliminary agreement in the Greece-IMF bailout tranche deal, which staves off another chapter in the crisis – until at least after the German federal elections. Surely, this is another ‘kick the can down the road’ type of deal with no real specifics, but markets feel it’s better than the alternative: no deal at all.

It’s been a pretty good 24-hours for risk-appetite, no doubt. But there’s still a good deal of wood to chop today before the forrest is cleared: three Fed speakers are due up. The combination of improving market sentiment alongside rising Q2’16 US growth expectations leaves open the door for an accelerated rate of hawkish commentary from Fed officials over the coming weeks.

I can’t help but feel – Is this déjà vu? US economic data improves > US equities rally > Fed talks up possibility of rate hike > US Dollar rallies > US economic data disappoints > US equities fall > Fed talks down possibility of rate hike > US Dollar falls > US economic data improves… wash, rinse, repeat.

See the above video for technical considerations in EUR/USD, GBP/USD, EUR/GBP, GBP/JPY, AUD/USD, USD/JPY, and the USDOLLAR Index.

Read more: USDOLLAR Index Tempered as GBP/USD Gains on BOE Brexit Commentary

If you haven’t yet, read the Q2’16 Euro Forecast, “EUR/USD Stuck in No-Man’s Land Headed into Q2’16; Don’t Discount ’Brexit’,” as well as the rest of all of DailyFX’s Q2’16 quarterly forecasts.

— Written by Christopher Vecchio, Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher’s e-mail distribution list, please fill out this form

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USD is Inside the Box: EUR/USD, GBP/USD Showing Divergent Trends

Talking Points:

- After the out-sized move higher in the US Dollar in the early portion of May, price action over the past five trading days has been confined to a rather well-defined box; and traders can use this in their setups and approaches.

- While the US Dollar has been confined to a box, we’ve seen two divergent themes develop in EUR/USD and GBP/USD, as EUR/USD broke support as GBP/USD throttled through resistance. Below, we go over how traders can use this in their approaches.

- If you’re looking for trading ideas, check out our Trading Guides. And if you want something more short-term in nature, check out our SSI indicator.

USD is trading in a Box Pattern: The past five days of price action in the US Dollar have been fairly similar, as the Greenback has struggled to punch through a pivotal resistance level at the 11,960 level on the Dow Jones FXCM US Dollar Index. This is the level that had provided the high two weeks ago, and while getting slight penetration through this resistance level, price action has struggled to surmount further gains beyond this level.

This type of price action will often show when macro themes are fairly priced-in to the market or as we await that next batch of news or motivation to move prices higher or lower. And with more Fed-speak on the economic calendar, this break could certainly occur as we get more information for or against that next potential rate hike in June. This type of price action can also allow for traders to look for breaks in the effort of getting an early entry into that next move that the US Dollar may put in. On the chart below, we’re looking at price action in USD with the past week highlighted as the ‘Box Range,’ and notice that the Fibonacci level that we denoted earlier at 11,960 is serving as the mid-line of this box.

Traders can look for breaks on either side of the box formation to denote potential continuation. And once that break happens, traders can then look to buy a ‘higher-low’ if a top-side break occurs or to sell a ‘lower-high’ should the bottom-side of the box become violated.

USD is Inside the Box: EUR/USD, GBP/USD Showing Divergent Trends

Created with Marketscope/Trading Station II; prepared by James Stanley

For USD-Strength Strategies, Look to EUR/USD

On Monday we asked which would break first, EUR/USD or USD/JPY. Within 24 hours we had an answer, and that was the EUR/USD, as USD/JPY merely found a higher-low and continued with the near-term retracement higher. But EUR/USD put in a break of a rather pivotal support level at 1.1212, and the ‘knock-in’ level that we were looking at 1.1142 was hit to denote a ‘lower-low’ in the pair.

Perhaps more interesting is the move lower that we’ve seen in EUR/USD despite this range-bound price action in the US Dollar. At this point, price action is continuing to hang around the zone of that prior swing low, and with prices sitting so close to near-term support, traders should be cautious of pushing the move. However, should price action find resistance in this zone from 1.1180-1.1212, traders may be able to look for a continuation move lower with stops placed just above the prior swing high of 1.1242. The chart below illustrates the full setup:

USD is Inside the Box: EUR/USD, GBP/USD Showing Divergent Trends

Created with Marketscope/Trading Station II; prepared by James Stanley

For USD-Weakness Strategies, Look to GBP/USD

While EUR/USD has staged a down-side break during this range-bound price action in the US Dollar, we’ve seen a far different tonality out of the British Pound, as this morning has seen another ‘higher-high’ print in the Cable. But just as traders should fear selling a bottom in EUR/USD, the same fear should exist on the opposing side of GBP/USD, as traders should fear the prospect of getting caught ‘buying a top’ after a new near-term high had just printed.

Given the veracity of this recent move higher, catching ‘higher-low’ support may be a little more difficult than looking for the ‘lower-high’ in EUR/USD. On the chart below, I’ve identified four potential areas of support based on prior price action that traders can look to in the effort of catching that next ‘higher-low.’ And price coming down to this level alone is not enough, traders will still want to see some evidence of buying support at this level before looking to get long, as we outlined in the article, The Price Action Trigger.

USD is Inside the Box: EUR/USD, GBP/USD Showing Divergent Trends

Created with Marketscope/Trading Station II; prepared by James Stanley

— Written by James Stanley, Analyst for DailyFX.com

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Contact and follow James on Twitter: @JStanleyFX

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Crude Oil Prices Aim Above $50, Gold Breaks 3-Month Support

Talking Points:

  • Crude oil prices negate bearish cues, set sights above $50/bbl figure
  • Gold prices break 3-month support as FOMC rate hike outlook builds
  • Fed officials’ commentary, EIA inventory data in the spotlight ahead

Crude oil prices pushed higher alongside a recovery in stock prices, with the advancing WTI contract tracking S&P 500 futures over the prior 24 hours. The recovery in sentiment began with yesterday’s European trading open, preceding upbeat US New Home Sales data published later in the day and subsequently cited around the news-wires as a would-be catalyst. In fact, a single readily-identifiable trigger appears absent.

Meanwhile, gold prices accelerated downward as Federal Reserve rate hike expectations continued to swell, undermining demand for anti-fiat and non-interest-bearing assets. The yellow metal fell for a fifth consecutive session, making for the longest losing streak since mid-October. Spot moved inversely of year-end expectations for the benchmark US lending rate implied in December 2016 Fed Funds futures. That measure now stands at the highest since late March.

Looking ahead, Fed-speak returns to the spotlight as comments from Neel Kashkari and Robert Kaplan – Presidents of the central bank’s Minneapolis and Dallas branches – cross the wires. A hawkish tone matching recent commentary from other Fed officials may continue to boost rate hike chances, punishing precious metals. Sentiment has proven impressively resilient despite swelling stimulus withdrawal bets, warning against assuming an automatic risk-off response in this scenario.

For its part, oil is eyeing the weekly set of EIA inventory figures. A 1.66 million barrel crude stockpile drop is expected. A private-sector estimate from the American Petroleum Institute (API) hinted at a larger drawdown of 5.14 million barrels yesterday, making for the largest outflow since December 2015. Prices may rise if this proves to foreshadow a larger-than-expected decline on official readings.

FXCM traders are net-long gold by a margin of nearly 2 to 1. What does this hintaboutthe trend?

GOLD TECHNICAL ANALYSISGold prices may be resuming their long-term down move after a narrow break of rising channel floor support set from mid-February. Near-term support is now at 1205.30, the 38.2% Fibonacci retracement, with a break below that on a daily closing basis exposing the 50% level at 1174.93. Alternatively, a reversal above channel support-turned-resistance at 1230.05 targets the 23.6% retracement at 1242.88.

Crude Oil Prices Aim Above $50, Gold Breaks 3-Month Support

CRUDE OIL TECHNICAL ANALYSISCrude oil prices overturned previously noted bearish reversal cues, pushing upward to issue the highest daily close in over seven months. From here, a push above the 61.8% Fibonacci expansion at 50.13 targets the 76.4% level at 51.82. Alternatively, a reversal back below resistance-turned-support at 48.77, the 50% Fib, sees the next downside barrier at 47.41 marked by the 38.2% expansion.

Crude Oil Prices Aim Above $50, Gold Breaks 3-Month Support

— Written by Ilya Spivak, Currency Strategist for DailyFX.com

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GBP/JPY Rally Approaching Initial Resistance Hurdle at 162

GBPJPY Daily

GBP/JPY Rally Approaching Initial Resistance Hurdle at 162

Chart Created Using FXCM Marketscope 2.0

Technical Outlook: Last week I noted that GBPJPY was “attempting a breach above a sliding parallel extending off the late-November low with the broader focus weighted to the topside while above 1.5617/35.” The pair has now tested this parallel as support with the pair rebounding sharply off this mark today. The trade remains constructive but we’re coming up on some significant resistance targets higher up- make-or-break levels that if breached could tilt the scales heavily in favor of the pound.

The immediate focus is higher while above this week’s low at 158.02 with topside resistance seen at the median-line confluence into the 162-handle. Subsequent objectives are eyed at 162.68/80 & 163.96. All three of these targets converge on longer-term slope resistance and a breach above is needed to fuel the next ‘big leg’ higher. From a trading standpoint, I would be looking for long entries on a pullback targeting the upper parallels with the pair at risk for some near-term exhaustion highs at those levels.

Avoid the pitfalls of near-term trading strategies by steering clear of classic mistakes. Review these principles in the “Traits of SuccessfulTraders” series.

GBPJPY 30min

GBP/JPY Rally Approaching Initial Resistance Hurdle at 162

Notes: The pair is testing immediate Fibonacci resistance at 160.51/83 (where the rally struggled last week) and is backed by the previously mentioned confluence at 161.75-162.00. Subsequent near-term resistance objectives are eyed at 162.68/80 & 163.51/86.

Interim support rests at the weekly open at 159.67 backed by 158.96 & the weekly opening-range low at 158.03. A break below this level would shift the near-term focus lower targeting the 61.8% retracement at 156.68 and the February low-day close at 156.18.

Keep in mind this is a wider-range scalp with a quarter of the daily average true range (ATR) yielding profit targets of 52-56 pips per scalp. Event risk picks up heading into the latter part of the week with the second read on U.K. 1Q GDP and Japanese inflation data highlighting the docket. Continue tracking this setup and more throughout the week- Subscribe to SB Trade Desk and take advantage of the DailyFX New Subscriber Discount.

Check out SSI to see how retail crowds are positioned as well as open interest heading into the tomorrow’s key event risk.

Relevant Data Releases

GBP/JPY Rally Approaching Initial Resistance Hurdle at 162

Other Setups in Play:

Looking for trade ideas? Review DailyFX’s 2016 2Q Projections!

—Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michaelon Twitter @MBForex contact him at mboutros@dailyfx.com or Click Here to be added to his email distribution list

Join Michael for Live Scalping Webinars on Mondays on DailyFX and Tuesday, Wednesday & Thursday’s on SB Trade Desk at 12:30 GMT (8:30ET)