Sive Morten
Special Consultant to the FPA
- Messages
- 18,763
Fundamentals
Actually not much to add in fundamentals part as mostly we've said everything in today's EUR research. There are two subject on the table right now - poor NFP and future Fed steps and tariffs piking with China.
As Reuters reports - gold prices rose on Friday, as Wall Street stocks tumbled and the dollar fell as
rhetoric from U.S. President Donald Trump and Chinese officials fed worries about a possible trade war, and after U.S. jobs data came in weaker than expected.
"We are moving back to a risk-off scenario today, but still stuck in a trading range between $1,300 and $1,360," said Rob Haworth, senior investment strategist for U.S. Bank Wealth Management. "The market is paying very much attention to the dollar and bond market in terms of what the Fed is going to do."
"The payrolls report has provided a small boost to gold, but overall it's had quite a dismal week," Saxo Bank's head of commodity strategy Ole Hansen said.
Indeed, as we've said in EUR report - despite week NFP numbers per se, report in general was not absolutely weak, as wage inflation has increased and Feb numbers were rather solid, which put Feb+Mar numbers in a row of average value. That's why impact on gold market was a bit muted.
The same is true in relation to tariffs war. We hear opposite statements from here and there but nobody knows what real steps will be. As a result gold shows tepid response on verbal piking, waiting for facts.
COT Report
CFTC data shows gradual contraction of net long positions, but open interest is dropping as well. It means long covering process but we do not have new short positions. In current situation, this is more bullish supportive factor rather bearish.
Monthly
April stands as inside month by far and makes no impact on overall picture.
Major resistance still stands at 1380-1391 that includes 2016 top, major Fib level and YPR1.
In fact, most important moment for long-term gold right now is ability to move higher. 1327 level is long-term COP target of AB-CD started at 1046$, in July 2015. First it was reached in July 2017. After logical minor bounce price returns back to it. But right now it should be an action higher, to next 1450 target, which is OP of the same AB-CD. If gold will not be able to do it - strong drop is possible, because price will fail to proceed next extension leg, showing inability and lack of strength to do it. This could break whole AB-CD construction.
MACD trend stands bullish here. Taking in consideration tight standing right under resistance - this is good sign for bulls. Downside reaction was rather small, in scale of monthly chart. Now we could recognize a kind of pennant pattern is forming as gold stands in contraction mode.
Weekly
Last time we've confirmed that bullish scenario is still valid as market holds above 3/8 level after AB-CD retracement down has been completed. Also we've mentioned bullish grabber. Logical conclusion that we've made - 1300 lows is major low to watch for. Until gold will stand above it, it will keep chances to proceed upward action. And market was able to hold above it. Strong rally has followed last week.
Now we again could speak on our major OP target at 1377. But if gold will proceed in the same manner, OP will become just tactical destination point as it stands around previous top. Breakout will lead to jump in volatility and massive stop order clapping.
Also gold is forming a kind of flag pattern right under strong monthly resistance - this usually happens before upside breakout attempt.
The one pattern that makes situation more complex is bearish grabber that has appeared recently. Now we have two grabbers in opposite direction. Bullish position looks stronger as we have other facts in favor of the bulls, besides, bullish grabber stands in agreement with major trend. Still, bearish grabber brings nothing good to bulls and we should be more diligent with choosing setups for trading on lower time frames.
Daily
So, while gold holds intact major bullish factors on monthly/weekly basis, we could build plans on upside potential. On daily chart, despite that trend formally stands bearish, but gold holds around major 5/8 Fib support, as it will be shown below, MPP and is forming tight consolidation that reminds wide pennant or falling wedge.
Nearest daily target that we will be watching is 1383 - which is AB=CD objective point (OP) and possible butterfly 1.27 extension. As with EUR - all that we need is good bullish pattern on lower time frames.
Intraday
4H time frame gives very interesting shape of reverse H&S pattern right at top. We have different AB-CD targets - XOP and OP but both stand in the same 1368 area. Tactically, this is just a question from which point gold will start upside action - either it already has started or a bit lower action will happen first.
Harmonically it looks more correct to drop slightly lower and this is really could happen by picture on 1H chart. This will not change overall picture and mostly a tactical question.
This reason on 1H stands due possible "222" Buy pattern and inner AB=CD, which suggests action to 1313. In fact, we already have talked about it earlier and it i better corresponds to idea of 4H pattern.
At the same time theoretically "222" Buy already has been formed, at least by its shape. As you can see price is forming megaphone (widening triangle) pattern. Keep an eye on it. Upside breakout could mean that upward action has started while downside breakout will make us focus on 1312-1313 AB=CD target as megaphone could become a part of butterfly, H&S or some other pattern.
Conclusion
Gold market right now is driven by external political factors. Information that is available right now suggests that this should be medium-term lasting action, especially this relates to tariffs turmoil. This fact let's us think that gold will be supported within few weeks and could reach higher targets, at least nearest ones around 1370-1385.
Meantime, domination of fundamental factors could lead to fading or ignoring normal market mechanics. Now arguably we would say that it's not the time to take long position yet, but at the same time we have clear patterns to keep an eye on, and that could give clear signal that situation is changing.
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.
Actually not much to add in fundamentals part as mostly we've said everything in today's EUR research. There are two subject on the table right now - poor NFP and future Fed steps and tariffs piking with China.
As Reuters reports - gold prices rose on Friday, as Wall Street stocks tumbled and the dollar fell as
rhetoric from U.S. President Donald Trump and Chinese officials fed worries about a possible trade war, and after U.S. jobs data came in weaker than expected.
"We are moving back to a risk-off scenario today, but still stuck in a trading range between $1,300 and $1,360," said Rob Haworth, senior investment strategist for U.S. Bank Wealth Management. "The market is paying very much attention to the dollar and bond market in terms of what the Fed is going to do."
"The payrolls report has provided a small boost to gold, but overall it's had quite a dismal week," Saxo Bank's head of commodity strategy Ole Hansen said.
Indeed, as we've said in EUR report - despite week NFP numbers per se, report in general was not absolutely weak, as wage inflation has increased and Feb numbers were rather solid, which put Feb+Mar numbers in a row of average value. That's why impact on gold market was a bit muted.
The same is true in relation to tariffs war. We hear opposite statements from here and there but nobody knows what real steps will be. As a result gold shows tepid response on verbal piking, waiting for facts.
COT Report
CFTC data shows gradual contraction of net long positions, but open interest is dropping as well. It means long covering process but we do not have new short positions. In current situation, this is more bullish supportive factor rather bearish.
Monthly
April stands as inside month by far and makes no impact on overall picture.
Major resistance still stands at 1380-1391 that includes 2016 top, major Fib level and YPR1.
In fact, most important moment for long-term gold right now is ability to move higher. 1327 level is long-term COP target of AB-CD started at 1046$, in July 2015. First it was reached in July 2017. After logical minor bounce price returns back to it. But right now it should be an action higher, to next 1450 target, which is OP of the same AB-CD. If gold will not be able to do it - strong drop is possible, because price will fail to proceed next extension leg, showing inability and lack of strength to do it. This could break whole AB-CD construction.
MACD trend stands bullish here. Taking in consideration tight standing right under resistance - this is good sign for bulls. Downside reaction was rather small, in scale of monthly chart. Now we could recognize a kind of pennant pattern is forming as gold stands in contraction mode.
Weekly
Last time we've confirmed that bullish scenario is still valid as market holds above 3/8 level after AB-CD retracement down has been completed. Also we've mentioned bullish grabber. Logical conclusion that we've made - 1300 lows is major low to watch for. Until gold will stand above it, it will keep chances to proceed upward action. And market was able to hold above it. Strong rally has followed last week.
Now we again could speak on our major OP target at 1377. But if gold will proceed in the same manner, OP will become just tactical destination point as it stands around previous top. Breakout will lead to jump in volatility and massive stop order clapping.
Also gold is forming a kind of flag pattern right under strong monthly resistance - this usually happens before upside breakout attempt.
The one pattern that makes situation more complex is bearish grabber that has appeared recently. Now we have two grabbers in opposite direction. Bullish position looks stronger as we have other facts in favor of the bulls, besides, bullish grabber stands in agreement with major trend. Still, bearish grabber brings nothing good to bulls and we should be more diligent with choosing setups for trading on lower time frames.
Daily
So, while gold holds intact major bullish factors on monthly/weekly basis, we could build plans on upside potential. On daily chart, despite that trend formally stands bearish, but gold holds around major 5/8 Fib support, as it will be shown below, MPP and is forming tight consolidation that reminds wide pennant or falling wedge.
Nearest daily target that we will be watching is 1383 - which is AB=CD objective point (OP) and possible butterfly 1.27 extension. As with EUR - all that we need is good bullish pattern on lower time frames.
Intraday
4H time frame gives very interesting shape of reverse H&S pattern right at top. We have different AB-CD targets - XOP and OP but both stand in the same 1368 area. Tactically, this is just a question from which point gold will start upside action - either it already has started or a bit lower action will happen first.
Harmonically it looks more correct to drop slightly lower and this is really could happen by picture on 1H chart. This will not change overall picture and mostly a tactical question.
This reason on 1H stands due possible "222" Buy pattern and inner AB=CD, which suggests action to 1313. In fact, we already have talked about it earlier and it i better corresponds to idea of 4H pattern.
At the same time theoretically "222" Buy already has been formed, at least by its shape. As you can see price is forming megaphone (widening triangle) pattern. Keep an eye on it. Upside breakout could mean that upward action has started while downside breakout will make us focus on 1312-1313 AB=CD target as megaphone could become a part of butterfly, H&S or some other pattern.
Conclusion
Gold market right now is driven by external political factors. Information that is available right now suggests that this should be medium-term lasting action, especially this relates to tariffs turmoil. This fact let's us think that gold will be supported within few weeks and could reach higher targets, at least nearest ones around 1370-1385.
Meantime, domination of fundamental factors could lead to fading or ignoring normal market mechanics. Now arguably we would say that it's not the time to take long position yet, but at the same time we have clear patterns to keep an eye on, and that could give clear signal that situation is changing.
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.
