Sive Morten
Special Consultant to the FPA
- Messages
- 18,676
Fundamentals
(Reuters) - Gold steadied on Friday, heading for its biggest weekly rise since mid-September as jitters over next week's U.S. election offset a solid payrolls report that shored up expectations for a U.S. interest rate hike
next month. Global equity markets slipped amid investor concerns about the outcome of Tuesday's U.S. presidential election, while the dollar eased, despite a solid U.S. jobs report that supported expectations for a Federal Reserve rate hike next month.
Spot gold was down 0.08 percent at $1,302.22 an ounce by 3:01 p.m. EDT (1901 GMT), off a low of $1,294.15 in the immediate wake of the payrolls data. U.S. gold futures for December delivery settled up 0.1 percent at $1,304.50.
"If (Republican Donald) Trump wins, and he could win, I don't think it's going to be the shock that some people are making it out that it could be," said Bob Haberkorn, senior market strategist for RJO Futures in Chicago. "If he does win, initial reaction will be gold will pop. I don't think it will be like Brexit." An initial dip in gold was quickly bought into as investors remained on edge ahead of Tuesday's vote.
"A Trump win would signal a positive direction for gold, so that's the bigger thing to watch," ING's head of commodity strategy Hamza Khan said. The dollar index was on track for its biggest weekly drop since July after the Federal Bureau of Investigation said last week it was reopening a probe of Democrat presidential
candidate Hillary Clinton's use of a private email server while she served as secretary of State.
"Gold implied volatility rallied sharply across the curve over the past week, as investors rotated to safe-haven assets after polls tightened," Citi said in a note. "As the election keeps driving gold prices in the short-term, we expect gold vol to remain elevated into Election Day."
Gold prices in India swung to a discount this week as a rally in prices dampened retail demand, while buying in leading consumer China rose due to safe-haven buying. Investor appetite looked firm, with the world's largest gold exchange-traded fund announcing a 4.4-tonne rise in its holdings on Thursday.
Today, guys, we will take a look at AUD. Yesterday in weekly research on EUR, we've talked a lot about elections importancy and how it makes impact on financial markets across the board. That's why, to combine gold view and "other markets" we've chosen AUD, as it stands in tight relation with gold.
COT Report
CFTC data on AUD shows net bullish speculative position that was increasing in recent 3-4 weeks. Open interest has increased as well. So, this is moderately bullish sentiment. Still, total position stands far from highs of 2013 and still has room to grow further.
On gold market we have also positive tendency in speculative net long position and open interest in last 3 weeks. But, total position stands almost fully loaded. On average it stands arond 200K contracts. Last just to 300K contracts was a bit exceptional issue, since it has established new high of speculative net long position, as well as new top in open interest.
It is interesting that SPDR storages shows very stable levels, even during last drop on gold market. Storages even have increased slightly on recent drop. It means that mostly it was technical short-term speculative tricks. At the same time it tells that overall gold positions are highly loaded and upside potential is limited.
That's why if even we will get rally on gold market, hardly it will exceed recent tops around 1360-1380 area. Situation could change only if overall market structure will be transformed and new big inflow will happen that will rise the limits to new levels. That could happen only big shifts in global economy.
Technicals
Monthly
Last time we've talked on AUD rather long time ago, in May. But now we see that our analysis was mostly correct. Just to remind you - our major idea stands around all time 5/8 Fib support and appearing of DRPO "Buy" pattern there. Pattern is still valid and price gradually moves to the target.
Speaking on very long-term perspectives, 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 in long-term perspective. As AUD will follow gold, 1.10-1.16 doesn't seem as impossible. CD leg of our huge AB=CD pattern was much faster than AB. As a rule this leads to more extended targets - 1.27 or even 1.618.
But some closer targets are more interesting for us now. As you can see AUD stands above Yearly Pivot. Next logical long-term destination is YPR1 around 0.81. DRPO "Buy" pattern also has the same destination point which is 50% Fib level that coincides with YPR1.
Trend is also bullish on monthly AUD, market is not at overbought.
Weekly
This time frame shows everything that we would like to know about AUD. Here we see clear bullish reversal pattern - reversed H&S that is mostly completed. It's minimum target, as AB=CD based on head and right shoulder points on the same 0.81 area as monthly DRPO and YPR1.
Most interesting thing here is tight consolidation just under neckline. We think that this is bullish issue by 2 reasons. First - AUD has formed multiple bearish grabbers here but none of them was triggered and riched target. If you remember, once we have similar situtiation on EUR daily chart - many grabber were formed but no one has been completed:
Second - consolidation below important level is classical bullish sign. This is some kind of energy building for breakout. Consequently we could make an assumption that gold market also should challenge of 1305 resistance:
Daily
On daily chart we also have large pattern with targets around 0.80 and 0.82 - this is butterfly "sell". Recent action on AUD, although it was rather choppy, still tells on growing bullish power. AUD struggles 0.78 area, but every pullback becomes smaller than previous one. It means that bears gradually loose energy to push market out from 0.78 and their power just churning around 0.78. Pullbacks of last 2 weeks are quite small and it seems that election week will become a culmination of upside breakout here.
In general, action inside red triangle is a bullish dynamic pressure, although we do not see corresponding picture from MACD Predictor indicator. Market also stands above MPP. Upward action probably will not be very simple, as we have resistance of MPR1 and overbought but, currently AUD looks very attractive.
Another reason, why AUD could get huge advantage of Trump victory is specific of Australian economy. Healthy interesting rates, attractive currency, AAA credit rating, low debt - all these moments make AUD very attractive as alternative currency to USD in a case of Trump victory. That's why we think that AUD could get stronger inflow and upside impulse compares to all other currencies against USD.
4-hour
Here we have multiple patterns, we will talk on "222" Buy pattern, but you also could recognize Butterflies here...
Based on "222" - AUD has reached minor 0.618 extension target. If AUD is really bullish market it should not break down 0.76 area - 5/8 Fib support, MPP and WPS1, but it would be much better if price will able to hold above K-support area and WPP.
Bullish setup will be destroyed if AUD will break daily upside tendency and drop below 0.7450 lows. But even drop below 0.76 will be warning sign. So, if price will fail to hold above it, better to not take longs for some time...
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, self-sufficient economy and one of financial centers of Asia region with English-speaking population. Thus currently we have a positive view on AUD.
On long-term charts market could form really thrilling setup that could push AUD for 10 points higher to 0.81 area first. Most positive scenario for AUD in 1-2 year perspective is 1.16 area, if gold indeed will start long-term bullish trend with 2200-2500 upside potential.
In short-term charts we will monitor process of creation of reverse H&S pattern and upside breakout of neckline. We treat election day as driving factor for that. Since we expect Trump's victory, AUD will get greater advantage compares to other currencies due advantages that we've pointed above.
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.
(Reuters) - Gold steadied on Friday, heading for its biggest weekly rise since mid-September as jitters over next week's U.S. election offset a solid payrolls report that shored up expectations for a U.S. interest rate hike
next month. Global equity markets slipped amid investor concerns about the outcome of Tuesday's U.S. presidential election, while the dollar eased, despite a solid U.S. jobs report that supported expectations for a Federal Reserve rate hike next month.
Spot gold was down 0.08 percent at $1,302.22 an ounce by 3:01 p.m. EDT (1901 GMT), off a low of $1,294.15 in the immediate wake of the payrolls data. U.S. gold futures for December delivery settled up 0.1 percent at $1,304.50.
"If (Republican Donald) Trump wins, and he could win, I don't think it's going to be the shock that some people are making it out that it could be," said Bob Haberkorn, senior market strategist for RJO Futures in Chicago. "If he does win, initial reaction will be gold will pop. I don't think it will be like Brexit." An initial dip in gold was quickly bought into as investors remained on edge ahead of Tuesday's vote.
"A Trump win would signal a positive direction for gold, so that's the bigger thing to watch," ING's head of commodity strategy Hamza Khan said. The dollar index was on track for its biggest weekly drop since July after the Federal Bureau of Investigation said last week it was reopening a probe of Democrat presidential
candidate Hillary Clinton's use of a private email server while she served as secretary of State.
"Gold implied volatility rallied sharply across the curve over the past week, as investors rotated to safe-haven assets after polls tightened," Citi said in a note. "As the election keeps driving gold prices in the short-term, we expect gold vol to remain elevated into Election Day."
Gold prices in India swung to a discount this week as a rally in prices dampened retail demand, while buying in leading consumer China rose due to safe-haven buying. Investor appetite looked firm, with the world's largest gold exchange-traded fund announcing a 4.4-tonne rise in its holdings on Thursday.
Today, guys, we will take a look at AUD. Yesterday in weekly research on EUR, we've talked a lot about elections importancy and how it makes impact on financial markets across the board. That's why, to combine gold view and "other markets" we've chosen AUD, as it stands in tight relation with gold.
COT Report
CFTC data on AUD shows net bullish speculative position that was increasing in recent 3-4 weeks. Open interest has increased as well. So, this is moderately bullish sentiment. Still, total position stands far from highs of 2013 and still has room to grow further.
On gold market we have also positive tendency in speculative net long position and open interest in last 3 weeks. But, total position stands almost fully loaded. On average it stands arond 200K contracts. Last just to 300K contracts was a bit exceptional issue, since it has established new high of speculative net long position, as well as new top in open interest.
It is interesting that SPDR storages shows very stable levels, even during last drop on gold market. Storages even have increased slightly on recent drop. It means that mostly it was technical short-term speculative tricks. At the same time it tells that overall gold positions are highly loaded and upside potential is limited.
That's why if even we will get rally on gold market, hardly it will exceed recent tops around 1360-1380 area. Situation could change only if overall market structure will be transformed and new big inflow will happen that will rise the limits to new levels. That could happen only big shifts in global economy.
Technicals
Monthly
Last time we've talked on AUD rather long time ago, in May. But now we see that our analysis was mostly correct. Just to remind you - our major idea stands around all time 5/8 Fib support and appearing of DRPO "Buy" pattern there. Pattern is still valid and price gradually moves to the target.
Speaking on very long-term perspectives, 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 in long-term perspective. As AUD will follow gold, 1.10-1.16 doesn't seem as impossible. CD leg of our huge AB=CD pattern was much faster than AB. As a rule this leads to more extended targets - 1.27 or even 1.618.
But some closer targets are more interesting for us now. As you can see AUD stands above Yearly Pivot. Next logical long-term destination is YPR1 around 0.81. DRPO "Buy" pattern also has the same destination point which is 50% Fib level that coincides with YPR1.
Trend is also bullish on monthly AUD, market is not at overbought.
Weekly
This time frame shows everything that we would like to know about AUD. Here we see clear bullish reversal pattern - reversed H&S that is mostly completed. It's minimum target, as AB=CD based on head and right shoulder points on the same 0.81 area as monthly DRPO and YPR1.
Most interesting thing here is tight consolidation just under neckline. We think that this is bullish issue by 2 reasons. First - AUD has formed multiple bearish grabbers here but none of them was triggered and riched target. If you remember, once we have similar situtiation on EUR daily chart - many grabber were formed but no one has been completed:
Second - consolidation below important level is classical bullish sign. This is some kind of energy building for breakout. Consequently we could make an assumption that gold market also should challenge of 1305 resistance:
Daily
On daily chart we also have large pattern with targets around 0.80 and 0.82 - this is butterfly "sell". Recent action on AUD, although it was rather choppy, still tells on growing bullish power. AUD struggles 0.78 area, but every pullback becomes smaller than previous one. It means that bears gradually loose energy to push market out from 0.78 and their power just churning around 0.78. Pullbacks of last 2 weeks are quite small and it seems that election week will become a culmination of upside breakout here.
In general, action inside red triangle is a bullish dynamic pressure, although we do not see corresponding picture from MACD Predictor indicator. Market also stands above MPP. Upward action probably will not be very simple, as we have resistance of MPR1 and overbought but, currently AUD looks very attractive.
Another reason, why AUD could get huge advantage of Trump victory is specific of Australian economy. Healthy interesting rates, attractive currency, AAA credit rating, low debt - all these moments make AUD very attractive as alternative currency to USD in a case of Trump victory. That's why we think that AUD could get stronger inflow and upside impulse compares to all other currencies against USD.
4-hour
Here we have multiple patterns, we will talk on "222" Buy pattern, but you also could recognize Butterflies here...
Based on "222" - AUD has reached minor 0.618 extension target. If AUD is really bullish market it should not break down 0.76 area - 5/8 Fib support, MPP and WPS1, but it would be much better if price will able to hold above K-support area and WPP.
Bullish setup will be destroyed if AUD will break daily upside tendency and drop below 0.7450 lows. But even drop below 0.76 will be warning sign. So, if price will fail to hold above it, better to not take longs for some time...
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, self-sufficient economy and one of financial centers of Asia region with English-speaking population. Thus currently we have a positive view on AUD.
On long-term charts market could form really thrilling setup that could push AUD for 10 points higher to 0.81 area first. Most positive scenario for AUD in 1-2 year perspective is 1.16 area, if gold indeed will start long-term bullish trend with 2200-2500 upside potential.
In short-term charts we will monitor process of creation of reverse H&S pattern and upside breakout of neckline. We treat election day as driving factor for that. Since we expect Trump's victory, AUD will get greater advantage compares to other currencies due advantages that we've pointed above.
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.
