Gold prices have bounced back sharply and given a short term breakout on the daily chart

By Al Press

Currencies

Strong German economy lifts Euro

All sectors of the German economy grew in the second quarter, data showed, with robust domestic activity helping to cushion against risks to exports from an uncertain global trade outlook. Construction and state spending expanded the most, both up 0.6 per cent quarter on quarter. Private consumption extended its growth run to six straight quarters, reflecting steady falls in unemployment during what has been a long phase of economic recovery. Turkish crisis seems to be calming down a bit, attention is starting to focus on other things, such as the risk appetite. That should lift the Euro overall.

China Central Bank supports Yuan

China’s central bank signaled that it’s taking action to support the yuan as trade tensions with the U.S. show no signs of ending soon. Starting this month, banks resumed using an adjustment, known as the counter-cyclical factor, in the daily pricing of the currency against the dollar to counter the bias toward a weaker yuan Following the end of the U.S.-China trade talks this week, the resumption of the counter-cyclical factor to strengthen the yuan, or prevent further weakness, could be a gesture from the Chinese authorities to the U.S. side. This could mean a slide in the value of USD/CNH

Equities

Triangle breakout

If Goldilocks was an equity trader, she would probably have her eye on the mid-cap segment of the market right now that is, if she was a technician. We say that because among the various market cap options, mid-caps appear to be in the sweet spot right now, from a charting perspective. Following an impressive run up to new highs, small-caps ran into some key extension levels and, like papa bear’s porridge, appear to be just a little too hot to chase at the moment. Conversely, as we tend to favor high relative strength areas of the market, the lagging large-caps just don’t fit the bill either. They remain stuck in a trading range and well off of January’s highs. Therefore, they’re a bit too cool for our liking. Mid-caps, however, may be just right. That’s because mid-caps, as represented by the S&P 400 MidCap Index (MID), have demonstrated relative strength of late, bouncing solidly this past week back up near their all-time highs. Plus, as they have not yet broken out and extended themselves into new high ground, they appear to have fuel in their tank still to initiate such a run. And the kicker is, they have potentially formed an ‘Ascending triangle’ pattern over the past three months

A ride on security moving to cloud

PANW is a long-term play on security moving to the cloud. PANW’s product leadership, cloud migration led customer revenue growth and an industry stalwart at the helm make it a good long term bet. It offers a differentiated business model with significant competitive advantage. With the hiring of a star executive, one can assume solid execution will lead to significant share price out performance. Also to be noted was that post his appointment as CEO of Palo Alto Network’s Nikesh Arora, On June 7 and 8 he bought 33,255 Palo Alto shares (ticker: PANW) for $6.6 million, or $199.20 each on average. These are the first open-market stock purchases by a Palo Alto executive or director since the company went public in July 2012. Shares have given a break out and we are bullish on the shares.

Metals

Short term breakout

Gold prices punched higher during the last trading day of the week to score their first weekly advance in seven weeks as the U.S. dollar extended losses in the wake of a closely followed speech from Federal Reserve Chairman Jerome Powell. The U.S. dollar weakened sharply, providing support for dollar-denominated gold prices, as Powell, at the annual Fed symposium in Jackson Hole, Wyo., said gradual U.S. interest-rate hikes remain appropriate and there was no risk to the economy overheating. He also said he was prepared to do “whatever it takes” if inflation becomes unanchored to the upside or downside “or should crisis threaten again.” Technically, gold prices after finding support at 161.8% Fibonacci retracement from the low of December 2017 ($1236.57) to January 2018 peak of ($1366.31), have bounced back sharply and given a short term breakout on the daily chart. The RSI (14) which is a leading indicator has also given a breakout from its short term range, which is a positive sign. Even the MACD indicator has triggered a buy signal, with histogram showing an uptick, indicating a pickup in momentum.

Copper demand set to rise

China’s copper producers and traders are riding an unexpected surge of business that has pushed physical prices to their highest in nearly two years as fabricators rush to buy refined metal to avoid import tariffs. The buying spree took off after Beijing announced two weeks ago it would hit $16 billion worth of U.S. imports, including scrap metal, with duties of 25 percent. World Copper consumption between January-June 2018 was 11.57 million tonnes as against 11.53 million tonnes in 2017. We expect demand for Copper to improve further.

Energies

Resistance at previous short term peak

Oil has closed the week on a positive note, with the latest rig count propping up prices despite bullish and bearish news pulling the market in all directions. Oilfield services firm Baker Hughes reported on Friday that the number of U.S. oil drilling rigs in operation fell by 9 to 860. The drop in rig counts, pointing to signs of tighter output, comes against data, released earlier this week, showing U.S. output rose for second-straight week to 11.0 million barrels a day. Also helping sentiment on oil were signs of falling Iranian crude output ahead of U.S. sanctions on the Islamic Republic’s crude exports, expected to take effect in November. Technically, crude oil prices bounced back sharply after taking support at the trend line constructed by joining the low of 4thApril 2018 ($60.51) and 18th June 2018 ($62.58). However, at present prices is facing resistance at 78.6% retracement of the fall from peak of 29th June 2018 ($71.29) to low of 16th August 2018 ($63.89). The zone of $69.50 – $70.50 also has previous short term peaks, which is likely to act as a supply zone for the short term.

Coffee fundamentals are improving

Weather work suggests that the current Brazil drought will impact the key September-through-November flowering period greatly and inflict even greater stress in an off-season year when coffee trees by their very nature need to rest from the larger output on-season crop. Brazil was forecast to produce 54.5 million 60-kg bags of coffee in 2019/20, with 38 million bags of arabica and 17 million bags of robusta, the median estimates showed. This would be down from a record 60 million bags in 2018/19, roughly made up of 43 million bags of arabica and 16 million bags of robusta, during the country’s seasonally larger biennial crop. Fundamentals are turning positive for Coffee.

This article provided by NewsEdge.