GOLD (AUD) PRO WEEKLY, March 28-01, 2016

Sive Morten

Special Consultant to the FPA
Messages
13,631
Fundamentals

Today we will not speak on gold, since market was closed on Friday and we mostly have discussed all issues there. So, I've decided to prepare weekly research on gold-related currency - AUD.

In the beginning of the research - comments on US Fed rate from Fanthom consulting:
US Inflation On The Rise

Headline US inflation has been below the Fed’s target since April 2012, and significantly so since the sharp falls in commodities prices. Market based measures of inflation expectations have fallen too. However, both inflation expectations and actual inflation data have turned upwards recently and on most measures inflation is already close to ‘normal’ levels.

Our chart shows how different measures of US inflation compare to their average over the 1998-2007 period. The measure of inflation that the Fed now has for its formal inflation target (headline PCE) averaged 2.0% over this period. In January headline CPI and PCE inflation remained some way below normal levels, but this largely a reflection of declines in energy prices. Measures which exclude the most volatile components of consumer prices are already at, or close to, normal levels. From low levels, market based measures of inflation expectations have also risen in the past few weeks.

Give Them an Inch, and They Will Take a Mile
Last week’s Federal Open Market Committee meeting coincided with both a press conference, and an updated summary of economic projections. It gave participants of the Federal Reserve Board their first opportunity to record, formally, how recent financial market gyrations have shaped their views about the economic outlook.


Having witnessed the equity market sell off that took place through January and into February, and having digested the Minutes of the January FOMC meeting, a downward revision to the level of the fed funds rate seen as appropriate for the end of this year appeared almost inevitable. In that respect, the Committee did not disappoint. Back in December 2015, the median projection was consistent with four 25 basis point increases in the policy rate through this year. By March 2016, only two were penciled in.

Whether it is because investors sensed an even more dovish tone at the accompanying press conference, or whether it is because there is now a growing belief that the FOMC will always under-deliver relative to its published guidance, the short-end of the US dollar curve has flattened still further. By close of business Friday, market pricing was consistent with just a single 25 basis point tightening in each of the next three years. Although the FOMC has given ground, in the eyes of investors it has not gone nearly far enough. Give them an inch, and they will take a mile! The gap between the level of the fed funds rate implied by the ‘dots’ curve at the end of the FOMC’s forecast horizon, and that implied by market pricing, is almost as large as it has ever been.


CFTC data shows mostly bullish dynamic. Despite that price slightly decreased, data shows growth as in net long position as in open interest. Right now as gold market as AUD turn to reasonable retracement.
upload_2016-3-27_14-12-46.png

Technicals
Monthly


Situation on monthly chart has not changed significantly. Although we've discussed this major support long-time ago, in Autumn 2015, market still stands here. In fact, March is the first month when AUD finally turns to upside reaction and shows respect to major support level. Trend has turned bullish.

In March AUD has moved above Yearly Pivot. Next logical long-term destination is YPR1 around 0.81 that also coincides with monthly overbought. As market has completed huge all-time AB=CD pattern, and now has shown retracement back to major 5/8 Fib support - whether market will return back to upside action is a rhetoric question. This is too long perspective. At the same time as market already was at 1.10, why it could not be at 1.16 1.618 Fib extension of all-time AB-CD pattern. Right now is tough time, situation changes rapidly, so we can't exclude any scenario. Besides, I've heard some opinions on perspectives of gold market and analysts do not exclude 2000-2500$ area. As AUD will follow gold, 1.10-1.16 doesn't seem as impossible.

Another pattern that we have here is DRPO "Buy" Look-alike (LAL). I call it LAL because thrust has a pause
in the middle of it. But this DiNapoli pattern also points on the same 0.81 area - 50% Fib level that coincides with YPR1 and overbought.

Right now AUD stands in reaction to YPP. First attempt of breakout has failed, but there some objective reasons to that, as we will see on other time frames.
aud_m_28_03_15.png


Weekly
This chart is very informative and full of different patterns - as short-term as long term.

Here trend also is bullish. Those of you guys, who follows our analysis should remember that initially we've thought about butterfly here. Most recent drop was really fast on AUD, but price has not quite reached 1.27 extension and right now it mostly reminds double bottom pattern.

Appearing of W&R right at the second bottom another bullish sign and it is very typical for Double Bottom. This is also good sign for monthly DRPO "Buy" pattern.

On a way up initially market has broken very strong resistance - neckline, Yearly Pivot and all these stuff around weekly overbought. On a way up AUD also has passed through MPR1. This tells on appearing of new bull trend here and points that this is not just retracement up in a bear trend. I even drop out MPP here, since all of them have been broken up already.

Following this logic nearest target should stand around 0.7850 area - important Fib resistance and double bottom target. Usually it equals the depth of double bottom itself, counted up from neckline. Current upside action looks important especially after strong drop in January.

MACD shows triple bullish divergence right at monthly major Fib support.

If we will take a look at broader picture - may be we will get reverse H&S pattern, although head is a bit overextended beyond 1.618 extension. We'll see... But the same 0.7850 is the neckline.

Still major problem right now is how to take long position, since market stands at weekly overbought and it would be better to wait for some retracement down. Our major task is to catch right moment for long entry here. Based on weekly chart it is logical to get re-testing of neckline.

aud_w_28_03_15.png

Daily
Daily picture shows two important things. Trend has turned bearish here. On a way up market not just has hit weekly overbought but it also has completed 1.618 AB-CD extension pattern and now stands at reasonable retracement down.

As short-term upside target has been hit - AUD has no reasons for W&R right now and a kind of fake spikes. It means that if somehow AUD will turn up again and move above recent top - it probably will mean real upside continuation to our next target - 0.7850 area.

A the same time, as overbought stands on weekly chart, continuation of retracement looks more probable. Minimum level that market could reach is 0.7450 Fib support and daily oversold as well. But usually weekly overbought pushes market to deeper Fib levels. That's why our favorite one is daily K-support area 0.7316-0.7335 that is also neckline of weekly Double Bottom pattern.

Thus, we carefully should watch for any patterns or Fib extensions on intraday charts that could confirm this area.
aud_d_28_03_15.png


4-hour
Here is, guys, one of possible scenarios, how it could turn. On 4-hour chart we could get H&S pattern that is logical, since weekly overbought assumes deeper retracement. First destination with this H&S is neckline, but it coincides with our 1st daily Fib level of 0.7440, oversold and WPS1. Thus upside bounce definitely should happen and this will lead to appearing of right shoulder.

After right shoulder will be completed - downward AB-CD action will lead us precisely to daily K-area and weekly double bottom neckline:
aud_4h_28_03_15.png


But, as we've said above - if market will change the shape of this pattern or unexpectedly will continue move up - it will mean that AUD just continues to next 0.7850 target, although currently this continuation is not logical yet.

Hourly
This picture just confirms that market should reach neckline very soon. Aussie already has moved below 1.0 AB-CD target. Hence, next logical destination is 1.618 and it stands precisely at daily Fib support and neckline of our H&S pattern. I like such kind of Agreements. They give us confidence with patterns that we discuss:
aud_1h_28_03_15.png


At the same time, market could form butterfly or small H&S to trigger upside action - out of neckline to create the shoulder.

Conclusion:
That's being said, if Australian Central Bank will not change it's policy drastically and will not be involved strongly in currency war - Australia could get significant advantages from healthy interest rates, relation to gold mining industry, sufficient economy and one of financial centers of Asia region. Thus currently we have a positive view on AUD.
In short-term we watch when retracement down will be over. Probably it should take 1-2 weeks. Our primary area to watch for is 0.7330 support on daily chart.


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.
 

Sive Morten

Special Consultant to the FPA
Messages
13,631
Good morning,

Gold dipped slightly on Tuesday, but held above a one-month low on a softer dollar and weak U.S. economic data that dented expectations of an immediate hike in U.S. interest rates.

Traders were waiting to hear from Federal Reserve Chair Janet Yellen later in the session on U.S. interest rate outlook amid recent hawkish comments from other Fed officials.

"If (Yellen) reinforces recent sentiment expressed by some governors, we could see further dollar strengthening and corresponding pressure on gold," said INTL FCStone analyst Edward Meir.
"However, our take ... is that she is exceedingly dovish and is loathe to disrupt expectations of a central bank firmly set on a very gradual rate trajectory and one that is gentler in slope than that being sketched out by her colleagues."

Higher rates could hurt demand for non-interest paying gold. Yellen will be speaking on the economic outlook and monetary policy to the Economic Club of New York at 1620 GMT on Tuesday.

Last week, comments from several Fed officials put investors on guard for the possibility of at least two rate increases this year, triggering a widespread correction across commodities and bolstering the dollar.
Some officials said another rate hike could come as early as next month if the economy maintained its momentum.

The Fed raised rates in December for the first time in nearly a decade. However, some of the expectations for an imminent hike in interest rates were dented after data on Monday showed U.S. consumer spending barely rose in February and inflation retreated.

Following the weak data, economists slashed their first-quarter gross domestic product growth estimates, while the dollar fell 0.2 percent against a basket of major currencies.


Today we again can take a look at gold market, although nothing has changed drastically yet there. On daily chart gold still stands at support and oversold, which creates DiNapoli "Stretch" setup and should trigger, at least theoretically, minor upside bounce:
gold_d_29_03_16.png


On 4-hour chart we also see that this is Agreement (AB=CD target) and MPP. Potential target of this retracement probably is a K-resistance area around 1240:
gold_4h_29_03_16.png


On hourly chart we have 2 important things. First is - pay attention to the trap with 1.618 AB-CD target and how it was clapped - market has turned to real upside only when it has touched 1.618 target. This is classical trap for gold market.
So, right now gold has chance to form H&S pattern. It's minor target should lead us to WPP, while classical target coincides with 4-hour K-resistance area. If gold will not be able to stay above 1215 area and bottom of right shoulder - then it really could continue move down and we will not get any bounce here:
gold_1h_29_03_16.png
 

bobsbeer

Corporal
Messages
98
On hourly chart we have 2 important things. First is - pay attention to the trap with 1.618 AB-CD target and how it was clapped - market has turned to real upside only when it has touched 1.618 target. This is classical trap for gold market.
I am confused. What do you mean 1.618 ABCD target? Is that a typo?
 

Sive Morten

Special Consultant to the FPA
Messages
13,631
I am confused. What do you mean 1.618 ABCD target? Is that a typo?
Hi. No typo ;).
Recall our previous discussion, how market could turn up. 1.618 is extension of AB-CD pattern on hourly chart that finally has been achieved. Look video for detail explanation.
 

Sive Morten

Special Consultant to the FPA
Messages
13,631
Good morning,

(Reuters) - Gold held on to sharp overnight gains on Wednesday, buoyed by a softer dollar and
Federal Reserve chair Janet Yellen's remarks that the U.S.central bank should be cautious in raising interest rates.

Gold is highly sensitive to U.S. monetary policy, as rising interest rates lift the opportunity cost of holding non-yielding bullion, while boosting the dollar. The metal slid 3 percent last week after hawkish comments from several Fed officials.

In her first comments since the Fed decided to hold rates steady two weeks ago, Yellen said on Tuesday inflation has not yet proven durable against the backdrop of looming global risks to the U.S economy, and that the Fed should proceed only cautiously on rate hikes.

Some profit-taking following the overnight jump in prices has taken gold lower but the metal will consolidate around $1,235-$1,240, said MKS Group trader Sam Laughlin. However, some analysts said gold could be subject to downside risks as focus now shifts to key U.S. jobs data due this week.

"Though the rally looks intact it can be dented by a good employment number in the non-farm payrolls release for March scheduled for Friday," said HSBC analyst James Steel. "A number above 200,000 new net jobs could wear on gold and clip recent gains."

Markets expect non-farm payrolls to grow by 205,000, according to a Reuters poll.A strong payrolls number could push the Fed to raise rates earlier than current market expectations.

U.S. federal funds futures rose on Tuesday, implying traders now think the Fed will not raise interest rates until late 2016. Dollar bulls were on the defensive on Wednesday after yet another setback inflicted by Yellen, whose cautious tone left markets wondering if there will be even one hike in U.S. interest rates this year.

Assets in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.40 percent to 820.47 tonnes on Tuesday - the first drop in two weeks. Holdings are still near their highest in over two years as wider turmoil in the stock markets has burnished gold's safe-haven appeal. Yellen's dovish tone could trigger further interest in gold funds.


So, although we couldn't foresee such comments from Yellen, but it has led market right to our destination around 1240 area. I suggest you to watch today's Forex video, there we speak a lot on this Fed step, it might be interesting:

gold_d_30_03_16.png

Current action is not very interesting for perspectives of daily chart. Thus, here, we need either drop to 1175 to go long, or signs of upside continuation, i.e. bullish trend and returning to the tops. Until this will happen, daily picture suggests no position taking.

On short-term perspective, currently it is not time yet for short entry (if somebody thinks about it). yes, gold stands at 1240 K-resistance, but no reversal patterns were formed yet. Besides, upside momentum is strong and market could at least complete harmonic swing, and reach 1255 Fib level and WPR1. Poor NFP data could bring even new scale to gold market. Thus, if you think about short entry - do this at least when you will get clear reversal pattern. But our thought is - better to sit on the hands till the end of the week....
gold_4h_30_03_16.png
 

Sive Morten

Special Consultant to the FPA
Messages
13,631
Good morning,

(Reuters) - Gold ticked up on Thursday, helped by a softer dollar and Federal Reserve Chair Janet
Yellen's caution over U.S. interest rate hikes, and was set to record its best quarter in nearly 30 years.
Bullion rallied sharply this year as worries over global economic growth and a slowdown in China shook up stock markets, triggering safe-haven demand for the yellow metal. It has gained 15.6 percent in the first three months of the year, its strongest such performance since the third quarter of 1986.

"It is difficult to get bearish on gold at this stage given that the Fed has made it quite clear that it is reluctant to raise rates, this despite signs that the U.S. economy is doing fairly well," said INTL FCStone analyst Edward Meir.
"As a result, the dollar is not rallying on constructive macro releases, and we have to suspect that its weaker tone will limit any substantial declines in gold for the time being." Investors gave the dollar a wide berth early on Thursday as dovish comments from Yellen continued to resonate, dampening
demand for the currency. Yellen said on Tuesday the U.S. central bank should proceed only cautiously as it looks to raise interest rates.

The comments boosted sentiment with investors, who had sold off gold and equities after a few Fed officials said that another rate hike could be just around the corner. The Fed raised rates in December for the first time in nearly a decade. Gold as a non-interest yielding asset benefits from lower rates.

Gains in the metal were capped by a rally in global equities. Asian shares edged up to a four-month high on
Thursday, as receding worries of near-term U.S. interest rate hikes continued to buoy risk sentiment.
Gold had gained nearly 2 percent on Tuesday immediately after Yellen's dovish remarks, but fell 1.4 percent at the following session as stronger equities triggered profit-taking.

Assets in SPDR Gold Trust, the world's top gold-backed exchange-traded fund, fell for a second straight session to 819.28 tonnes on Wednesday. Holdings are still near their highest in over two years.


Today we've got something interesting on gold. On daily chart as you can see - market has not quite completed harmonic swing retracement. But this is not most interesting stuff:
gold_d_31_03_16.png


The most interesting stands on 4-hour chart. Here we recognize potential 3-Drive "buy" pattern that could trigger upside action at least to 1270 or, ultimately could lead to long-term bull trend continuation. Recall our recent discussion of 1.618 AB-CD target completion (that was a trap). But by the same minor dive down gold has touched 1.618 extension of 1st drive - take a look at the chart. Appearing of 3-Drive here could mean that downward retracement is over. This is important pattern.
gold_4h_31_03_16.png


On hourly chart we also have a signs of upside continuation, but they are shorter term. Thus, here market could form upside AB-CD with minimum target around 1250 Fib resistance and WPR1. Hidden bullish divergence with MACD also points on this sub.
To keep this scenario valid market needs just to hold above 1220 area and above former H&S consolidation, it should not return back inside of it. If this will happen, then all that we've said about upside continuation will be under question:
gold_1h_31_03_16.png
 

Sive Morten

Special Consultant to the FPA
Messages
13,631
Good morning,

(Reuters)
Gold held steady above $1,230 an ounce on Friday, after posting its biggest quarterly rise in nearly 30 years on waning expectations of U.S. rate hikes, with investors waiting for U.S. non-farm payrolls data for more cues.

With a 16-percent jump, gold on Thursday recorded its best quarterly performance since 1986 as global growth concernsdiminished expectations of further U.S. interest rate hikes this year. A tumble in the global stock market and the U.S. dollar triggered safe-haven demand for the metal.

* Bullion is sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets, while boosting the dollar.

* Federal Reserve Chair Janet Yellen said this week that the U.S. central bank should proceed only cautiously as it looks to raise interest rates.

* New York Federal Reserve President William Dudley on Thursday said he agrees with Yellen's views that the U.S. central bank should proceed cautiously, particularly given risks from slow growth abroad.

* All eyes are now on U.S. non-farm payrolls data due later in the session that will be watched for clues about the labour market and the economy. U.S. payrolls are expected to grow by 205,000, according
to a Reuters poll. A stronger number could revive expectations of higher U.S. rates, strengthen the dollar and hurt gold.

* Global manufacturing surveys due on Friday will also be in focus. U.S. Mint sold 38,000 ounces of American Eagle gold coins in March, down 54.5 percent from the previous month, according to the latest data.

India's gold demand in the March quarter is set to drop by about two-thirds from a year ago to its lowest in seven years, as higher prices and a strike by jewellers curbed sales in the world's second-biggest consumer.

Higher gold prices curbed demand for the precious metal in Asia this week, with premiums in several major markets taking a hit, traders in the top consuming region said.


Daily picture barely has changed. Here we wait for significant changes to make a final judgement on situation. NFP theoretically could clarify this. Particularly speaking, we need to know whether current retracement is over or we still could expect deeper levels to buy into:
gold_d_01_04_16.png


Most interesting for us is 4-hour chart. Yesterday we've talked on possible 3-Drive pattern that could bring these chances that we've mentioned above.
Still, right now, shorter-term pattern is also interesting. Recently we've said that gold could show slightly higher retracement up till the end of the week. On hourly chart we have bullish divergence, here, we have potential AB-CD and - butterfly "Sell'. It has 2 targets - at 1248 and WPR1 and 1258 and AB-CD target. What particular one will be hit - depend on NFP, probably.
gold_4h_01_04_16.png
 
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