#Gold dynamic reverses smoothly on the daily charts, setting up a double-bottom formation.
Gold is forming a local uptrend after touching the lows near $1680 at the very beginning of the month. The daily charts show that the area near $1700 attracts buyers.
Notably, the trend reversal in gold occurred a couple of days earlier than in the currency market. This ability to swim against the current indicates solid underneath demand.
Steady buying in gold broke the trend near the same levels as in July. At the same time, the RSI index in the daily charts set higher lows than two months ago. This divergence between the index and the price signals that the sell-off intensity is diminishing. At the same time, the index came out of the oversold zone, further indicating that the bulls are taking the local initiative.
However, so far, we see a local tug of war. Gold needs to overcome several markers to talk about a more global trend change.
Gold is forming a local uptrend after touching the lows near $1680 at the very beginning of the month. The daily charts show that the area near $1700 attracts buyers.
Notably, the trend reversal in gold occurred a couple of days earlier than in the currency market. This ability to swim against the current indicates solid underneath demand.
Steady buying in gold broke the trend near the same levels as in July. At the same time, the RSI index in the daily charts set higher lows than two months ago. This divergence between the index and the price signals that the sell-off intensity is diminishing. At the same time, the index came out of the oversold zone, further indicating that the bulls are taking the local initiative.
However, so far, we see a local tug of war. Gold needs to overcome several markers to talk about a more global trend change.
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The first test of gold's bullish reversal would be in the cross of the 50-day moving average near the $1740 area. Since April, bears got the upper hand after the price nears this line, so now we are looking at how the price will behave there.
Silver, the gold's little sister, gained more than 3.5% on Monday and got well above its 50-day average. This is an additional bullish indicator of a reversal in market sentiment.
Should the bulls succeed locally, the next significant hurdle will be $1800, a psychologically significant round level and a local August peak. A consolidation above this level would confirm the formation of a "double bottom" and the completion of the downward momentum. In this case, the gold will open the road towards $1920-1970.
Silver, the gold's little sister, gained more than 3.5% on Monday and got well above its 50-day average. This is an additional bullish indicator of a reversal in market sentiment.
Should the bulls succeed locally, the next significant hurdle will be $1800, a psychologically significant round level and a local August peak. A consolidation above this level would confirm the formation of a "double bottom" and the completion of the downward momentum. In this case, the gold will open the road towards $1920-1970.
Outside the chart analysis, seasonality is also on the side of the gold, as the long-term trend reversal is in progress during August-September. Separately, we note the increase in trading volumes and impressive growth in equities in the sector. Barrick Gold shares added more than 9% to their lows at the start of September, while the smaller gold producer ETF has gained 10.5% over the same time frame.
#Bitcoin rose 2.6% to $22,300 in the past 24 hours. Ethereum losing 0.7% to $1715. Top altcoins performance ranged from -1.5% (Cardano) to +10% (Solana).
Total crypto market capitalisation, according to CoinMarketCap, rose 1% overnight to $1.06 trillion.
BTC is just a hair above its 50-day average, which should hardly be considered an encouraging bullish sign. The following intermediate stage of recovery that could revive the market is the 200-week average at $23.2K.
The latter dynamic suggests cautious market players, who are likely to shift their attention to global macro issues. The most critical of these today is the US inflation report, which could return optimism to the markets if price growth slows and sell-offs otherwise.
Solana posted the highest daily gain among top coins. Despite the overall market decline, the number of NFTs issued on the Solana blockchain rose sharply, reaching 312K. The trading volumes of collectable assets on the network have also jumped.
Total crypto market capitalisation, according to CoinMarketCap, rose 1% overnight to $1.06 trillion.
BTC is just a hair above its 50-day average, which should hardly be considered an encouraging bullish sign. The following intermediate stage of recovery that could revive the market is the 200-week average at $23.2K.
The latter dynamic suggests cautious market players, who are likely to shift their attention to global macro issues. The most critical of these today is the US inflation report, which could return optimism to the markets if price growth slows and sell-offs otherwise.
Solana posted the highest daily gain among top coins. Despite the overall market decline, the number of NFTs issued on the Solana blockchain rose sharply, reaching 312K. The trading volumes of collectable assets on the network have also jumped.
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The UK economy slowdown has lowered the trade deficit
Monthly estimates showed that the UK economy added 2.5% over the three months to July vs the same period a year earlier. The negative surprise was a 0.3% decline in Industrial Production in July compared to expectations of a 0.4% gain after a 0.9% slip in June. Production added a modest 1.1% compared to July last year.
Construction and industrial production indices are back in the 2019 range after a quick dip and subsequent recovery due to the pandemic. And they are stagnating for some time around these levels. Manufacturing and construction are at the forefront of the economic cycle, and their message is not optimistic at all.
Monthly estimates showed that the UK economy added 2.5% over the three months to July vs the same period a year earlier. The negative surprise was a 0.3% decline in Industrial Production in July compared to expectations of a 0.4% gain after a 0.9% slip in June. Production added a modest 1.1% compared to July last year.
Construction and industrial production indices are back in the 2019 range after a quick dip and subsequent recovery due to the pandemic. And they are stagnating for some time around these levels. Manufacturing and construction are at the forefront of the economic cycle, and their message is not optimistic at all.
Foreign trade is much more dynamic. Import values have fallen for two months after ballooning during the first five months of the year, while exports have remained close to the highs. These local dynamics have reduced the foreign trade deficit to its lowest level since December 2021.
The narrowing of the foreign trade deficit is positive for the Sterling as it reduces capital outflows from the country. On the other hand, if the weakness in imports is linked to stagnant domestic demand and production, it does not carry anything good in the medium term. GBPUSD seems to have pushed back from the bottom in the middle of last week, but this dynamic is more attributed to the USD profit-taking after the rally rather than investments in the pound.
The narrowing of the foreign trade deficit is positive for the Sterling as it reduces capital outflows from the country. On the other hand, if the weakness in imports is linked to stagnant domestic demand and production, it does not carry anything good in the medium term. GBPUSD seems to have pushed back from the bottom in the middle of last week, but this dynamic is more attributed to the USD profit-taking after the rally rather than investments in the pound.
#WaveAnalysis
#USDCAD falling inside short-term corrective wave (ii)
• Likely to fall to support level 1.2900
USDCAD currency pair continues to fall inside the short-term corrective wave (ii), which started earlier from the key resistance level 1.3200 (which stopped wave 1 in July).
Wave (ii) belongs to the higher-order impulse waves 3 and (3) from August and April respectively.
USDCAD can be expected to fall further toward the next support level 1.2900 (low of the previous correction (ii) from August and the target for the completion of the active wave (ii)).
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#USDCAD falling inside short-term corrective wave (ii)
• Likely to fall to support level 1.2900
USDCAD currency pair continues to fall inside the short-term corrective wave (ii), which started earlier from the key resistance level 1.3200 (which stopped wave 1 in July).
Wave (ii) belongs to the higher-order impulse waves 3 and (3) from August and April respectively.
USDCAD can be expected to fall further toward the next support level 1.2900 (low of the previous correction (ii) from August and the target for the completion of the active wave (ii)).
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#WaveAnalysis
#WTI reversed from key support level 85.00
• Likely to fall to resistance level 90.00
WTI crude oil recently reversed up from the key support level 85.00 (former multi-month high from October of 2021), intersecting with the 61.8% Fibonacci correction of the upward impulse from December.
The upward reversal from the support level 85.00 created the daily candlesticks reversal pattern Morning Star – which marked the end of the earlier primary ABC correction from March.
WTI crude oil can be expected to rise further toward the next round resistance level 90.00.
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#WTI reversed from key support level 85.00
• Likely to fall to resistance level 90.00
WTI crude oil recently reversed up from the key support level 85.00 (former multi-month high from October of 2021), intersecting with the 61.8% Fibonacci correction of the upward impulse from December.
The upward reversal from the support level 85.00 created the daily candlesticks reversal pattern Morning Star – which marked the end of the earlier primary ABC correction from March.
WTI crude oil can be expected to rise further toward the next round resistance level 90.00.
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Dollar bulls pocketing profits
The US dollar had reversed, losing 2.6% to a basket of major currencies from last Wednesday’s highs when the DXY was making multi-year highs. Although the dollar sell-off is very active, it looks more like a profit taking than a reversal.
The current rally in the dollar started last June, and most of the time, the 50-day moving average has repeatedly acted as support during corrective pullbacks. This curve now passes through 107.4, 50 points below the current price, which preserves some potential for further retracements.
Meanwhile, the fundamental growth driver was the markedly more aggressive monetary policy than the leading competitors. And so far, there are no currencies from the DXY basket which are raising rates as decisively. The gap between short-term interest rates thus remains in favour of the dollar.
The US dollar had reversed, losing 2.6% to a basket of major currencies from last Wednesday’s highs when the DXY was making multi-year highs. Although the dollar sell-off is very active, it looks more like a profit taking than a reversal.
The current rally in the dollar started last June, and most of the time, the 50-day moving average has repeatedly acted as support during corrective pullbacks. This curve now passes through 107.4, 50 points below the current price, which preserves some potential for further retracements.
Meanwhile, the fundamental growth driver was the markedly more aggressive monetary policy than the leading competitors. And so far, there are no currencies from the DXY basket which are raising rates as decisively. The gap between short-term interest rates thus remains in favour of the dollar.
However, the dollar is by no means vulnerable. The latest impulse for growth comes as traders have priced in a third successive rate hike of 75 points at the next meeting on September 21. According to CME’s FedWatch tool, the market estimates an 86% probability of such a move.
However, the likelihood of further Fed sharp hikes may be questioned due to inflation and consumer activity. Later today, US CPI data is released, which is expected to slow from 8.5% to 8.1% y/y.
Investors and traders are also looking at inflation expectations. The latest Reserve Bank of New York survey noted a return of 3-year expectations to 2.76%, which is within the 2015-2021 range, meaning it can be considered the norm.
However, the likelihood of further Fed sharp hikes may be questioned due to inflation and consumer activity. Later today, US CPI data is released, which is expected to slow from 8.5% to 8.1% y/y.
Investors and traders are also looking at inflation expectations. The latest Reserve Bank of New York survey noted a return of 3-year expectations to 2.76%, which is within the 2015-2021 range, meaning it can be considered the norm.
A combination of two factors could reverse the dollar’s trend: (1) a slowdown in actual and expected inflation and (2) the Fed’s immediate acceptance of this. There could be problems with the latter - mirroring how the Central Bank behaved before the first half of last year.
Among the technical signals of a reversal in the dollar is the 50-day average. A decisive slide below 107.40 over the week runs the risk of triggering a wider liquidation of longs in the American currency.
We also pay attention to the divergence between the DXY price and the RSI index on the daily charts, where lower relative strength index highs match higher local highs.
Among the technical signals of a reversal in the dollar is the 50-day average. A decisive slide below 107.40 over the week runs the risk of triggering a wider liquidation of longs in the American currency.
We also pay attention to the divergence between the DXY price and the RSI index on the daily charts, where lower relative strength index highs match higher local highs.
The dollar surged after the sticky inflation report
US inflation turned out to be wider and hotter than expected, confirming markets for another 75-point rate hike next week. Published data showed a 0.1% increase in prices for August, against expectations of a decline of the same magnitude. Annual inflation slowed from 8.5% to 8.3% but was better than the 8.1% forecasted.
Most of all, the markets were spooked by the surge in the core index. It added 0.6% over the month, to an annual rate of 6.3%, signalling inflation is spreading beyond energy and food.
The inflation roots set the stage for a stiffening response from the Fed. Almost immediately after the report, the swap market plotted a 100% probability of a rate hike of 75 points in a week. Risk assets have been vulnerable as the currency and stock markets have retreated from extremes over the past week. The dollar, meanwhile, has decisively returned to the upside.
US inflation turned out to be wider and hotter than expected, confirming markets for another 75-point rate hike next week. Published data showed a 0.1% increase in prices for August, against expectations of a decline of the same magnitude. Annual inflation slowed from 8.5% to 8.3% but was better than the 8.1% forecasted.
Most of all, the markets were spooked by the surge in the core index. It added 0.6% over the month, to an annual rate of 6.3%, signalling inflation is spreading beyond energy and food.
The inflation roots set the stage for a stiffening response from the Fed. Almost immediately after the report, the swap market plotted a 100% probability of a rate hike of 75 points in a week. Risk assets have been vulnerable as the currency and stock markets have retreated from extremes over the past week. The dollar, meanwhile, has decisively returned to the upside.
The S&P500 futures are losing almost 3% immediately after publication, and the Nasdaq100 is down 3.5%, erasing virtually all the gains from last Friday. The Dollar Index adds 1.6% to the day's lows, hitting 109.48. Once again, the 50 SMA acts as the basis for renewing longs after a brief shake-out.
Tomorrow is starts the week-long silence period for the Fed before the next policy meeting, which will leave the markets on their own assessments. In such an environment, the USD index is well placed to make new 20-year highs within just a few days.
Tomorrow is starts the week-long silence period for the Fed before the next policy meeting, which will leave the markets on their own assessments. In such an environment, the USD index is well placed to make new 20-year highs within just a few days.
#WaveAnalysis
#Palladium reversed from resistance level 2270.00
• Likely to fall to support level 2000.00
Palladium recently reversed down from the key resistance level 2270.00 (which has been reversing the price from the end of April).
The resistance level 2270.00 was further strengthened by the nearby upper daily Bollinger Band and by the 38.2% Fibonacci correction of the ABC correction (2) from March.
Palladium can be expected to fall further toward the next round support level 2000.00 (which stopped the previous waves (iv), (a) and 2).
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#Palladium reversed from resistance level 2270.00
• Likely to fall to support level 2000.00
Palladium recently reversed down from the key resistance level 2270.00 (which has been reversing the price from the end of April).
The resistance level 2270.00 was further strengthened by the nearby upper daily Bollinger Band and by the 38.2% Fibonacci correction of the ABC correction (2) from March.
Palladium can be expected to fall further toward the next round support level 2000.00 (which stopped the previous waves (iv), (a) and 2).
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#WaveAnalysis
#GBPUSD reversed from resistance level 1.1740
• Likely to fall to support level 1.1400
GBPUSD recently reversed down from the key resistance level 1.1740 (former monthly low from July), 20-day moving average and the 38.2% Fibonacci correction of the downward impulse from August.
The downward reversal from the resistance level 1.1740 continues the active short-term impulse wave 3 of wave (5) from May.
GBPUSD can be expected to fall further toward the next support level 1.1400 (low of wave (v) and the target for the completion of the impulse wave 3).
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#GBPUSD reversed from resistance level 1.1740
• Likely to fall to support level 1.1400
GBPUSD recently reversed down from the key resistance level 1.1740 (former monthly low from July), 20-day moving average and the 38.2% Fibonacci correction of the downward impulse from August.
The downward reversal from the resistance level 1.1740 continues the active short-term impulse wave 3 of wave (5) from May.
GBPUSD can be expected to fall further toward the next support level 1.1400 (low of wave (v) and the target for the completion of the impulse wave 3).
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Crypto bears confirmed their strength
#Bitcoin collapsed 9.6% on Tuesday, ending the day near $20.2K, which remains on Wednesday morning. Ether is losing 6.4% overnight to $1610. The most significant altcoins took a heavy hit, losing between 4.6% (BNB) and 13% (Solana), but remain on the plus side after seven days.
The bears in Bitcoin have asserted that they are in control. From the 50-day moving average level, BTCUSD experienced a substantial decline. This could bring back downward sentiment, as it did in August, for an extended period. However, it is too early to speculate on whether the June lows will be renewed.
Pressure on all risky assets came after a hot US inflation report, which increased the likelihood of a more robust Fed rate hike next week and triggered the strongest sell-off in more than two years.
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#Bitcoin collapsed 9.6% on Tuesday, ending the day near $20.2K, which remains on Wednesday morning. Ether is losing 6.4% overnight to $1610. The most significant altcoins took a heavy hit, losing between 4.6% (BNB) and 13% (Solana), but remain on the plus side after seven days.
The bears in Bitcoin have asserted that they are in control. From the 50-day moving average level, BTCUSD experienced a substantial decline. This could bring back downward sentiment, as it did in August, for an extended period. However, it is too early to speculate on whether the June lows will be renewed.
Pressure on all risky assets came after a hot US inflation report, which increased the likelihood of a more robust Fed rate hike next week and triggered the strongest sell-off in more than two years.
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Weakening UK inflation eases pressure on the Pound
The inflation report marathon continues, and it was the UK's turn this morning. Traditionally, the consumer price change figures attracted the most attention. For the month, they rose by 0.5% (slightly less than the 0.6% expected), and annual inflation fell from 10.1% to 9.9%, slightly weaker than the 10.0% expected.
As previously with the US data, core inflation exceeded expectations, reaching 6.3% - a new all-time high. However, there are several signs that the inflation wave has subsided.
The inflation report marathon continues, and it was the UK's turn this morning. Traditionally, the consumer price change figures attracted the most attention. For the month, they rose by 0.5% (slightly less than the 0.6% expected), and annual inflation fell from 10.1% to 9.9%, slightly weaker than the 10.0% expected.
As previously with the US data, core inflation exceeded expectations, reaching 6.3% - a new all-time high. However, there are several signs that the inflation wave has subsided.
Producers reduced their selling prices for the first time in almost two years. The reduction was a nominal 0.1%, but we should expect more. This indicator's annual rate of increase fell from 17.1% to 16.1%.
Producer input prices (an even earlier indicator for inflation) lost 1.2% in August - the largest since April 2020. By the same month a year earlier, growth had slowed to 20.5% compared with 22.6% in July and 24.1% in June.
It is also worth remembering that the effect of the high base (there were already higher price growth rates at this time a year ago) will weigh on the annual inflation figure.
Producer input prices (an even earlier indicator for inflation) lost 1.2% in August - the largest since April 2020. By the same month a year earlier, growth had slowed to 20.5% compared with 22.6% in July and 24.1% in June.
It is also worth remembering that the effect of the high base (there were already higher price growth rates at this time a year ago) will weigh on the annual inflation figure.