Sive Morten
Special Consultant to the FPA
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Today, guys, we replace regular gold research on AUD analysis as it seems to be more interesting for trading. But we will cover gold view in our daily videos, as long-term picture has not changed significantly yet.
Fundamentals
(Reuters) Gold fell 1 percent on Friday after better-than-expected U.S. jobs data boosted the beleaguered dollar and potentially cleared the way for the U.S. Federal Reserve to raise interest rates for a third time this
year. U.S. employers hired more workers than expected in July and raised their hourly earnings by the most in five months, signs of labor market tightness and offering the Fed some assurance that inflation will radually rise to its 2 percent target.
The U.S. dollar , which was wallowing near 15-month lows prior to the figures, rallied after the release, making dollar-priced gold costlier for non-U.S investors.
"The strong rise in non-farm payrolls together with the drop back in the unemployment rate to a joint 16-year low suggests the Fed will still need to raise rates again later this year, even if inflation remains subdued," said Simona Gambarini, commodities economist at Capital Economics.
"In the absence of substantial geopolitical risks, we think that Fed tightening will prove too strong a headwind for gold prices this year. We expect the gold price to end the year at $1,150 per ounce."
Spot gold was down 0.8 percent at $1,257.66 an ounce by 2:02 p.m. EDT (1802 GMT), after falling 1.1 percent. It was on track to end the week down 0.9 percent following three straight weeks higher. U.S. gold futures for December delivery settled down 0.8 percent at $1,264.60.
"This triggered a sell from safe haven buyers of gold and silver," said Miguel Perez-Santalla, vice president of Heraeus Metal Management in New York. "Though the U.S. dollar's strength weighs on (gold and silver), the market is still not convinced that this data does anything to change the Fed's trajectory."
More evidence that the U.S. economy is on a sustainable path of growth is needed to for the dollar to make a more meaningful comeback, said Fawad Razaqzada, technical analyst for Forex.com. Limiting steeper losses in gold was escalating political turmoil in Washington which has cooled expectations for growth and inflation, and boosted safe haven assets like the precious metal. On Tuesday, bullion rose to a seven-week high at $1,273.90 an ounce.
Chart of the Week: Divergence Between Unemployment and Wages in The Euro Area
by Fathom Consulting
Steadily falling unemployment in the euro area has not translated into any significant increases in wages; increases in quarterly compensation per employee have averaged only 1.3% since 2014. This has been a key reason for why core inflation has flatlined since then. We suspect that labour market slack might be significantly higher than that suggested by the headline unemployment data. Despite the unemployment rate falling to pre-euro-crisis lows, a more detailed look into the composition of unemployment paints a bleak picture for wage growth going forward. As people are unable to secure a full-time job, they may instead take a part-time job, work on a temporary contract or become self-employed. Therefore, labour market slack might be better reflected by broader unemployment figures, rather than just the headline unemployment figure.
Broader measures of joblessness point to a softer market for jobseekers. There are still around seven million underemployed part-time workers in the euro area, up from just over 5.5 million in 2008. By definition, those are “people employed part-time who want to work more hours and are available to do so”. This suggests a significant number of people would rather work more, and that takes away some of their bargaining power when it comes to wage demands. Rather than pushing for wage increases, underemployed part-time workers are likely to push for full-time employment, which could undermine wage growth. As a result, despite an uptick in June, from 1.1% to 1.2%, core inflation is unlikely to see a “self-sustaining” pick-up anytime soon.
COT Report
AUD data shows good bullish performance as net speculative long position is growing on a background of positive dynamic in open interest. It means that new longs are coming and coming on market. At the same time AUD net long position is far from total saturation. If you will take a look at historical chart, you'll see that total long position stands around 50-60% from the peak. It doesn't mean that AUD will rise due this factor, but it tells that we have no barriers of sentimental quality.
Technical
Monthly
In a stubborn counter standing on monthly/weekly charts of flat resistance around 0.77-0.78 area and higher lows - bulls has won. Higher lows that were started to form in September 2015 indicates bullish dynamic pressure, but only in July 2017 this breakout has happened.
Trend stands bullish (at least by letter) since 2015 here, price neither OB nor OS right now. So AUD has free space to continue upside action.
Last 2 month price strongly acts above YPP. As price moves above YPP, next destination should be YPR1 that stands around 0.81 area.
Upside action has started from a kind of "222" Buy" pattern (but not quite, as "D' point of inner AB-CD stands slightly higher than "B" point), and now we have wide AB-CD in progress that has the same target - 0.8165 and stands in a Agreement with major Fib resistance level. So, this is next target here.
Despite strong rally in past few weeks - market has not quite reached major target. It means that if even we will get deeper downside action on coming week - it should be treated as retracement and through the prism of better chances to go long.
Weekly
On weekly chart trend is bullish as well, and here we have two important issues. First is big butterfly "Sell" pattern is forming. Its 1.618 target coincides with monthly AB-CD Agreement around 0.8160 area. Thus - another target at the same monthly area.
Second - right now market has reached 1.27 extension of the same butterfly. This level coincides with 3/8 major resistance @ 0.7946 and weekly overbought. Last week as you can see is inside one and AUD starts to feel some barrier around this level. As we've suggested 2 weeks ago - aussie could show meaningful bounce as reaction on strong resistance and 1.27 target.
Taking in consideration these two issues we could make two conclusions. First - in nearest 1-2 weeks odds suggest retracement. We do not know how deep it could be, but even minor 3/8 respect of butterfly and daily overbought will be significant bounce for daily/intraday trading.
Second - after some time, upside action to 0.8165 area should continue. Despite all other moments that we already have discussed - take a look that price forms clear acceleration to 1.27 butterfly target. As a rule this leads price to 1.618 target after retracement will be over.
Daily
Daily chart shows some important nuances. At the first glance - we have very similar situation to GBP. But in reality it is not quite so. The point is that fundamental background for AUD and GBP is different. AUD looks stronger and Bank of Australia has different rate policy to BoE. It means that reaction on recent USD strength could be different.
Take a look, by letter we have DRPO "Sell" pattern here. But even strong NFP was not able to push aussie significantly lower. Thus, as on GBP we're watching for 2-leg downside retracement - here it could just triangle consolidation. This is the major point that we have to keep an eye on here.
This very common situation - when reaction after DRPO confirmation stands lazy - it's a big step in favor of triangle consolidation and upside continuation after some time.
On coming week, at least in first 2-3 days we have a floor around 0.7875 area as daily has OS there, Fib level and MPP. Thus, all our trading process will stand mostly inside of this triangle.
Intraday
On 4-hour chart we bring alternative scenario - the same as on GBP. If still, downside pressure will be strong enough to trigger 2-leg retracement down, here we also could get some kind of AB-CD pattern. Take a look that it's target coincide with daily K-support as well.
Still, even on this chart MACD bullish divergence hints that it could be just triangle, not H&S:
Whether we will get H&S and DRPO, or it will be just a triangle - it seems that next leg should be up. Either another swing in triangle or starting of shoulder shape. It means that we should keep an eye on possible bullish reversal patterns somewhere around on hourly chart. If we will get it - we could possess ourselves for both scenarios. If it will be triangle - we already will have position for upside breakout. If bears will be stronger than we suggest right now - no problem, we will out either at b/e or even with small profit on backward action to neckline....
Conclusion:
AUD looks strong on long-term basis and our next target is 0.8150. In shorter-term perspective, we have a floor around 0.7875 area, at least for 2-3 sessions, and also suspicious that aussie could form just triangle consolidation but not compounded 2-leg retracement down. That's why in the beginning of the week we should keep an eye on bullish reversal patterns on intraday charts.
The technical portion of Sive's analysis owes a great deal to Joe DiNapoli's methods, and uses a number of Joe's proprietary indicators. Please note that Sive's analysis is his own view of the market and is not endorsed by Joe DiNapoli or any related companies.
Fundamentals
(Reuters) Gold fell 1 percent on Friday after better-than-expected U.S. jobs data boosted the beleaguered dollar and potentially cleared the way for the U.S. Federal Reserve to raise interest rates for a third time this
year. U.S. employers hired more workers than expected in July and raised their hourly earnings by the most in five months, signs of labor market tightness and offering the Fed some assurance that inflation will radually rise to its 2 percent target.
The U.S. dollar , which was wallowing near 15-month lows prior to the figures, rallied after the release, making dollar-priced gold costlier for non-U.S investors.
"The strong rise in non-farm payrolls together with the drop back in the unemployment rate to a joint 16-year low suggests the Fed will still need to raise rates again later this year, even if inflation remains subdued," said Simona Gambarini, commodities economist at Capital Economics.
"In the absence of substantial geopolitical risks, we think that Fed tightening will prove too strong a headwind for gold prices this year. We expect the gold price to end the year at $1,150 per ounce."
Spot gold was down 0.8 percent at $1,257.66 an ounce by 2:02 p.m. EDT (1802 GMT), after falling 1.1 percent. It was on track to end the week down 0.9 percent following three straight weeks higher. U.S. gold futures for December delivery settled down 0.8 percent at $1,264.60.
"This triggered a sell from safe haven buyers of gold and silver," said Miguel Perez-Santalla, vice president of Heraeus Metal Management in New York. "Though the U.S. dollar's strength weighs on (gold and silver), the market is still not convinced that this data does anything to change the Fed's trajectory."
More evidence that the U.S. economy is on a sustainable path of growth is needed to for the dollar to make a more meaningful comeback, said Fawad Razaqzada, technical analyst for Forex.com. Limiting steeper losses in gold was escalating political turmoil in Washington which has cooled expectations for growth and inflation, and boosted safe haven assets like the precious metal. On Tuesday, bullion rose to a seven-week high at $1,273.90 an ounce.
Chart of the Week: Divergence Between Unemployment and Wages in The Euro Area
by Fathom Consulting
Steadily falling unemployment in the euro area has not translated into any significant increases in wages; increases in quarterly compensation per employee have averaged only 1.3% since 2014. This has been a key reason for why core inflation has flatlined since then. We suspect that labour market slack might be significantly higher than that suggested by the headline unemployment data. Despite the unemployment rate falling to pre-euro-crisis lows, a more detailed look into the composition of unemployment paints a bleak picture for wage growth going forward. As people are unable to secure a full-time job, they may instead take a part-time job, work on a temporary contract or become self-employed. Therefore, labour market slack might be better reflected by broader unemployment figures, rather than just the headline unemployment figure.
Broader measures of joblessness point to a softer market for jobseekers. There are still around seven million underemployed part-time workers in the euro area, up from just over 5.5 million in 2008. By definition, those are “people employed part-time who want to work more hours and are available to do so”. This suggests a significant number of people would rather work more, and that takes away some of their bargaining power when it comes to wage demands. Rather than pushing for wage increases, underemployed part-time workers are likely to push for full-time employment, which could undermine wage growth. As a result, despite an uptick in June, from 1.1% to 1.2%, core inflation is unlikely to see a “self-sustaining” pick-up anytime soon.
COT Report
AUD data shows good bullish performance as net speculative long position is growing on a background of positive dynamic in open interest. It means that new longs are coming and coming on market. At the same time AUD net long position is far from total saturation. If you will take a look at historical chart, you'll see that total long position stands around 50-60% from the peak. It doesn't mean that AUD will rise due this factor, but it tells that we have no barriers of sentimental quality.
Technical
Monthly
In a stubborn counter standing on monthly/weekly charts of flat resistance around 0.77-0.78 area and higher lows - bulls has won. Higher lows that were started to form in September 2015 indicates bullish dynamic pressure, but only in July 2017 this breakout has happened.
Trend stands bullish (at least by letter) since 2015 here, price neither OB nor OS right now. So AUD has free space to continue upside action.
Last 2 month price strongly acts above YPP. As price moves above YPP, next destination should be YPR1 that stands around 0.81 area.
Upside action has started from a kind of "222" Buy" pattern (but not quite, as "D' point of inner AB-CD stands slightly higher than "B" point), and now we have wide AB-CD in progress that has the same target - 0.8165 and stands in a Agreement with major Fib resistance level. So, this is next target here.
Despite strong rally in past few weeks - market has not quite reached major target. It means that if even we will get deeper downside action on coming week - it should be treated as retracement and through the prism of better chances to go long.
Weekly
On weekly chart trend is bullish as well, and here we have two important issues. First is big butterfly "Sell" pattern is forming. Its 1.618 target coincides with monthly AB-CD Agreement around 0.8160 area. Thus - another target at the same monthly area.
Second - right now market has reached 1.27 extension of the same butterfly. This level coincides with 3/8 major resistance @ 0.7946 and weekly overbought. Last week as you can see is inside one and AUD starts to feel some barrier around this level. As we've suggested 2 weeks ago - aussie could show meaningful bounce as reaction on strong resistance and 1.27 target.
Taking in consideration these two issues we could make two conclusions. First - in nearest 1-2 weeks odds suggest retracement. We do not know how deep it could be, but even minor 3/8 respect of butterfly and daily overbought will be significant bounce for daily/intraday trading.
Second - after some time, upside action to 0.8165 area should continue. Despite all other moments that we already have discussed - take a look that price forms clear acceleration to 1.27 butterfly target. As a rule this leads price to 1.618 target after retracement will be over.
Daily
Daily chart shows some important nuances. At the first glance - we have very similar situation to GBP. But in reality it is not quite so. The point is that fundamental background for AUD and GBP is different. AUD looks stronger and Bank of Australia has different rate policy to BoE. It means that reaction on recent USD strength could be different.
Take a look, by letter we have DRPO "Sell" pattern here. But even strong NFP was not able to push aussie significantly lower. Thus, as on GBP we're watching for 2-leg downside retracement - here it could just triangle consolidation. This is the major point that we have to keep an eye on here.
This very common situation - when reaction after DRPO confirmation stands lazy - it's a big step in favor of triangle consolidation and upside continuation after some time.
On coming week, at least in first 2-3 days we have a floor around 0.7875 area as daily has OS there, Fib level and MPP. Thus, all our trading process will stand mostly inside of this triangle.
Intraday
On 4-hour chart we bring alternative scenario - the same as on GBP. If still, downside pressure will be strong enough to trigger 2-leg retracement down, here we also could get some kind of AB-CD pattern. Take a look that it's target coincide with daily K-support as well.
Still, even on this chart MACD bullish divergence hints that it could be just triangle, not H&S:
Whether we will get H&S and DRPO, or it will be just a triangle - it seems that next leg should be up. Either another swing in triangle or starting of shoulder shape. It means that we should keep an eye on possible bullish reversal patterns somewhere around on hourly chart. If we will get it - we could possess ourselves for both scenarios. If it will be triangle - we already will have position for upside breakout. If bears will be stronger than we suggest right now - no problem, we will out either at b/e or even with small profit on backward action to neckline....
Conclusion:
AUD looks strong on long-term basis and our next target is 0.8150. In shorter-term perspective, we have a floor around 0.7875 area, at least for 2-3 sessions, and also suspicious that aussie could form just triangle consolidation but not compounded 2-leg retracement down. That's why in the beginning of the week we should keep an eye on bullish reversal patterns on intraday charts.
The technical portion of Sive's analysis owes a great deal to Joe DiNapoli's methods, and uses a number of Joe's proprietary indicators. Please note that Sive's analysis is his own view of the market and is not endorsed by Joe DiNapoli or any related companies.