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Weekly Review 6.3.17- 10.3.17

EUR/USD

 

The EUR/USD pair closed the week a 1.0686. The greenback is poised to end the week clearly higher against all of its major rivals, but the Euro ( Euro got a lift after the ECB's monetary policy meeting, as despite the Central Bank left its policy unchanged, offered a more optimistic economic outlook). ECB president Draghi said that there is no longer risks of deflation, but he also added that the ongoing easing program will remain in place, and that rates could go further lower if needed, trying to prevent the EUR to appreciate further. The ECB is expected to reveal a tapering plan in September, if the Eurozone’s political picture is stable and the inflation is on a solid path toward the bank’s 2% mandate target.

The US added 235,000 new jobs in February, whilst the unemployment rate edged down to 4.7% (underemployment rate edged to 9.2% from previous 9.4% and the  US monthly employment report was quite encouraging). On monthly basis wages rose by 0.2%, missing expectations of 0.3%, but year-on-year surged to 2.8% ( but this is not worrying). All of this support the rate hike anticipated by US monetary policy makers for next week (according to some analysts a 25bps hike is already priced in and attention will be focused to what's next on hikes).

EUR/USD is still in the "SELL" zone (fundamentally and technically). Most analysts agree that as long as below the critical 1.15 level , the risk will remain towards the downside. Market participants will likely be watching the FOMC statement rhetoric at the upcoming meeting for direction, with an indication that 2017 could see three or more hikes likely to boost the greenback further from current levels.

 

When we look at the monthly chart of this pair we see that the long trend is bearish (downtrend).  As long the price is below this trend line there is no indication of long trend reversal and EURUSD is in the sell zone (Big Investors are still in the short – SELL position on this pair). On this monthly chart we can see support and resistance levels, 1.1500 (resistance) and 1.0500 (support) levels represent current trading range and breaking above/below this levels would open way to 1.2250 (resistance 2) or 1.000 ( psychological support).

 

If the price breaks 1.07 we have open way to 1.08 level. Most analysts agree that as long as below the critical 1.15 level , the risk will remain towards the downside. If the price breaks 1.055 support we have open way to 1.034 level and after that 1.01 level.

 

Indices (DJIA and DAX)

Dow Jones Industrial Average

A number of analysts and strategists over the past few days are cautioning that worrisome trends are starting to crop up as equities take the escalator higher, pointing to a market that is getting overheated (according to them there is several signs that suggest Wall Street’s “uptrend is getting tired”). Some analysts says the market’s run of good days to record highs could be a “bull trap” that sees latecomers gored when the market takes a step back. But most Wall Street's pros wouldn't say so, my opinion is also that there are no signs for now that "bullish" trend will end, there could be a short term retreat but as long S&P 500 and Dow Jones Industrial Average are above (2,250 and 20,000 points) there is no signal of "bear" market. Positive thing is that the US added 235,000 new jobs in February, whilst the unemployment rate edged down to 4.7% (underemployment rate edged to 9.2% from previous 9.4% and the  US monthly employment report was quite encouraging). On monthly basis wages rose by 0.2%, missing expectations of 0.3%, but year-on-year surged to 2.8% ( but this is not worrying).

When we look at 5 year chart we see that Dow Jones Industrial Average is moving in "uptrend". As long DJIA is above this trend line and 20,000 points this index is in the "BUY" zone ( 20,000 and 19,000 represent support levels). Short term support and resistance levels are 21,000 and 21,500 points - If DJIA jumps above 21,500 points that would be a confirmation of "BULLISH" trend. If DJIA falls below 19,000 points it would be strong "SELL" signal and than we have open way to 18,000 level support.

 

DAX

Situation in Europe starts to look optimistic, ECB's monetary policy meeting last week offered a more optimistic economic outlook. ECB president Draghi said that there is no longer risks of deflation, but he also added that the ongoing easing program will remain in place, and that rates could go further lower if needed, trying to prevent the EUR to appreciate further. This situation is positive for DAX and stocks. The ECB is expected to reveal a tapering plan in September, if the Eurozone’s political picture is stable and the inflation is on a solid path toward the bank’s 2% mandate target.

When we look at this chart we can see that DAX Index is moving in "uptrend". As long the DAX is above this trend line and 11,400 points this index is in the "BUY" zone ( 11,400 represent support level). If DAX jumps above 12,000 points that would be a confirmation of "BULLISH" trend and open way to 12,500 resistance.  As long is the DAX is above 11,400 points short term trend is "bullish" ( this index is in the BUY zone) and there is no indication of trend reversal. If the DAX falls below this trend line it would be strong "SELL" signal and than we have open way to 10,000 level support.

 

Gold

GOLD continued declining on Fed expectations, and the current multi-week decline could see lower lows below 1125 in the coming weeks. Next week should see the metal test 1180 for a bounce, to set up for another down leg thereafter.

Whenever the market crashes or bad US economic news comes out, gold prices moves higher. This is because investors will sell stocks and buy into gold as a safe haven. But the opposite is not always true. A strong US dollar also tends to bring gold prices down. But this is not always true. It is particularly true that during the inflationary period, both the US dollar and gold prices will fly high as the dollar will be worth much less then. Market manipulation by big players including high frequency trading houses: in most times gold prices moved lower before Fed meetings and spiked high after no interest rate hike was announced. But a few weeks later, the gold price will always give up all the short term gains and set new lows.

The non farm payroll numbers beat as expected, though wages continue to disappoint in terms of growth. The US added 235,000 new jobs in February, whilst the unemployment rate edged down to 4.7% (underemployment rate edged to 9.2% from previous 9.4% and the  US monthly employment report was quite encouraging). Market participants will likely be watching the FOMC statement rhetoric at the upcoming meeting for direction, with an indication that 2017 could see three or more hikes likely to boost the greenback further from current levels.  In Europe, ECB president Draghi said that there is no longer risks of deflation ( Euro got a lift after the ECB's monetary policy meeting, as despite the Central Bank left its policy unchanged, offered a more optimistic economic outlook). The ECB is expected to reveal a tapering plan in September, if the Eurozone’s political picture is stable and the inflation is on a solid path toward the bank’s 2% mandate target.  All of this support the fall in gold price.

 

Tehnical analysis ( current price is 1,204.50 USD )

When we look at this one year chart we can see that price of gold has broken this trendline ( this represents "SELL" signal and open way to 1.125 support level). For the price of gold is very important to stay above 1200 USD (psychological support level), but my opinion is that price will fall below this support and it will probably reach 1125 USD. Very strong "BUY" signal will be if the price jumps above 1260 USD.

US dollar's strong bullish sentiment on rate hike expectations keeps the yellow metal under pressure. For now gold is more "bearish" ( fundamentally and technically).

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