::Eyes of gold for the first positive month since January - critical next week

June 16, 2012 16: 11 GMT  fundamental forecasts for gold: neutral Gold is significantly stronger at the end of trade this week with the metal precious progress of 2.09% to nearly $1626 in New York, marking its biggest weekly advance since the first week of June. The price of bullion has increased steadily throughout the week risk of major event of the week next with elections key in Greece and the decision of FOMC rate on tap. The rise in the price of gold is accompanied by a decrease in the value of the greenback which closed the week off the coast of 0.80% after the G20 leaders cited of the preparations for a coordinated global response counter offshore risk of a liquidity crunch that the actors of the market of weight the consequences of a Greek-euro exit.
All eyes will be fixed on the Greece this weekend at the head of voters return to the polls for parliamentary elections with the likely outcome determine the future of the countries of the Euro area. With the global central banks reaffirming their commitment to provide additional liquidity should the Greek vote rile markets, it is probably however will remain well supported as the injection of liquidity invites investors to move from currency fiat on inflation concerns. While the results of the election will weigh heavily on the broader risk appetite, which is more crucial to the prospects for gold are how major global central banks - the Federal Reserve and the European Central Bank - to meet a disappointing outcome of the elections. Indeed, chatter, 14 June suggested that the g-20 leaders discussed a coordinated response around the world to help support the euro. While we suspect an important announcement over the weekend, the next meeting of the Federal Reserve policy offers clues where this can occur.
The decision of rate FOMC Wednesday, highlights the risk of event more important for the precious metal. With national economic data begins to soften even once, recent speech of the Fed officials suggests that there is a growing split within the Federal Reserve with respect to start a new round of easing quantitative or not. Thus, the implications of the FOMC decision next week for gold can be significant participants of the market begin to factor in the likelihood of more fed of relaxation. Look for the value of the dollar offers clarity with the dollar likely to come under substantial pressure should officials signal intention to intervene in markets to support the fragile recovery. Such a scenario would likely fuel a rally in gold that takes the precious metal through resistance key to $1628.
From a technical point of view, gold remains within dating descending channel training to senior February with the closing of the week price just below the confluence of the resistance of the chain and the tracing of Fibonacci 38.2% from February 29 down $1628. A breach of this level exposes the objectives of resistance to the confluence of the 50 day moving average and the tracing of 50% to $1659 and the moving average 200 days to $1675. Interim support is the responsibility of the tracing by 23.6% to $1590 and is supported by the lower $ 1545 of June. It is important to note that the month last gold has broken below trendline support dating back to 2008 with only a full commitment to ease more the Fed likely to rehabilitate the break. Look for prices to benchmarks in the coast of the evolution of the situation in Greece and the decision of rate FOMC increased speculation of more comprehensive Bank Central facilitating likely to keep many gold argued early next week.
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16 June 2012 16: 11 GMT

% Dollar Surges to 16 Month Highs - Leading Move or False Break?

Dollar Surges to 16 Month Highs – Leading Move or False Break? Euro Drops as Outlook for Growth, Greek Stability, Bailout Solutions Deteriorate Japanese Yen Risk Reaction Inhibited by Downgrade, BoJ Decision Up British Pound Finds Reprieve from Inflation Slide through Risk Bearing Australian Dollar: Risk Trends Sour and Yield Forecast at Six Month Lows Canadian Dollar Still the Only Major Looking at a Rate Hike Gold Loses its Footing, Posts Biggest Drop in Two Week Dollar Surges to 16 Month Highs – Leading Move or False Break?
Congestion is usually the path of least resistance, but it seems that the reversal pattern the Dow Jones FXCM Dollar was carving out yesterday carried more fundamental pressure than originally expected. On the verge of surrendering to a meaningful retracement after its incredible 3.5 percent rally through the opening weeks of May, dollar traders instead proved far more critical of the currency’s fundamental value. There is little doubt where the greenback found its strength through the close of Tuesday’s New York session as equity markets retreated sharply. Yet, even before the risk aversion move of the latter part of the session, the dollar proved more buoyant than its risk counterparts would imply.
From its own fundamental backdrop, the dollar found strength in the Organization for Economic Co-operation and Development’s (OECD) updated economic forecasts. Against the backdrop of other lowered growth forecasts for other big players, the OECD upgraded its US growth estimates. The group expects growth of 2.4 percent in 2012 (previously 2.0 percent) and 2.6 percent in 2013 (previously 2.5 percent). In the meantime, a $35 billion sale in 2-year Treasury notes drew the highest demand (3.95 bid-to-cover) since November at a sparse 0.30 percent – showing consistent demand despite the supposed excess of US paper on the market.
In the end, the real push behind the dollar’s rally Tuesday (its biggest since March 9) was traditional risk aversion. The pullback from equities, the hit high yield currencies suffered and the renewed burden on the Euro’s shoulders would all bolster the safe haven appeal of the greenback. That said, the S&P 500 has not plunged its own lows and EURUSD is still above 1.2625. When it comes to the risk connection, there was a notable shift from the bounce on Friday and Monday, but we have not definitively ushered in the next leg of market-wide deleveraging. This is a critical component to the dollar’s strength. As a last option liquidity provider, the level of risk aversion needed to keep the reserve currency moving onto new highs is quite high. If we don’t find a quick follow through on risk assets, the dollar could correct to its fundamental mean.
Euro Drops as Outlook for Growth, Greek Stability, Bailout Solutions Deteriorate
The Euro took a significant, fundamental hit this past session. Through the end of the day, the currency managed modest gains against the high-yield, investment currencies which speaks to the underlying current to the FX market: risk aversion was in play. Despite the uncertainties surrounding the European economy and financial markets, the Euro nevertheless still outperforms the Australian, New Zealand and Canadian dollars in times of true deleveraging. Against everything else though, the euro is a distinct encumbrance to a portfolio. In the morning, the bearish pressure began with the OECD’s downgraded growth outlook (calling for a 0.1 percent contraction in 2012) and warning that policy officials should be ready with more stimulus. That was followed by a downgrade for Spain by Egan Jones and a surge in rates of auctioned 3-month and 6-month Spanish bonds (though the 10-year yield dropped 20 bps and CDS 44 bps). The full press came in the late US session though when former Greek Prime Minister Papademos said his country was at risk of leaving the Eurozone and it could cost €500 billion to €1 trillion. Over-enthusiastic bulls may expect tomorrow’s EU meeting to yield supportive policy (Eurozone bonds?) but don’t hold your breath.
Japanese Yen Risk Reaction Inhibited by Downgrade, BoJ Decision Up
The Japanese yen was under all sorts of pressure Tuesday. A two step downgrade by Fitch to A+ refocuses the market’s attention on the currency’s growing debt load. If that weren’t enough of a sign, the OECD followed up by saying Japan’s debt was heading into ‘uncharted territory’ alongside its 2.0 percent 2012 GDP forecast. The relief in a weakened currency however was sabotaged when risk aversion kicked in later. The BoJ could have taken a swing at trying to drive its currency lower, but deferred by keeping its asset purchases at 40 trillion yen.
British Pound Finds Reprieve from Inflation Slide through Risk Bearing
If risk trends weren’t on the move the past 24 hours, the sterling would have taken a serious hit across the board. Instead, the currency managed to hold its own against the higher yield currencies and slid against the more fundamental balanced and safe haven counterparts. The fundamental hit for the pound came from its April CPI readings. The stimulus conversation is an important one for the currency’s bearings. With a drop in the headline figure to 3.0 percent year-over-year, it is now at the top of its band. Will the minutes show a dovish Posen vote tomorrow?
Australian Dollar: Risk Trends Sour and Yield Forecast at Six Month Lows
Tuesday morning, the OECD lowered its growth projections for China to 8.2 percent for 2012 (from 8.5 percent projected previously). For interest rate expectations, the market is pricing in its biggest round of rate cuts for the RBA over the coming year in six months (123 bps). If risk appetite was rising and demand for yields still buoyant, the Aussie dollar may have overcome this pressure; but sentiment trends would do no favors for the currency. With all three drivers aligned for the bears, AUDUSD plunge fresh six month lows.
Canadian Dollar Still the Only Major Looking at a Rate Hike
Though we aggregate the Canadian dollar with the other high-yield commodity currencies, its strength is a little more sound. Though it starts with a lower yield, the Canadian rate is more stable. In fact, it is the only major with a notable outlook for hawkish monetary policy – the market is pricing in 28 bps of hikes over the coming 12 months and a 14 percent probability it’s the next meeting. Up next, we have retail sales data.
Gold Loses its Footing, Posts Biggest Drop in Two Week
Well, that was embarrassing for gold. After struggling to regain its footing at the cusp of tripping below 1525 (and possibly changing the larger trend of the precious metal), the commodity was knocked back before securing 1600. In fact, Tuesday’s 1.5 percent drop was the biggest gold bugs have suffered in two weeks. Where was the fundamental pressure for this particular move? Where general risk aversion may have offered the metal a little bit of a boost, the dollar’s outperformance on the day provide a draw for capital away from the fiat alternative. Should expected (implied) volatility continue its climb, the financial stability implications will further divert capital to the dollar and away from gold.
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ECONOMIC DATA
Next 24 Hours
Bank of Japan Interest Rate Decision
Conference Board Leading Index (MAR)
Westpac Leading Index (MoM) (MAR)
DEWR Internet Skilled Vacancies (MoM) (APR)
Euro-Zone Current Account s.a. (euros) (MAR)
Euro-Zone Current Account n.s.a. (euros) (MAR)
Italian Consumer Confidence Index s.a. (MAY)
Retail Sales ex Auto Fuel (MoM) (APR)
Retail Sales ex Auto Fuel (YoY) (APR)
Retail Sales inc Auto Fuel (MoM) (APR)
Retail Sales inc Auto Fuel (YoY) (APR)
CBI Trends Selling Prices (MAY)
MBA Mortgage Applications (MAY 18)
Leading Indicators (MoM) (APR)
Retail Sales ex Autos (MoM) (MAR)
House Price Purchase Index (QoQ) (1Q)
Trade Balance (New Zealand dollars) (APR)
Exports (New Zealand dollars) (APR)
Imports (New Zealand dollars) (APR)
Balance (YTD) (New Zealand dollars) (APR)
EU Meeting to Discuss Greece, Financial Issues
|| US Treasury to Sell $35 Bln 5yr Notes
Fed's Narayana Kocherlakota Speaks on U.S. Economy
SUPPORT AND RESISTANCE LEVELS
To see updated SUPPORT AND RESISTANCE LEVELS for the Majors, visit Technical Analysis Portal
To see updated PIVOT POINT LEVELS for the Majors and Crosses, visit our Pivot Point Table
CLASSIC SUPPORT AND RESISTANCE –EMERGING MARKETS 18:00 GMTSCANDIES CURRENCIES 18:00 GMT
INTRA-DAY PROBABILITY BANDS 18:00 GMT

$ Dollar Just Short of 16 Month High, We Need a Push

Dollar Just Short of 16 Month High, We Need a Push Euro: Market Starting to Panic Over Greece, Crisis Fallout British Pound Takes a Hit after BoE Repeats a Dovish Bias Japanese Yen Unfazed by GDP Beat, Market Focuses on Risk Australian Dollar Pauses as 10 Year Yield Stabilizes at Record Low Swiss Franc: Risk to EURCHF Growing as EZ Crisis Fears Solidify Gold Traders Weigh the Fundamentals at Next Massive Cliff Dollar Just Short of 16 Month High, We Need a Push
We are keeping the count on the dollar’s impressive run. With Wednesday’s close, that is four consecutive bullish trading days and 11 advances in the past 13 sessions. This impressive run has yielded another official close at levels not traversed since January 2011, but one statistic that we have yet to nudge is a 16-month high on an intraday trading basis. Given the momentum behind this move, it may seem a shoo-in that a new high is in the cards; but follow through is becoming increasingly difficult to support on this drive. As we press new highs on the dollar, the burden for fundamental fuel grows higher and higher. Yet, as we have seen with the benchmark equity indexes (the most stubborn of risk-tracking barometers) panic isn’t leveraging the risk aversion drive. And, without panic, we don’t have that instinctive drive to seek shelter in the world’s last resort currency: the US dollar. Letting up on the fundamental gas and positioned at the tail end of large moves, risk of correction is high.
In the past session, the battered capital market bulls had the chance to revive the call that has led the charge behind reinvestment for the past three years: stimulus – specifically Fed stimulus. Though the Federal Reserve offered a statement, its forecasts and Chairman Bernanke for question and answer after its last policy decision; there was still a latent chance that the policy group could outline the procedure for further support should it be needed. This would set the pace for the more dovish policy forecasts (like Goldman Sachs) that believes further easing will be enacted within the next few months. What was seen in the minutes did little to tip the scales towards QE3 or another Operation Twist. Most notable was the account that ‘several’ FOMC members suggested further easing may be necessary should the recovery fall apart. If the market were particularly susceptible to stimulus hopes, this may have provided a real boost; but keeping the options open is far from a rally cry.
Over the coming 24 hours, there are few key pieces of event risk that could meaningfully nudge the dollar one way or another. As usual, greenback traders should remain tapped in to the larger ebb and flow of risk positioning. Here too, there are few definable catalysts to point to. That means we will have to gauge the propensity for speculators covering on the recent run versus unexpected headline fodder.
Euro: Market Starting to Panic Over Greece, Crisis Fallout
We are starting to see the signs of genuine panic surround the euro. While the euro itself is still stable (though notably weaker), we can see evidence of fear percolating through headlines and across various points of the market itself. Through the past 36 hours, the newswires were littered with stories that a full-blown bank run had taken over in Greece. This was later dismissed, but investors saw it as a viable enough threat that the concerns were taken seriously. In reality, the fear comes from reasonable evidence with net deposits in Greece’s banking system standing just off a six-year low 160 billion euros and given recent comments by the President that another 700 million euros had been withdrawn since the failed election. Another shock that ran through the system was speculation that the ECB was planning to up its crisis fight with LTRO 3 or reactivation of government bond purchases, but that too was rebuffed by ‘official sources’ who say previous efforts are being reviewed. When the market finds itself more prone to bombastic headlines, it suggests genuine fear. Default premiums and equity declines support that concern.
British Pound Takes a Hit after BoE Repeats a Dovish Bias
The sterling may have undermined its own detachment to the Euro-area’s troubles and risk trends in general with its fundamental round this past trading day. The April labour data was a pleasant surprise with a 13,700-person drop in jobless claims (the biggest drop since June 2010) and unexpected downtick in the unemployment rate from February’s16-year high. Yet, the market was not interested in employment figures that were fighting the trend of a double-dip recession. The focus was on the BoE’s Quarterly Inflation report. This report projected that the first hike was likely after 1Q 2014. Further, the report and Governor King reiterated the threat that the EU crisis posed – something the market tried to ignore.
Japanese Yen Unfazed by GDP Beat, Market Focuses on Risk
Perhaps the last big piece of event risk this week was the reading of first quarter Japanese GDP released this morning. The impact from the data, however, belied its economic importance. According to the figures, the world’s third large economy (after the US and China) grew a slightly-greater-than-expected 1.0 percent over the opening quarter, leading the annualized reading to climb to 4.1 percent expansion. That was a notable reading, but the support from reconstruction spending is expected to fade. And, in the end, this doesn’t spur carry interests.
Australian Dollar Pauses as 10 Year Yield Stabilizes at Record Low
The Australian dollar has outpaced the deterioration in its interest rate forecast as well as the slide in Australian and US shares. So then, where is this additional momentum coming from? The outlook for rates and underlying temperature for risk are critical components of the Aussie dollar’s performance, but current yield is also an important factor. In the past two months, the yield on the 10-year Australian bond has dropped more than 25 percent. Over the past three days, this benchmark has found some stability; but a true rebound has yet to materialize.
Swiss Franc: Risk to EURCHF Growing as EZ Crisis Fears Solidify
As the sting of panic starts to bite at the euro, Swiss policy officials have to recheck their contingency plans. If the regional crisis (which has been acknowledged and lamented over by Japan, the US, the UK, and of course European officials over just the past 24 hours) intensifies, the very real flight of capital out of the Euro Zone will put immediate pressure on EURCHF exchange rate. There was another rejected spike towards the 1.2000 floor this past session, but we haven’t seen another epic clash. That could soon change. What does the SNB have planned?
Gold Traders Weigh the Fundamentals at Next Massive Cliff
The count on gold is nearly as impressive as the dollar itself – for good reason. One is the premier reserve currency and the other the preferred alternative to fiat. We surpasses a significant threshold this past week breaking a multi-year rising trendline and now we find the next challenge, lining up at floor that has held since July of last year. If the dollar can’t keep moving, gold will likely find reprieve.
For Real Time Forex News, visit: http://www.dailyfx.com/real_time_news/
**For a full list of upcoming event risk and past releases, go to www.dailyfx.com/calendar
ECONOMIC DATA
Next 24 Hours
Consumer Inflation Expectation (May)
RBA sees inflation near lower bound of forecasts
ANZ Consumer Confidence Index (May)
Could come under pressure with unemployment near 13-year high
ANZ Consumer Confidence MoM (May)
Average Weekly Wages (QoQ) (Feb)
Most recent RBA statement projects slower wage growth on slowdown in non-mining sectors of economy
Average Weekly Wages (YoY) (Feb)
RBA Foreign Exchange Transactions (Apr)
Tokyo Condominium Sales (YoY) (Apr)
Capacity Utilization (MoM) (Mar F)
YoY data to be high due to low base of comparison from Mar 2011 earthquake
Industrial Production (MoM) (Mar F)
Industrial Production YOY% (Mar F)
Machine Tool Orders (YoY) (Apr F)
Final numbers expected to confirm Spain in technical recession
Int'l Securities Transactions (Mar)
Initial Jobless Claims (May 12)
Jobless claims have seen an uptick over recent weeks
Bloomberg Consumer Comfort (May 13)
US consumer sentiment worsening since mid-April on job-market softness
Bloomberg Economic Expectations (May)
Expected to rise again after retreating in April
US economic fundamentals more uncertain
Fed’s Bullard Speaks in Louisville, Kentucky
SUPPORT AND RESISTANCE LEVELS
To see updated SUPPORT AND RESISTANCE LEVELS for the Majors, visit Technical Analysis Portal
To see updated PIVOT POINT LEVELS for the Majors and Crosses, visit our Pivot Point Table
CLASSIC SUPPORT AND RESISTANCE –EMERGING MARKETS 18:00 GMTSCANDIES CURRENCIES 18:00 GMT
INTRA-DAY PROBABILITY BANDS 18:00 GMT

EURUSD Testing 4 Month Trendline Support

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By Jamie Saettele, 04 April 2012 19:49 GMT WeeklyBars

Prepared by Jamie Saettele, CMT

I’ve focused on the short term pattern recently due to the 5 wave decline from the February top and 3 wave recovery from the 3/16 low. The implications from that 5-3 pattern remain for a break below 13003. In fact, failure at the 7 month trendline resistance reinforces the idea that the larger trend remains down. Currently testing the line that extends off of the January and March lows, a bounce encounters resistance at 13180-13210.

Bottom Line (next 5 days): lower

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04 April 2012 19:49 GMT

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