FiboGroup Market Analysis 2018

[fibogroup.com]

If we look at the arrow on the weekly gold price chart we can see that a resistance point that was first encountered in around august of last year has proved to be problematic with gold bouncing off the same downward trend line again in September and more recently the beginning of this year.

It made a run for the $1,365 mark which is the top resistance line in the chart also at the beginning of the year but was quickly rejected and has not returned to this point ever since.

Gold needs to make a sustained break firstly through $1,350 which is the current resistance point on the middle downtrend line and then the top line of $1,365 as shown by the arrow at the top in order to push significantly higher.

 

[fibogroup.com]

The US dollar jumped suddenly after yesterday’s release of better than expected inflation data and then suddenly reversed into negative territory which left investor’s scratching their heads as to why the later happened.

Consumer Price Index figures on a monthly basis hit the market at 0.5 percent which was well above analysts’ expectations for a figure of 0.3 percent while the yearly figure came in at 2.1 percent which also beat consensus for a figure of 1.9 percent.

The inflation numbers are now within the US Federal Reserve’s target range of between 2 and 3 percent which seems to give the green light for around 4 rate rises this year (provided inflation remains around or higher than the current range)

There was one other release yesterday that was overshadowed by the CPI figures but may be a cause of concern for the US economy and that was the retail sales figures.

The figures came in at -0.3 percent against expectations for a figure of 0.2 percent and are sharply lower from last month figures of 0.4 percent and clearly poses the question, is the American consumer ready for higher interest rates?

This poses a serious problem for the Fed as history shows that it’s a bad idea to lift rates on inflation figures alone as this can present other issues which pose bigger threats in the long term.

"Given the weak retail sales report alongside (the inflation data), the markets are probably going to talk about stagflation, where you are getting stronger inflation but not really getting a stronger consumer," said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York.

If the American consumer continues to cut back on spending while the Fed is raising rates, the later may have to rethink the situation and any sudden pause in rate hikes is going to hit the US dollar hard.

 

[fibogroup.com]

Higher inflation and rising interest rates which in the US usually does wonders for the US dollar as investors from around the globe chase higher returns but as it turns out this time, it is not the case and safe haven assets like gold are luring cautious investors

CPI numbers out a few days ago from the US showed inflation figures within the US Federal Reserve’s target range of between 2 and 3 percent and with the jobs market also booming, the Fed has a green light to lift interest rates further, maybe by as many as 4 times this year.

So what is going on in the markets at the moment and why is such a scenario at play?

Ever since the CPI numbers were released on Wednesday (and above expectations I may add) the US dollar has lost ground while gold has jumped over $50 and if we look back at previous rate tightening cycles gold has actually suffered.

Below may be the answer to the earlier question,

The US economy has not had to deal with rising inflation in nearly a decade so the reason for the strange events unfolding may be buried in the fact that investors are spooked by prospects of higher inflation, which is completely justified as was shown by the tumble in financial markets over the last 2 weeks which was caused purely by the fear of higher interest rates.

So this time around, it looks as if gold is going to be the safe haven of choice for investors and funds alike as a hedge against inflation which will erode their purchasing power.

Maxwell Gold of ETF Securities believes that the US dollar had already fallen out of favour before this week’s CPI figures and that an overall US dollar will also help gold

"Beyond the inflation factor, we're seeing the dollar remain weaker," he said, "I think that we are structurally in a dollar bear market and I think that it could boost gold prices in this range." He said

 

[fibogroup.com]

The British pound is expected to push Brexit negotiations aside for the next 3 months and instead the currency will be driven by economic data which may translate into an interest rate hike, depending on the outcome of the news.

In their latest rate decision, the Bank of England kept rates on hold as expected, but sent strong signals to the market that rate rise was on the cards in the nearest future in order to drive down inflation which is currently siting around 3 percent and causing problems in the economy with wage growth is lagging far behind.

“The BOE surprised everyone by being so openly hawkish, so now every piece of data will be analyzed as a ‘make or break’ for a May rate hike,” said Sonja Marten, a currency strategist at DZ Bank AG in Frankfurt, who sees the pound climbing to $1.45 in six months. “Sterling will obviously benefit from evidence that confirms the prospect for a rate hike.”

Overall weakness in the US dollar is also expected to help the pound sterling climb higher against its major rival according to some analysts who predict that the greenback is in the early stages of a major down trend which will become evident over the next few months

“Global capital demand is likely to rise, given both more expansionary US fiscal policy and increasingly strong global economic performance, which has convinced us to expect the longer-term USD downtrend to start sooner and be more pronounced,” says Hans Redeker, head of Foreign exchange strategy at Morgan Stanley.

“The upward USD correction we previously anticipated for 2H18 has been brought forward into 2Q; we expect it to be more shallow.” He added.

 

[fibogroup.com]

If we look at the chart we can see that gold entered a key trading range of between $1,360 and $1,365 over the last month but failed to remain there and since entering this zone 5 days ago it has been sharply rejected and has lost around $40 in value.

In September of last year the beginning of this range was also a strong resistance point where gold was sharply rejected so this level becomes even more critical.

Looking forward, the price needs to reverse and trade back within the key price channel that has formed on the chart and from there a support level can develop where gold can finally break the $1,365 level.

“Traders are watching to see if gold can break through the key technical resistance at $1,365. This resistance area has contained rallies in gold on five separate occasions. If gold breaks above $1,400 that would set the stage for a powerful rally in the months ahead,” said Ken Ford, president of Warwick Valley Financial Advisors.

 

[fibogroup.com]

Bitcoin, the world’s most popular crypto currency has certainly taken investors for a ride since the start of the year, falling from around $15,000 since the beginning of January to $6,000 in the space of 6 weeks only to bounce back above the $10,000 dollar mark in today’s trading.

This certainly is the volatility a trader dreams of, with opportunities abound in long or short positions, so the question in which direction will it travel now?

It seems at the moment analysts are pretty divided about where bitcoin will end up in the nearest future but one thing is for sure, with such volatility and especially the sudden drop in price of around $9,000, one has to be quietly cautious about placing any positions.

Craig Erlam, a senior market analyst at Oanda notes that investors indeed should be wary because the chances of another sharp decline definitely remain.

“Bitcoin continues to be a volatile as ever, having almost double in price in two weeks since bottoming around $6,000 on 6 February,” he said

“It now finds itself testing $10,000 from above, a level that is providing some support in the near term. Sentiment remains extremely fragile in cryptocurrencies and I’m not convinced it’s yet recovered from what was a nasty selloff around the turn of the year.” he added.

Some say that the current level of $10,000 may be here to stay in the short term as investors who got in within the last few weeks exit their trades and book in profits but that will eventually end and a new wave of long positions will see bitcoin move significantly higher.

“$10,000 is a plateau for Bitcoin only as long as profit-taking continues,” says Trevor Gerszt, from Coin IRA

“Investors who bought the dip nearly doubled their money when Bitcoin got close to $12,000, so a little bit of retrenchment was not unexpected. Once that’s over, we expect Bitcoin to continue its long-term price appreciation.” He added.

 

[Vlad_Vahnovanu]

I'm sure it will cost $ 50,000 by the end of 2018

 

[fibogroup.com]

The British pound is soundly back through the $1.40 mark today against its US counterpart after comments over the weekend by a BOE board member, and the release of strong data all but guarantee a rate hike in the nearest future.

Deputy governor from the Bank of England Dave Ramsden, who is one of the more hawkish members on the bank’s board, told the Sunday times over the weekend that he sees interest rates in the UK rising sooner than later, which has pushed market expectations to a 70 percent chance the BOE will lift rates in May.

“We all will keep a close eye on what happens through the early part of this year to see if that BOE forecast of wage growth picking up to 3 percent is realized,” noted Mr Ramsden

“But certainly relative to where I was, I see the case for rates rising somewhat sooner rather than somewhat later.” He added.

Adding more certainty to a rate hike was the release of key real estate data from the UK earlier today.

Mortgage approvals figures hit the market at 40.11k against analysts’ expectations for a figure of 35.92k and shows the fear of higher rates is not deterring home owners and investors alike.

The key for the pound this week are speeches due to be delivered by Prime Minister Theresa May on Friday, which follows opposition leader Jeremy Corban’s speech today, where both speakers will outline their stances regarding Brexit, and in particular the trade agreement following England’s departure from the EU.

“The upcoming speeches will be very much in focus for market participants who are still looking for more clarity on Brexit,” said Lee Hardman from MUFG in London.

“I’m not sure the uncertainty is going to clear enough in the coming week. It’s likely to hold back the pound in the near term.” he added.

 

[fibogroup.com]

Gold has remained largely range bound over the past 4 trading sessions but it seems as the today there is momentum gaining to the upside and the formation of a reverse head and shoulders as we can see in on the chart is definitely a bullish sign.

They key for this pattern for this pattern to continue will be the Speech due out in around an hour by US Federal Reserve President Jeremy Powell where he will lay out the state of the economy and the Feds plans going forward.

Powell only took over the top job at the Fed recently so chances are he may take a soft tone and not talk up the economy too much for fear of spooking investors about future interest rates.

This maybe just what gold needs to once again trade back into the familiar trading range of between $1,360 and $1,365.

 

[fibogroup.com]

Investors are bracing for more stock market turmoil over the coming weeks as the new head of the US Federal Reserve made clear yesterday that the recent volatility in world market won’t be a deterrent in the feds quest to hike interest rates.

New Fed president Jeremy Powell, speaking before the US congress yesterday noted that the US economy was in solid shape and that “headwinds have shifted to tailwinds”, implying that the worst is left behind.

Mr Powell also noted that he expects inflation to hit the Fed’s target range in the nearest future

“My personal outlook for the economy has strengthened since December, The FOMC (Federal Open Market Committee) will continue to strike a balance between avoiding an overheated economy and bringing PCE price inflation to 2 per cent on a sustained basis.”

The recent turmoil in financial markets, where billions of dollars where wiped out didn’t seem to bother Mr Powell who noted that it won’t affect the economic recovery and should only be seen as temporary.

“At this point, we do not see these developments as weighing heavily on the outlook for economic activity, the labour market and inflation. Indeed, the economic outlook remains strong,” he said.

The question is now not if the Fed will raise rates, but how many times with many predicting that there will be 4 rate rises which will leave the current bench mark rate a full percentage point higher than it is today.

The US dollar jumped after Powell’s speech as investors took positions in anticipation of further rate hikes,

“What the markets are telling you today and year-to-date is that interest rate hikes are expected and that’s getting priced in,” Medha Samant, director of Fidelity International investment .