Sample Category Title

The yellow metal is continuing its decline, as the metal traded near the 1,260 mark on Thursday morning. However, there are bad news for the bears, as during the data releases of Wednesday the commodity price managed to surge and reach above the 1,280 mark, which most likely triggered a lot of stop losses. The bullion retreated once more to trade near the 1,260 after the Federal Reserve made their announcements at 18:00 GMT during yesterday’s trading session. It can still be expected that the gold price will decline down to the 1,255.79 mark where the first weekly support was located at on Thursday. The support is also strengthened by the close by located monthly pivot point at the 1,253 mark.

AUD/USD – 0.7597

Recent wave: Wave 5 ended at 1.1081 and major correction has commenced for fall to 0.7000 and then towards 0.6500-10

Trend: Near term down

Original strategy :

Buy at 0.7500, Target: 0.7650, Stop: 0.7440

Position: -
Target:  -
Stop: -

New strategy :

Buy at 0.7525, Target: 0.7670, Stop: 0.7465

Position: -
Target:  -
Stop:-

As the Australian dollar has eased after meeting resistance at 0.7636, suggesting consolidation below this level would be seen and pullback t0 0.7550-60 cannot be ruled out, however, reckon support at 0.7524 would limit downside and bring another rise later, above said resistance at 0.7636 would extend recent upmove from 0.7329 towards resistance at 0.7680 but loss of momentum should limit upside and price should falter below chart point at 0.7750.

In view of this, we are looking to buy aussie on dips as 0.7520-25 should limit downside and bring another rise. Only below support at 0.7457 would abort and suggest top is possibly formed, bring weakness to 0.7415-20 but price should stay well above key support at 0.7372, bring another rebound later.

On the 4-hour chart, the move from 0.8066 is the wave 5 with i: 0.8860, ii: 0.8315, wave iii is an extended move ended at 1.0183, iv: 0.9706 and wave v has ended at 1.1081 (also the top of entire wave 5). The subsequent selloff is the major correction which is unfolding as ABC-X-ABC and 2nd A leg has ended at 0.8848, followed by a-b-c wave B which ended at 0.9758, hence, 2nd C wave is now in progress and indicated downside target at 0.7000 and 0.6950 had been met, so further fall to 0.6710-20 cannot be ruled out.

As was anticipated, the retest of the six-week down-trend caused the Buck to decline against the Yen yesterday, as poor US fundamentals and political ‘issues’ overshadowed the Fed’s hawkish tone. As a result, the key support, namely the monthly S1 at 109.22, was briefly pierced, but the exchange rate quickly recovered back towards 109.50. The USD/JPY pair still has a number of strong resistances in close proximity, which are all likely to contribute to another leg down. Moreover, technical indicators keep suggesting the bearish momentum is to prevail today, bolstering the possibility of the negative outcome. Furthermore, with the breach of the key support, the given pair is now exposed to falling under the 109.00 mark, with the next solid support being only the 108.00 psychological level.

Even though the GBP/USD currency pair experienced some volatility on Wednesday, trade still closed with the Cable remaining relatively unchanged. The pair was also unable to stabilise above the monthly S1, which suggests that more downside movement is possible. However, technical studies are unable to fully confirm this scenario. The 1.2624 level, namely the monthly S2, is still likely to be the bottom floor, where demand is expected to be sufficient to either limit the losses or even trigger a rebound. In case the Sterling manages to outperform the Buck, thus, climb above the monthly S1, a potential resistance area would be just above the 1.28 handle, represented by the 200hour SMA and the upper Bollinger band.

The common European currency remains near previous session opening levels against the US Dollar. However, there is a huge arch observable on the hourly chart. The jump of the currency exchange rate was caused by the US CPI and Retails Sales data set release, which turned out to be a lot less than the average market forecast. That caused the EUR/USD pair to jump and almost reach the 1.13 mark. However, at 18:00 GMT the Federal Reserve made their announcements, which strengthened the US Dollar all across the markets. As a result the pair trades in limbo around the cluster of levels of significance at just above the 1.12 mark. The rate can either retreat to the 38.20% Fibonacci retracement level at the 1.1188 level or begin a surge up to the 200-hour SMA at 1.1231 by the end of the day.

'The wage figures are astonishingly weak.' - Samuel Tombs, Pantheon Macroeconomics

The number of Britons applying for unemployment benefits dropped more than expected, whereas wage growth slowed unexpectedly in the three-month period to April. The Office for National Statistics reported on Wednesday that the unemployment rate came in at 4.6% for the period between February and April, unchanged from the prior month and in line with forecasts. Meanwhile, the number of claimants fell to 7.3K, following the preceding month's upwardly revised figure of 22.0K and surpassing expectations for a decrease to 12.5K. Meanwhile, the number of people in work rose 109K in the three-month period to April. Thus, the employment rate climbed to a record high of 74.8%. Apart from that, average hourly earnings grew just 2.1% between February and April, the weakest since February 2016 and following the March quarter's downwardly revised increase of 2.3%, whereas analysts anticipated a rise of 2.4%. A combination of weak wage growth and strong inflation raised concerns over the ability of consumer spending to contribute to economic growth.

'What I can tell you is that we anticipate reducing reserve balances and our overall balance sheet to levels appreciably below those seen in recent years but larger than before the financial crisis.' - Janet Yellen, Federal Reserve

As markets expected, the Federal Reserve raised its interest rates at the end of its meeting on Wednesday, adding that it would start cutting its Treasury bonds and other securities this year amid solid economic growth and strong employment trends. Despite the release of weak retail sales and inflation figures earlier in the day, policymakers voted to lift its benchmark lending rate to a target range of 1.00-1.25% and predicted one more rate hike this year. The Bank said the economy remained on a steady growth path and continued generating new jobs. Moreover, policymakers noted that the most recent slowdown in inflation was driven by transitory factors. The Fed also said that it would soon start reducing its $4.2T portfolio of Treasury bonds and other securities. The Fed Chair said that the Bank would start cutting its Treasury holdings by $6B per month and increase the size of cuts by $6B every three months until they hit $30B per month. The Bank's mortgage-backed securities would be a subject to a $4B monthly cap that would continue rising by $4B on a three-month basis until it reaches $20B per month.

'The much-stronger-than-anticipated rise in employment in May and the larger-than-expected fall in the unemployment rate will go some way to quashing growing talk of the chance of another interest rate cut by the RBA later this year.' - Paul Dales, Capital Economics

The Australian economy created more than expected jobs last month, while the jobless rate fell unexpectedly. The Australian Bureau of Statistics reported on Thursday that the economy generated 42.0K jobs on a seasonally adjusted basis in May, following the preceding month's upwardly revised gain of 46.1K jobs, whereas analysts expected the economy to create just 9.7K new positions. That marked the eight-straight month of job gains, with 124K full-time positions created since September 2016. However, the participation rate rose just 0.1% to 64.9% during the reported period. Thursday's data also showed that the unemployment rate dropped to 5.5% last month, whereas economists expected the rate to remain unchanged at 5.7%. The strong employment data is expected to please the Reserve Bank of Australia and remove a possible rate hike from the table. Nevertheless, due to weak pay growth, the Bank is set to remain on hold until 2019. After the release, the Australian Dollar hit its multi-week highs against the Euro and the British Pound and hit 0.7636 against its US counterpart.

The New Zealand GDP figures released today showed the country’s economy expanding at a slower pace than projected by analysts during the first quarter of the year. The New Zealand dollar fell relative to its US counterpart as the data hit the markets.

Regarding the actual figures, first quarter GDP grew by 0.5% on a quarterly basis, falling short of expectations for 0.7% growth but slightly above the respective growth rate during the fourth quarter of 2016, which stood at 0.4%. It should be mentioned that growth in the fourth quarter of last year was negatively affected by bad weather conditions. On an annual basis, the economy grew by 2.5%, below expectations and the previous quarter’s 2.7%.

Delving into the details underpinning the numbers, the GDP figures were negatively affected by the decline in activity in the construction sector. Specifically, building activity contracted by 2.1% quarter-on-quarter in the first quarter of the year, marking its first fall since June 2015.

Looking at the reaction in the forex markets, kiwi/dollar fell to as low as 0.7235 within the first few minutes of data release. The pair was trading at 0.7260 previously. It is worthy of mention that kiwi/dollar recorded a four-month high of 0.7319 in yesterday’s trading.

The Reserve Bank of New Zealand decided to keep its key cash rate at the record low of 1.75% in its latest meeting in May. The Bank next convenes to set monetary policy on June 22. Should the Bank view the latest GDP figures as indicative of weakness in the economy, then it could delay its rate normalization plans. Such a stance is expected to weaken the New Zealand dollar. The central bank’s forecast for first quarter growth was at 0.9%, significantly diverging from the 0.5% that was recorded.

The pair is trading within 109.25/80 range on Thursday, following spike to fresh nearly two-month low at 108.80 and subsequent quick bounce after FOMC on Wednesday.

The dollar remains under pressure against yen, with today's action being capped by daily Tenkan-sen in steep descend which continues to weigh heavily after capping recovery attempts in recent sessions.

Technical studies on daily chart remain in firm bearish setup (20/200SMA Death Cross is forming today) and favor fresh downside attempts as the pair cracked strong support at 109.11 on Wednesday, but close below the latter is needed to confirm bearish resumption.

Strong barriers at 109.80 (Tenkan-sen) and 109.94 (falling 10 SMA) are expected to ideally cap, with extended upticks to hold below 110.30/40 zone (highs of 14/12 June).

Res: 109.80, 109.94, 110.34, 110.43
Sup: 109.25, 108.80, 108.37, 108.11