Gold GOLD PRO WEEKLY, July 03 - 07, 2023

Sive Morten

Special Consultant to the FPA
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Fundamentals

Last week was relatively quiet, and has given us just some statistics numbers, without surprising speeches or political events. Yesterday we've made in depth analysis of situation in the US, including liquidity level in the banking system and now it seems that it remains balanced. Households have not spent all savings by far, while US Ministry of Finance has ability to redistribute liquidity out from Fed's repo and banking reserves into the system, refilling also its own reserves on the Fed's account.

At the same time, we suspect that something big is preparing, because US Treasury has not started yet its major borrowings, requirement to banking capital supposedly should become tighter and J. Yellen already briefly hinted that it gonna be some problems in banking sector. Number of bankruptcies in corporate sector is rising and coming to the levels fo 2008. S&P agency forecasts its increasing further.

Fed officials start making curious statements that not all US Treasury Bonds are truly safe. With high interest rates Fed's emergency liquidity measures, meet stable demand and now it becomes obvious that banks hardly could return this money back at the current level of interest rates. Despite that we've got a lot of positive US data and now market consensus suggests that Fed is just with two more rate hikes near the pivot, the US yields are keep rising, although it should be the opposite.

Besides, Wall Street whales all together fill the offers for ETF's to SEC. What they intend to do on the market with total capitalization just around $1 Trln, if their total AUM are around 27 Trln? It will be really tight on this market if all of them will get ETF licenses from the SEC. Finally unrest in France and confrontation with China makes picture really interesting. Currently it is not quite clear what they are thinking about, but very interesting. And definitely something is coming, but in more extended perspective, not earlier than in the beginning of 2024 we suppose. Still, recent Gold market performance clearly shows that liquidity slowly but is still draining out.

Finally all central banks start hurry up with CBDC introduction. "Fed Now" is going to be started this month. While EU countries accelerating pilot projects of CBDC. Hardly this happens occasionally and right after BlackRock&Co ETF's files have been sent to SEC. SEC has 240 days to consider these files. Thus, something is going to happen with this term, or even earlier.

Market overview

Gold edged higher as investors assessed increasing geopolitical uncertainty and recessionary signals. Bullion rose as much as 0.6% on Monday after Russian mercenary leader Yevgeny Prigozhin’s extraordinary mutiny. Still, the upside for the haven was limited after Prigozhin suddenly halted his dramatic advance toward Moscow over the weekend.

Bullion is more likely to be influenced by real rates and the dollar, and history suggests that rallies fueled by geopolitical risks tend to be short-lived.

“Gold seems to be trying to price a wide range of possible outcomes all at once, with downside from higher rates and upside from inflation/growth risks,” Morgan Stanley analysts led by Amy Sergeant said in an emailed note. “Although gold has been coming off from the highs, it still looks very strong relative to where yields are.”
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Gold reversed course to slip on Tuesday after strong U.S. economic readings, while traders positioned for Federal Reserve Chair Jerome Powell's speech and more data that could offer clues on future interest rate hikes. U.S. consumer confidence increased in June to the highest level in nearly 1-1/2 years, while new single-family home sales rose by a more-than-expected 12.2% in May.

"Gold did not like the news," said Edward Moya, senior market analyst at OANDA, as "that better economic data is going to drive those Fed tightening expectations and that should push up yields as well".

But for gold, "the key question is the extent to which the internal tensions within Russia or any potential toppling of the government might affect global monetary policy," Commerzbank analysts wrote in a note.

Gold has shed about 2.6% this month — set for a second consecutive monthly fall if losses hold — as bets for higher-for-longer U.S. interest rates dented the zero-yielding asset's appeal and overshadowed its traditional safe-haven role to some extent.

"Between now and Thursday, you're going to see a drifting, no-man's-land trading, sideways market here in gold, unless something else was to break," said Bob Haberkorn, senior market strategist at RJO Futures.

It is interesting guys, but this "unless something else was to break" sounds from many sources...

A surprise drop in initial jobless claims and a sharp upward revision in first-quarter GDP underscored U.S. economic resilience and further cemented the likelihood that the Fed will raise interest rates at least once, and maybe twice more, this year.

"The continued strength in the economy has given the Fed a free hand to keep increasing interest rates without causing a recession," said Joseph Sroka, chief investment officer at NovaPoint in Atlanta. "Economic growth has been good and there's optimism that if the economy were to stumble, the Fed now has the ammunition to respond."

Financial markets have priced in an 87% probability that the central bank will implement another 25 basis point hike to the Fed funds target rate at the conclusion of its upcoming July policy meeting, according to CME's FedWatch tool.

Treasury yields rose, with 10-year yields touching their highest level since early March after economic reports painted a picture of a solid U.S. economy, promoting the "higher for longer" scenario with respect to restrictive monetary policy. The dollar touched a two-week high against a basket of world currencies as upbeat economic data provided cushion to the Fed to continue raising rates.

Gold prices are still trading under the 100-day moving average, a key support level breached earlier this month as prospects for further monetary tightening by US and European central banks remained at the fore. The “sluggish technicals” could see bullion sink to anywhere between $1,875 and $1,880, Citigroup Inc. strategists led by Aakash Doshi said in a note, adding that losses are unlikely to push gold below $1,800.

Money managers have been turning positive on gold again, increasing net-long positions by 1.4% in the week ending June 20 after bullish bets plunged nearly 20% in the previous session.

The jitters affecting the world’s second-biggest economy are starting to feed through into China’s gold market.A surge in purchases by Chinese residents, driven by pent-up demand after three years of pandemic restrictions and optimism that the economy would quickly rebound, is starting to slow — yet another sign that the recovery is losing momentum.

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The rapid expansion in retail sales of gold and silver jewelry looks to have topped out, rising 24% year-on-year in May to 26.6 billion yuan ($3.7 billion). That’s slower than the 44% and 37% growth recorded in the previous two months. The same period last year included the extended lockdown of Shanghai, when demand for goods and services cratered across the economy.

A key demand indicator for the precious metal suggests a further weakening in June. From a premium of $44.20 an ounce in March, the Shanghai gold price is now trading at a discount to the international market, according to the World Gold Council.

“Residents are pretty cautious in spending cash right now amid various uncertainties,” said Jiang Shu, general manager of the precious metals department at Shanghai Shandong Gold Industrial Development Co. “We may not see a rapid surge in purchases again without a slump in gold prices.”

Although China’s buying spree has slowed, retail sales should stay elevated in the near term as gold remains a sound investment while inflation concerns persist, particularly in the US, said Zhang Ting, an analyst with Sichuan Tianfu Bank Co. Further purchases from the People’s Bank of China could also offset declines in retail sales, said Shanghai Shandong’s Jiang.

Tyler Cowen says the precious metal has been considered “a harbinger of disaster for both fiat currency and Western civilization.” But not anymore, Tyler argues: “Gold is no longer a good hedge against bad times (???), as it correlates with both low interest rates and global economic growth.” Instead, he assures readers, having high gold prices is perfectly fine because gold is now just like any other cyclical economic asset. But if gold can’t ring the economic alarm bells anymore, then how the heck are we supposed to tell if we’re about to have a “richcession”? Or a “rolling recession”? Or no recession at all?

“Waiting for this recession feels ever more like Waiting for Godot. When is it coming? Could it even ... be time to say openly that it’s been canceled?” Isabelle Lee asks. Jonathan Levin is of the belief that yes, we should just stop with this “economic downturn” nonsense: “These just aren’t the sorts of numbers you see in an economy careering toward a recession,” he writes. In other words, its not the economy that’s dying, it’s the prospect of a recession itself.

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Some economists even tell that Gold is no more the safe haven in bad times. Even if it’s trading around a record high of $2,000 these days, gold is a little boring and likely to remain so for the foreseeable future. According to a new study from the National Bureau of Economic Research, gold prices have followed some fairly standard principles since at least 1990. To put it simply, gold prices decline when real interest rates rise. That is because gold itself has zero direct yield, so at higher interest rates the opportunity cost of holding gold goes up. 1 In this regard, gold is like many other assets, including crypto, tech companies, and real estate.

The price of gold also goes up (down) when demand for it as a commodity goes up (down). So, if say China becomes a major global economic power, the Chinese economy will need more gold, if only for its commodity uses, and that in turn will boost gold prices, as it did starting in 2002. There is also sizeable gold jewelry demand from India, so as that country becomes wealthier that too will boost the demand for gold and thus its price.

Under both mechanisms, gold is no longer a good hedge against bad times, as it correlates with both low interest rates and global economic growth. Gold becomes another cyclical economic asset, and that is a big part of the reason why gold prices are no longer followed so closely or seen as useful harbingers of social and economic collapse. Instead, it is perfectly fine to have a high or rising price of gold.

We have absolutely different view and to response on this article I would ask - what really "bad times" have happened in last 30 years, since 1990's? Last time, the changes of the same scale was only after WWII and maybe in late 50's. Now we're coming to epic times, and when thunder really strikes, nobody will be thinking about this theory and what the level of real interest rates and what rates will be "real" at those moment. Everybody will think only about to safe the assets but not to get return on them. This is the big difference.

Few months ago we've considered Z. Pozsar's "Bretton Woods III" theory when he spoke on new global financial order. One other newly formed opinion that will shape Pozsar’s research: The support mechanisms that the Fed dialed up for banks during the mini-financial crisis earlier this year are here to stay. They included programs such as the Bank Term Funding Program (BTFP), which offers cash to banks in exchange for US Treasuries and agency-backed mortgage bonds.

“It’s a part of the system now. I think the BTFP is going to be there as a standard feature of the system, much like the standing repo facility and swap lines are there,” he says. “Imagine the Treasury market coming under strain because some of these banks have to meet, you know, liquidity shortfalls and then instead of pledging to the Fed off-market to get liquidity, you basically have to dump it on dealers and imagine what that would’ve done to the Treasury market? Nothing good. So we just basically kept these Treasuries off the grid, so to speak.”

“Credit has yet to have its reckoning and commercial real estate has yet to have its reckoning. But again, it’s better to suffer those losses in non-banks than banks because banking crises are very nasty things,” he says. “But if these losses get booked and absorbed in balance sheets that are — I don’t want to say not levered because they are — but that leverage doesn't really have much to do with money markets, that's orders of magnitude better to deal with than dealing with a lot of these concentrated exporters in the banking system.”

And here is another great answer to gold skeptics. The North Carolina House of Representatives has approved a bill allowing the State Treasury to invest in gold and bitcoin. After approval by the House of Representatives, the bill will be considered by the Senate and, if the outcome is positive, by the Governor of North Carolina.

The initiative aims to "protect the state's assets. Many people in the world of cryptocurrencies, as well as in the world of precious metals, know […] that the US government is consistently and knowingly devaluing its currency,” Congressman Mark Brody said.

China economy boom is cracking

Right after the taking off all CV19 limitations, everybody were expecting that financial crisis should start moving to an end. Now China triggers consumption and we're at the edge of new economy boom, they spoke. But, everything goes in different direction. China in recent time sends worrying signs. Economy is slowing, domestic consumption fizzles, national currency is dropping despite strong support measures from PBoC. Started economy confrontation with the west also doesn't make situation better. Those who said that yuan soon should replace dollar now keep silence. But it is not all bad news for China.

As you know, our major theory, concerning global order is based on the struggle between AUKUS and China. West has to isolate China from global markets building the "controlling defence belt" in China Sea, relying on allies in Japan, Australia, Philippines, S. Korea, if necessary and controlling trading way by land to Indian ocean.
If AUKUS will not succeed in this startup - they will loose global competition. Recent trading piking, started with semiconductor goods bans and other stuff, now is continued by investments outflow.

Financial fragmentation among the world's major economies is on the rise. Gross cross-border investment flows are declining in major economies. In 2021, the gross value of cross-border financial transactions involving the US, China and the euro area was $7.9 trillion. In 2022, that figure was only $2.8 trillion. China is the hardest hit by financial fragmentation.

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Thus, investment flows in China are turning : there is a net outflow of capital. By the way, this may be a marker of an imminent aggravation of the political situation: everyone who needs to be warned and the result is obvious. Soon it's a quarter or two. Hardly the United States will have a war with China until the year end. We must prepare to create reserves - that is, commodity markets should have to rise some time before the escalation. And then grow again when it all starts....

Wall Street bank JPMorgan said on Tuesday it was staying "bearish" on China's yuan despite its recent slide and that the country's central bank could look to step in to prevent the move accelerating.

"As spot currency weakness and depreciation expectations tend to be self-reinforcing, the People's Bank of China might find it necessary to introduce some circuit breaker, with stronger fixings (the central bank's official daily FX rate) a preemptive move to prevent currency weakness going non-linear," JPMorgan's analysts said in a research note.

Second is, this is not only in China. Since the beginning of 2023, investors have withdrawn $27 billion from European funds. This was reported by Bloomberg, citing data from Bank of America. Over the past seven days, $4.6 billion has been withdrawn from European funds. An outflow of investments has been observed in Europe for the 16th week in a row, writes Bloomberg. Europe was also the only major region to experience an outflow of investment in June. Investors have turned to US funds as the US economy appears to be more resilient amid fears of a slowdown in global economic growth.

Thus, it seems American shares are not going to fall yet, as new financial source has appeared. So it is unlikely that the US will collapse strongly in the coming months. Probably smooth sales will start closer to 2024.

So, here is how "most reliable" alternative to US Dollar looks like:
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To be continued...
 
The Bank of China and other regulators in the country have asked exporters, importers and banks to share information on cash flows and demand for currency hedging operations, Bloomberg writes, citing people familiar with the matter. The Chinese authorities are concerned about the depreciation of the yuan. Against this background, they are paying more and more attention to the practice of foreign exchange trading and cross-border movement of capital, writes Bloomberg, citing informed sources.

The Bank of China and other regulators in the country asked exporters, importers and banks to share information on cash flows and demand for currency hedging operations. In addition, they asked the opinion of representatives of these organizations about the prospects for the yuan and the mood in the foreign exchange market.

The State Monetary Administration of the People's Republic of China also asked these organizations to submit proposals on measures to stabilize the yuan in the coming days. Devaluation quickly began to accelerate for everyone... Would somebody to ride out the global problems in a "new reserve" currency?

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Is the Fed Watching China? Yep.
DC, of course, may not admit to the rise of China (growth and trade) and the slow decline of USD hegemony, but the facts and trends I’ve recently described are not escaping them. So how will the USA fight its financial war with Beijing? If history and math are any guides, much will hinge upon the USD, which means we can expect it to get weaker over time, despite inevitable peaks along the way.

Japan made its slow and steady rise into the 1980’s. Its "rising sun" seemed to have no end as Tokyo-based financiers were buying up everything from California real estate to the Rockefeller Center in NYC. But fast-forward to 1989 and the Nikkei implosion, and that same Japanese sun was beginning to set. During the 90’s, the US was deliberately weakening the USD to reduce the warp speed of Japanese trade and economic growth. At the acme of this hidden financial war, the yen had appreciated 46% against an intentionally devalued Greenback. Uncle Sam squeezed Japan.

China is clearly the next target (or “Japan”) for US financial war-gamers. And it’s my strong opinion that among the many advantages and realities of a falling USD ahead, the hidden planners in DC are adding the desire to cripple Chinese growth as yet another reason (besides inflating away debt or combatting a denied recession) to weaken the USD.

A similar pattern emerging between the US and China. Although the Fed has yet to officially abandon its “war” on an inflation disaster which they had previously (i.e., wrongly/dishonestly) described as transitory,” they know the USD is and was too strong for its own good, and they also know that China and Russia are making deals which threaten US trade and settlement superiority. The US needs to fight ugly again, and to do, they need an uglier/weaker dollar.

Thus, in the coming months, quarters and years, when the rate hikes of late (paused for now, but promised for later?) keep on breaking things (see below), the inevitable pretext for an otherwise bad habit of debasing, printing and weakening the USD will become too tempting for the mouse-click-money-addicted central planners in Washington to ignore. Stated even more simply: The pivot to easy money is only a matter of time, for in addition to needing an inflationary money-printer to stay alive (and print-away debt), DC also needs a weaker USD to beat a rising East.

Of course, there is also the omni-present risk of a financial war turning into a hot war with China. Though unthinkable in a nuclear era, such risks change the entire argument, and at such points, financial forecasting and planning (or reports like this) will be less of a priority than simply finding drinkable water. Perhaps such worst-case scenarios are too insane and stupid even for the policy makers and neocons in DC.

Besides, and as Michael Mullen said over a decade ago from the Joint Chiefs of Staff: How could America, who borrows money from China, which it then uses to build weapons to potentially fight China, actually go to war with China, where the vast majority of the components necessary for those very same weapons are made?

So, military measures might be applied, but mostly as holding factor, or as a local conflicts on 3rd side territory, such as Taiwan (in a same way as NATO war with Russia stands on territory of Ukraine), but hardly it will be full clash with China.

For now we can only sit back and wait as a totally fork-tongued and cornered Powell plays with markets, currencies and interest rates like a child playing with matches.

FEW OTHER THINGS ON US LIQUIDITY

Looking at the Treasury sale on June 26 reveals the extent of the problem. The Treasury sold $162 billion in securities, with $120 billion in short-term Treasury bills with high yields.
  • $58 billion in six-month bills at an investment yield of 5.45%
  • $62 billion in three-month bills at an investment yield of 5.34%.
  • $42 billion in two-year notes at a high yield of 4.67%, amid very strong demand. Longer-term yields are still far below short-term yields.
With this flood of Treasury bills, the share of short-term paper underpinning the debt is approaching 20%. That’s considered the upper limit, meaning the Treasury will soon have to turn to issuing longer-term notes and bonds. That means the Treasury will be locking in higher interest rates for the long term.

An analyst cited by Bloomberg projects a $600 billion rise in notes and bonds beginning in August through the end of the year. Issuance will likely ramp up further in 2024 with a projected additional $1.7 trillion in notes and bonds. This raises another important question: who is going to buy all of these notes and bonds?

Some of the biggest buyers are in the process of reducing their holdings.
  • According to the Treasury Department’s TIC data, foreign buyers shed $140 billion in holdings in April compared to 2022.
  • US banks shed $210 billion in Treasury securities and $332 billion in mortgage-backed securities in May compared to a year ago, according to Federal Reserve data. This is continuing fallout from the financial crisis as banks struggle with unrealized losses from holdings they bought when yields were artificially low.
  • As it tightens monetary policy to fight inflation, the Fed has been unloading Treasury securities at a rate of around $60 billion a month to shrink its balance sheet.
In effect, the US Treasury is increasing the supply of Treasury securities even as demand is falling.

As WolfStreet summed up:

It could result in a ‘demand vacuum’ that would be resolved by higher yields for longer maturity securities, according to Bank of America, cited by Bloomberg. Yield solves all demand problems, and long-term yields have been much lower than shorter-term yields, with the 10-year Treasury currently at 3.71%.

The only way demand will rise to absorb this supply is if yields on the upper end of the curve rise. And that means additional interest expenses for the federal government locked in over many years. If interest rates continue to rise and remain elevated for an extended amount of time, interest expenses could climb rapidly into the top three federal expenses. This calls into question the Fed’s ability to stay in the inflation fight. Eventually, it could be forced to cut rates in order to keep the US government solvent. And it also may need to go back to quantitative easing in order to artificially boost demand for Treasury securities. Which is actually agrees with strategy to fight China, right?

Conclusion:

Recent data that we have, as political as economical, statistics tell that US government follows to different strategy. It seems that they intend to decide questions not slowly and from one episode to another, but fast and sharp. Because if it would go "slowly" we should see gradual drop in liquidity week by week, rising US Treasury borrowings and decreasing reserves and Repo balances, together with rising of Fed BTFP programme. That could happen if Fed and Treasury would focus on domestic problems mostly. But now we see absolutely different picture. Domestic liquidity system is kept in balanced mode, no big shifts, while we see active preparation for confrontation on foreign arena. This is the strategy of big scale and they need time for preparation. Based on recent events, such as US banking crisis, coming higher capital requirements, massive involving of Wall Street into crypto market, acceleration of CBDC launch - all these stuff makes me think that this is a course of concentration of finance, make them as tight as possible and control everything bia number of big transnational banks, such as JP Morgan, Fidelity, Black Rock etc. Make a kind of financial fist of commercial banks, headed by the Fed and Ministry of Finance and take fast and sharp decisions. It seems we should get 6-8 months until preparation will be over. And then the time of vital decisions should come. Until this moment gold probably remains in current conditions - not quite popular among investors, standing in sideways or slow downside action. But we suggest that this is temporary and brings good chance for accumulation of physical metal in a way of coins and ballots for long term investments. In short-term trading we intend to follow setup that will be formed on short-term charts.

Technicals
Monthly

So, demand for the gold exists, although even gold feels drain of liquidity. Despite the resistance, it is still moving lower. Although we have to acknowledge, that it shows outstanding persistence - with the rate above 5%, it has dropped just a little bit, out of the top to 1900$ area. MACD trend remains bullish, while price still stands inside the "bullish sentiment area" between YPP and YPR1. Indirectly we could suggest that despite all talks concerning "strong economy", "inflation defeat" and Fed's pivot - investors keep caution and rely on gold.
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Weekly

Here is, no doubts, most important chart for us, that puts the background for our trading scenarios on coming week, or maybe for few weeks. This is strong K-support area. And we already see reaction after its first test. So, once again, gold looks predictable enough and our Friday's trading plan is working.

Although we can't consider it as reversal by far with trend remains bearish, even 3/8 pullback on weekly chart will look significant on daily/intraday basis.

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Daily

So, here is the sequence of targets that we have for now. First one is 1927 - 3/8 pullback of a butterfly, and it is almost completed already. Next one is our major target that we've discussed already - 1948-1952 K-resistance. That's for nearest week. If some background will change, it will be possible to consider stronger action to 1985 resistance area, which potentially could lead to appearing of reverse H&S, based on existed butterfly pattern. But now it is too early to speak about it (although divergence here points on the same).
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Intraday

So, our Friday's minor H&S has worked perfect. If we're correct with our view, then bullish patterns should start appearing as a nested doll - from smaller to larger ones. Here is the "perfect" bullish picture, as it should be if everything goes with the plan. Nearest daily resistance is 1927.50 which is very close to XOP target of 1932. Which, in turn, agrees with potential neckline of larger H&S pattern. If it will be formed, we should get another chance for long entry around 1910-1915$ area.

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Despite how fascinating this chart looks like - keep an eye on possible irrational action, that could point on bullish failure. For instance, inability to proceed to XOP, or drop back below the neckline of small H&S pattern, etc...
 
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Greetings everybody,

It seems COMEX market is closed today, but my FX Choice is moving ;). Everything goes with our plan. Yes, upside bounce is slow, but, still it has started from predefined level. First 1927 target is completed, divergence is confirmed here:
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As market is coming to the neckline of our next, larger intraday H&S we're watching for market response. Scalp bears could start watching for bearish patterns around it. For example...
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On 1H chart, once XOP will be completed, we expect forming of the right arm. It seems that XOP might be finalized by minor upside butterfly here, which in fact is a reversal pattern that also might be used for scalp trading setup here. But our major target is a right arm's bottom, for position taking with larger H&S pattern here and moving to ~1950 target.
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Greetings everybody,

Gold shows perfect behavior, and makes us happy at least in recent few weeks. Daily picture has not changed too much, as price still stands around 1927 resistance:

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On 4H chart we've got small bullish grabber, but could get another one, if 4H candle will close above MACDP. Also it is a reversal-kind action, which is a good for bullish context:
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Finally, the butterfly that we have just suggested yesterday - now is taking shape. Supposedly it should finalize the XOP target and reaching of the neckline of larger H&S. As we've said - scalp bears could watch for reaction, as market could start forming the right arm, especially if Fed's minutes today will be hawkish:

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Greetings everybody,

So, upside intraday XOP @1932 is done, and downside reversal starts as planned. As a result, we've got bearish reversal session on daily chart. It is not good sign for our long-term plan, but let's see. NFP could change everything and put it in right direction if numbers will be weak:
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Meantime we keep working with the next, larger reverse H&S pattern. Neckline is touched, and we're coming to culmination - reversal around right arm's bottom (supposedly), that should appear near 1910 area, based on harmony to left arm:
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On 1H chart we do not have any downside AB-CD's, so we use different approach - ultimate butterfly targets. They are the same 1.27 and 1.618 but of the whole butterfly shape. Now 1.27 is touched already, market shows minor bounce, forming puny "222" Sell here. 1.618 accurately matches to the same 1.0910 area.
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Thus, those who hold shorts should start thinking about booking, somewhere in the range between 1.27 and 1.618 downside extensions, or use some other measures to protect the result. While bulls need to keep an eye on market performance around 1910, whether any bullish patterns will be formed to not miss the chance to step in.
 
Greetings,

Although gold has completed our short-term scenario, the longer term one now is under hazard of erasing, as downside ADP action looks too strong. On daily chart we do not see it yet:
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But on 4H chart, downside action looks too strong for bullish reversal pattern. This is not good sign for the bulls:
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On 1H chart, picture also looks bearish. Although the H&S shape is not broken, the upside reaction on 5/8 support looks too weak, in a way of some "222" pattern that we have discussed yesterday as well (slightly above on the chart).
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If we wouldn't have NFP today, I would say that it is possible to look for short entry. Actually we could, but if you ready to take NFP risk. In fact NFP puts bulls and bears in equal conditions. Yes, technical picture and ADP are on the bears' side. But weak NFP could turn everything from top to bottom. That's why, the conservative approach is to wait until payrolls. But if you're ready to take risk - both positions are valid by far. But result, as you understand mostly depends on NFP, so some component of gambling exists here as well.
 
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