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Key Highlights

• Gold started a downside correction from the $2,380 zone.
• A key bearish trend line is forming with resistance at $2,370 on the 4-hour chart.
• Oil prices are showing bearish signs below $80.00.
• Bitcoin price is still consolidating above the $60,000 support zone.

Gold Price Technical Analysis

Gold prices started a fresh increase above the $2,335 resistance against the US Dollar. It traded above the $2,350 zone before the bears appeared.

The 4-hour chart of XAU/USD indicates that the price traded as high as $2,378 and settled above the 100 Simple Moving Average (red, 4 hours) and the 200 Simple Moving Average (green, 4 hours).

Recently, there was a downside correction from the $2,378 level and the price declined below $2,355. The price dipped below the 23.6% Fib retracement level of the upward move from the $2,277 swing low to the $2,378 high.

On the downside, the 100 Simple Moving Average (red, 4 hours) is the key at $2,328. It is close to the 50% Fib retracement level of the upward move from the $2,277 swing low to the $2,378 high.

The next support sits at the 200 Simple Moving Average (green, 4 hours) and $2,315. A downside break below the $2,315 support might call for more downsides. The next major support is near the $2,280 level. Any more losses might send Gold prices toward $2,265.

On the upside, immediate resistance is at $2,355. The first major resistance is now forming near a key bearish trend line at $2,375, above which the price could accelerate higher toward $2,395.

Looking at Bitcoin, the bulls are still active above the $60,000 support and they might aim for a steady increase in the near term.

Economic Releases to Watch Today

• UK Claimant Count Change for April 2024 – Forecast 13.9K, versus 10.9K previous.
• UK ILO Unemployment Rate Feb 2024 (3M) – Forecast 4.3%, versus 4.2% previous.
• US Producer Price Index for April 2024 (YoY) – Forecast +2.2%, versus +2.1% previous.

IMF projects Japan's economic growth to continue, with a noticeable increase in consumption anticipated later this year. According to a report, Japan's growth rate is expected to decelerate to 0.9% in 2024, largely due to the fading impact of one-off factors that boosted growth in 2023.

The report highlights that consumption will pick up in the latter half of 2024 and into 2025, driven by rising nominal wages following a strong Shunto settlement in 2024 and a decrease in headline inflation that will boost real wages.

IMF foresees core inflation gradually declining as the impact of higher import prices diminishes. However, core inflation is expected to remain above BoJ's 2% target until the second half of 2025.

In light of these developments, IMF suggests that further increases in BoJ's short-term policy rate should "proceed at a gradual pace" and be "data­dependent", considering the balanced risks to inflation and the mixed signals from recent economic data.

IMF emphasizes the importance of Japan's adherence to a "flexible exchange rate regime", which will play a crucial role in absorbing economic shocks and supporting the central bank's focus on maintaining price stability.

Full IMF report on Japan here.

Fed Vice Chair Philip Jefferson indicated that with the economy showing robust job growth, Fed can focus "even more so" on ensuring that inflation returns to its 2% target. Jefferson acknowledged the slow progress in reducing inflation, asserting that it justifies keeping the policy rate elevated.

"In light of the attenuation in progress, in terms of getting inflation down to our target, it is appropriate that we maintain the policy rate in restrictive territory," Jefferson noted.

He reiterated that the Fed is vigilant in seeking clear evidence of inflation decreasing to the desired level before considering any policy rate adjustments.

Fed's approach is influenced by the varied perspectives among policymakers, which Jefferson believes enriches policy discussions. However, he cautioned that increased communication from Fed might sometimes lead to greater uncertainty about its policies, rather than clarity.

• UK set to report further softening in employment conditions
• Data accuracy issues persist, but wage growth could still move the pound
• GBPUSD needs to gain buying confidence above 1.2700

BoE leans towards a rate cut

The Bank of England (BoE) left interest rates steady at a 16-year high of 5.25% last Thursday as widely expected, and although it did not pre-commit its future policy path, it telegraphed that a summer rate cut is on the cards. While the majority of the board members voted to keep rates steady, Deputy Governor Dave Ramsden joined Shati Dhingra to advocate for an immediate quarter-point reduction.

A downward revision in the central bank’s inflation projections to 1.9% in two years and 1.6% in three years added to the signs that the central bank is likely feeling more confident to shift to the dovish side despite highlighting near-term upside risks in the face of geopolitical factors and persisting upside pressures in the services costs.

Nevertheless, the dovish tilt did not signal the need for an immediate rate cut at the next policy meeting in June. Analysts are still split between a rate cut next month or at some point in the third quarter despite the odds of a June cut increasing to 54% according to futures markets. Moreover, with BoE chief Andrew Bailey requesting a close monitoring of the tight labor market, wage trends, and upside price pressures in the services sector, the central bank might remain data-dependent in the coming months.

Jobs data to soften further; real wages to hold positive

Tuesday’s jobs data is the next key event on the UK calendar and might attract special attention, although the labor survey has lost value after regional stats showed an unexplained variability. Analysts foresee a soft release, with employment falling more aggressively for the third consecutive month by 216k on average over the three months to March compared to a decline of 156k in February. Consequently, the unemployment rate could tick up to 4.3% from 4.2% previously – the highest since September 2023 and March 2018 excluding the pandemic period–, while average hourly earnings could slip from 5.6% to 5.5% but still hold comfortably above the headline inflation rate of 3.2% y/y.

Data accuracy concerns and the fact that there are two more inflation report releases before June’s gathering could mute any market reaction. However, any unexpected changes to wages will not go unnoticed, especially considering that British employers are projected to increase wages by 4.0% in the coming year, as per the recent survey by the Chartered Institute of Personnel and Development.

GBP/USD levels to watch

If wage growth exceeds expectations, pushing the rate cut timeline to August, GBPUSD could rise above the resistance zone of 1.2560 and surpass the flattening 50- and 200-day exponential moving averages (EMAs). Still, an extension above the 1.2630-1.2700 trendline territory could be more meaningful.

In the event of a negative surprise, analysts might evaluate how fast or far the central bank might loosen monetary policy after the BoE Governor said that policy might get less restrictive than markets are currently thinking. If the data miss forecasts by a large margin, analysts could bet on a pre-Fed rate cut action in June, causing a downside reversal in GBPUSD. Specifically, a step below 1.2500 could confirm a continuation towards the 1.2420 barrier and then down to the 1.2295-1.2345 restrictive region.

Key themes: Markets were in a holding pattern overnight as investors await key US inflation data later this week. US Fed Chair Powell is also due to speak, possibly providing further insights on future rate moves.

US equities were mixed and lack direction for most of the session. US bond yields were broadly unchanged, with stronger than expected consumer inflation expectations data driving yields higher late in the session. The US dollar was softer.

The local share market finished flat ahead of today’s 2024-25 federal budget. The government revealed overnight that it expects a $A9.3bn surplus this financial year. The key question for markets is whether the government can strike the right balance between providing cost-of-living support and continuing to take pressure off inflation.

Share markets: US equities drifted to a mixed finish. Investors are in a holding pattern ahead of key inflation data which includes the release of US producer price data on Tuesday, and the consumer price index on Wednesday.

The S&P 500 was broadly unchanged closing at 5,221.42 after flipping between small gains and losses through the session. The Dow Jones fell 0.2% to 39,431.51. The Nasdaq rose 0.3% to 16,338.24.

The ASX 200 was flat, closing at 7,750.0 ahead of the 2024-25 federal budget. Health and consumer equities advanced, while energy stocks declined in line with the fall in oil prices. Futures are pointing to a soft open today.

Interest rates: US bond yields were broadly unchanged. After falling in early trade, yields recovered on the back of stronger than expected consumer inflation expectations data released by the New York Fed.

The 2-year bond yield was unchanged at 4.86%, after reaching a low of 4.82%. The 10-year treasury yield declined by 1 basis point to 4.49%, after reaching a low of 4.46%.

Interest-rate markets continue to price a full rate cut by November. For 2024, the market is pricing in around 40 basis points of cuts – slightly less than two 25-basis-point moves.

Australian yields were also flat. The 3-year government bond yield (futures) was down by 1 basis point, at 3.95%. The 10-year government bond yield (futures) was up by 1 basis point, at 4.35%.

Foreign exchange: The US dollar was softer. The DXY index fell to a low of 105.06, before receiving yield support and staging a recovery late in the day to reach a high of 105.37. The DXY Index is trading at around 105.23.

The Aussie flipped between minor gains and losses, remaining around the 0.6600 level. Through the session, the AUD/USD moved from a low of 0.6586 to a high of 0.6629. The pair is currently trading at around 0.6606.

Commodities: Commodities were mixed. Oil and copper were higher. Gold and coal were lower. Iron ore was unchanged.

The West Texas Intermediate (WTI) futures is currently sitting at around US$79.12 per barrel.

Iron ore reached a high of almost US$118.0 per tonne following speculation the Chinese government will use capital, raised through the sovereign bond issuance program announced yesterday, to support the economy and property sector.

Australia: Business confidence and conditions were little changed in April. Conditions slipped 2 points to +7 index points. This is below the 10-year average but around the long-term average of the monthly series. Confidence was unchanged in the month, remaining just in positive territory, at +1 index points. Confidence among businesses has fluctuated around neutral levels for a little over 18 months, with occasional bumps higher or lower in certain months.

Quarterly measures of labour and purchase cost growth - key inputs for businesses - were both softer in the month, at 1.5% and 1.2%, respectively. Retail price growth slowed to the second slowest pace since January 2021, at 0.9% on a quarterly equivalent basis.

From a big picture perspective, little has changed in April. Conditions continue to gradually trend lower but remain around long-run average levels, while businesses are still cautious about the future. 2024 is expected to be a year of two halves. While conditions remain challenging in the first half of the year, a gradual recovery is expected to take place from the second half of 2024, before picking up more pace into 2025.

United States: The New York Fed consumer inflation expectations survey for April showed a sharp increase in expectations for the year ahead - 3.3% from 3.0% in March. Inflation expectations for five years ahead also increased, from 2.6% in March to 2.8% in April.

• Platinum reversed from resistance level 1010.00
• Likely to fall to support level 990.00

Platinum just reversed down from the major resistance level 1010.00, which has been reversing the price from the end of December.

The resistance level 1010.00 stands well above the upper daily Bollinger Band – increasing the possibility of the sharp correction in the near-term future.

Give the strength of the resistance level 1010.00, overbought daily Stochastic, Platinum can be expected to fall further toward the next support level 990.00.

The price of Brent crude oil is currently experiencing a downturn, trading around 82.55 USD per barrel this Monday. The primary concern affecting the market today is the uncertainty surrounding demand levels, exerting significant pressure on the commodity.

Recent statements from representatives of the US Federal Reserve have led to expectations that interest rates may remain elevated for an extended period. This prospect of sustained high rates is likely to dampen economic growth, which could, in turn, negatively impact fuel demand from American consumers. The likelihood that the Fed will maintain current lending rates throughout the year is considered relatively high.

Additionally, data released on Friday showed a marked decline in US consumer confidence, reinforcing concerns that the economy might be losing its growth momentum. As we approach the summer season, traditionally a peak period for fuel consumption, the latest reports indicate rising stocks of petrol and distillates in the US. However, demand appears lacklustre, contradicting typical seasonal trends.

The next OPEC meeting is scheduled for early June. The group is expected to extend its production quotas into the second half of the year, a decision that could further impact oil price movements.

Brent technical analysis

The Brent H4 chart's initial growth impulse to 84.24 has been completed, and the subsequent correction wave nearing 82.02 is almost finished. We anticipate the formation of a consolidation range above this level. If the price breaks upwards from this range, a growth to the level of 85.00 is expected, potentially extending to 88.00. This bullish scenario is technically supported by the MACD indicator, whose signal line is below zero but pointing upwards from the lows.

On the H1 chart, after completing the growth structure to 84.24, the market has finalised its correction at 82.02. A consolidation range above this level is expected to form. A breakout upwards from this range could initiate a new growth wave towards 85.00. The Stochastic oscillator corroborates this potential upward movement, with its signal line currently above 20 and aiming towards 80, suggesting a bullish momentum could be building.

Markets

All eyes are on Wednesday’s US CPI inflation print and to a lesser extent its PPI precursor tomorrow. That led to stoic, listless trading at the start of the new week. China announced during early Asian dealings that it will kick off its CNY 1tn stimulus plan on Friday with a CNY 40bn 30-yr auction of special bonds (of which the proceeds are used for predetermined investments). It’s the first round of the many that will stretch the year through November, with maturities ranging between 20 and 50 year. News of the rare event (China has issued special bonds on four occasions only, this one included) pulled Chinese equities from the intraday lows but had little impact on markets ex-China. European stocks lose some minor ground with the likes of the EuroStoxx50 shedding 0.2%. US stocks open with marginal gains of about 0.3%. Most commodities are well bid with oil seeking a gain to $83/b after a sharp drop earlier this month. Copper is on track for the highest close since April 2022. Core bonds gained some ground with a slight outperformance of US Treasuries vs German Bunds. US yields ease between 2.4 (30-yr) and 3.4 bps (2-yr). German rates give up 1.7-2.8 bps across the curve. Japanese yields are the odd one out today, having added up to 2.7 bps at the long end of the curve. This followed the Bank of Japan offering to purchase a smaller amount of government 5-to-10 year bonds in a regular operation than it did the previous time (April 24). While the amount was still within the planned range for the running quarter, it is seen as a baby step by the central bank to reduce its presence in the debt market and an attempt to support the ailing currency. The Japanese yen barely, if at all, profits though. USD/JPY holds steady around 155.7 even as the US dollar is suffering a bit from the Monday blues. DXY eases from 105.3 to 105.12 currently. EUR/USD is flirting with the 1.08 big figure compared to an 1.768 open. Technically, resistance is spotted at 1.0807, followed by 1.0885 (38.2% recovery on the December-April decline; April correction high). Sterling whipsawed within an extremely tight trading range between 0.8595 and 0.8611. The UK labour market is scheduled for release tomorrow. It’s one of the two reports that the Bank of England receives ahead of the June policy decision, along with two CPI prints. The data will be crucial with the central bank in last week’s meeting looking to cut rates sooner rather than later.

News & Views

Czech inflation in April accelerated more than expected by 0.7% M/M with the Y/Y-figure approaching the upper band of the tolerance band around the Czech National Bank’s 2% inflation target (2.9% from 2% in March). The CNB in its spring monetary policy report (published early May) only expected a rebound to 2.5% Y/Y. The deviation was mainly due to food prices which rose 1% Y/Y instead of the projected -0.5% Y/Y decline. In line with expectations, core inflation slowed slightly further to 2.6% Y/Y. The CNB reacted that the qualitative message of the spring forecast remains valid with inflation moving back close to the 2% target throughout the year. The Czech koruna rallied after inflation numbers with EUR/CZK testing the 200-day moving average at 24.75 (strongest CZK-level since early February). CZK swap rates rose up to 9 bps at the front end of the curve. Today’s figures strengthen the case for a reduction in the CNB rate cut pace from the next meeting onwards (25 bps instead of 50 bps).

Polish Monetary Policy Council member Kotecki currently doesn’t see any room for interest rate cuts. Some room may come at the end of the year if wage growth slows. It doesn’t seem to be the base case and any potential rate cut will just be the minimal 25 bps. MPC Wnorowski also sees stable rates in 2024 as the base scenario and even thinks that the likelihood of a rate cut this year is smaller than a month ago. He also thinks that 2025 is too distant of a future to give already guidance on the scale of any potential cuts. The Polish zloty at EUR/PLN 4.30 holds strong against the euro.

Graphs

EUR/CZK: Czech crown rallies after CPI accelerates more than expected, bolstering case for slowdown the easing pace

Japanese 10-yr yield rises to new YtD high after BoJ cuts buying amount in regular bond auction

Copper prices on track for highest close since early 2022. Will Chinese stimulus boost demand further?

EUR/USD attacks 1.0805 in quiet trading and ahead of important US data tomorrow (PPI) and Wednesday (CPI)

In this technical article we’re going to take a quick look at the Elliott Wave charts of Copper Futures HG_F, published in members area of the website. As our members know, Copper is showing impulsive bullish sequences in the cycle from the 3.6592 low. Consequently we are favoring the long positions at this stage. The commodity has recently given us a 3-wave pattern, when buyers appeared right at the equal legs zone. We are going to explain Elliott Wave forecast further in this article.

Copper H1 Asia Update 05.08.2024

The current view suggests that the Copper commodity is doing a ((ii)) black pullback, which is correcting the cycle from the 4.4671 low. So far pullback has given us 5 waves from the peak, suggesting structure is still incomplete. We expect to see another leg down toward equal legs : 4.5408-4.4925 ( buying area). Once extreme zone is reached , we expect potential buyers to appear in that area, which could lead to a further rally towards new high or a three-wave bounce at least.

Copper H1 Midday Update 05.10.2024

The commodity made another leg down as we expected. The price has reached the extreme zone at 4.5408-4.4925 area and made a nice rally from the Equal Legs-Buyers zone, as anticipated.The commodity remains bullish against the 4.4652 pivot. We expect Copper to keep finding buyers in 3,7,11 swings as far as the mentioned pivot holds.