Week of volatility for Gold – Century Financial Brokers Weekly Market Report

Currencies

Uncertainty to spur safe-haven demand

Yen is expected to pick up some strength on the back of safe –haven demand as the week is flooded with key events which would drive the volatility in the markets. The major event risk next week will be the highly anticipated meeting between President Trump and North Korean Leader Kim Jong Un. Also, all eyes will be on the US Federal Reserve and the ECB meeting next week as the two central banks are expected to take further steps toward policy normalization.

In contrast, the policy meeting by the Bank of Japan is anticipated to be a non-event. Fresh updates from the FOMC is likely to impact the near-term outlook for dollar-yen especially as Chairman Jerome Powell pledge to phase out the forward-guidance for monetary policy. The FOMC will publish its updated dot plot chart, which plots the Fed’s projected rate path and if the expected rate increases remain at three, it could dampen the appeal for the greenback. Fed Fund Futures are now showing narrowing expectations for four rate-hikes in 2018 and if Fed sticks to three rate hikes, USD/JPY can come under pressure as investors scale back bets for a more aggressive hiking-cycle.

Tweezer top candlestick pattern

The pair on the daily chart has been moving in a higher top higher bottom formation and has gained by nearly 15% from the low of 17.93 over the past two months. On daily chart prices have stalled at 70.7% retracement of the fall from 22.07 to 17.45. We are even witnessing a ‘Tweezer top’ candlestick pattern on the daily chart which is a bearish reversal pattern. The mentioned pattern requires confirmation in the form a close below 20.2489. Prices have also done an equal percentage move of its previous leg from 17.45 to 19.91. MACD indicator on the daily chart is showing a first degree negative divergence indicating correction or consolidation in prices going forward. Going forward, as long as the pair stays below 20.80 it is likely to head lower towards 19.75 to 19.50

Equities

Rising wedge pattern on daily chart

The previous week markets remained northbound as SPX managed to close the week at the highest point. However, the current week markets are likely to remain volatile with a series of Central bank policy lined up, along with the much awaited summit between U.S President Donald Trump and North Korean leader Kim Jong Un. The FED is likely to hike the interest rate by 25 bps, which is widely expected by the market; however, the tone of policy will be the next trigger for the markets. Even the G -7 summit which has held over the weekend ended in total disarray, which will have some negative reactions from the market. Technically, prices on the daily chart are forming a ‘rising wedge’ pattern which has bearish implications. The mentioned pattern is also known as Wolf Wave, which has a typical characteristic of a ramp and fade move. In such a pattern the upper end of the trend line is crossed and prices then reverse back sharply forming a bull trap. The pattern will remain valid till prices stay below 2506 level. The RSI (14) momentum indicator on the 240 min is showing negative divergence indicating prices might consolidate or correct going forward.

Break out above major technical resistance

As e-commerce continues to gain traction, Shipping giant FDX is called upon more get items from point A to point B. With its reasonable valuation and solid growth profile, FDX stock is finally looking like it’s ready to go higher. The company is to report its fiscal 4th quarter results on June 19, and its quarterly earnings are expected to grow by 33.8% to $5.69 per share, while revenue are expected to rise by nearly 9.5% to $17.2 billion. FedEx shares has been putting in a series of higher lows and appear to have broken out, surging above a technical resistance level of $255, and that breakout is what could trigger the stock’s rise back to its all-time highs of around $275. The technical chart depicts a rising triangle, and that is a bullish continuation pattern. The stock’s attempt to break above $255 on many occasions in the past has been unsuccessful thus far in 2018. But on June 6, shares managed to rise above that technical resistance level which should now act as an area of technical support.

Metals

Geopolitical uncertainty

Gold futures finished in the red on Friday as the dollar showed a modicum of strength, but intensifying global trade disputes limited losses for bullion, allowing the commodity to hold onto a gain for the week. Gold’s near-term outlook is once again in the hands of central bankers as two much anticipated monetary policy meetings of FED and ECB will be held during the week. The other important data during the week is the Core CPI and Retail sales data, which will have a bearing on the gold prices. Further highlighting event risk next week will be the highly anticipated meeting between President Trump and North Korean Leader Kim Jong Un. Technically, prices are trapped between 200 – day moving average at $1307 and the medium term support trend line at $1285. Whenever, the paths in gold prices in dollar term remain unclear, it is gold priced in euro term which gives a clear direction on what will be the way going forward. During the recent days we have seen gold priced in euro breaking out, hence we expect gold price in dollar to follow suit. In the short to medium term perspective as long as gold holds above $1285 it is likely to head toward $1315 to $1325.

Trendline break out

Platinum mine production will fall another 1% in 2018, marking the third consecutive annual drop and coming 7% below the peak of 2011 at 188 tonnes. Meanwhile, Platinum demand continues to rise. While diesel car sales are down in the European Union, heavy duty diesel sales are strong in the rest of the world and US heavy-duty truck orders have responded to rising freight demand in a confident economy. In China, increased sales were bolstered by higher platinum loadings to meet tightening emissions legislation. Environmentally driven fleet renewal in India is now also underway. The annual supply surplus in the platinum market should shrink in 2018 as demand rises but South African mine production shrinks. We believe platinum supply remains constrained and capital expenditure will decline. Prices are likely to be bullish as all forms of demand are seen rising to 7.8 million ounces from 7.77 million. Technically, there is a trendline break out, suggesting it could rally further.

Energies

Winter wheat condition ratings lower this week

The National Agricultural Statistics service forecast the size of wheat crop would be somewhere around 1.19 billion bushels that would be approximately 6% down from the previous year and it’s been also forecasted that acreage for wheat cultivation will also drop to record low of 24.8 million acres in US. Winter wheat condition ratings were lower this week, the US crop index down 2 points and Texas down 9 points. Moreover, a series of weather problems around the world, from the southern U.S. Plains to the Black Sea and Australia could tighten global supplies. Storms moving through the US Central Plains should eventually help areas to the south though concerns about dry conditions and slow planting on the northern Plains remain a cause of worry.

Doji reversal candle stick

Crude oil prices posted a third straight weekly loss after settling lower Friday on concerns about ongoing U.S. output after data showed the number of U.S. oil rigs continued to climb. The number of oil rigs operating in the US increased by 1 to 862, its highest level since March 13, 2015, according to data from energy services firm Baker Hughes, pointing to signs of an expansion in U.S. output. U.S. oil inventories rose by 2.1 million barrels in the week to June 1 to 436.5 million barrels, the Energy Information Administration said. Markets were tightened oversupply concerns in Venezuela, where the country is nearly a month behind on delivering crude to customers. The country is in the midst of an economic crisis and faces threats of U.S. sanctions. Technically, prices remained volatile in the range of $64.50 – $66.50 over the past week. On weekly chart prices have formed a ‘doji’ candlestick pattern near 50% Fibonacci retracement of the rise from $58.07 to $72.83. The mentioned pattern requires confirmation in the form of a close above $66.24. A move above $66.24 would push the prices $67.50 to $68.20. On the downside $64.50 – $64 are likely to act as support for the short term.

This article provided by NewsEdge.