Gold price back tests cloud and trend line break out area

Trading 09 mai 2020 Commentaire »

Gold price broke above the 4 hour Ichimoku cloud and the downward sloping trend line. It is imperative that bulls are strong at current levels and push price higher. A bounce off this support area around $1,700 would be a bullish sign.

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Red lines - trading range

Black line -resistance trend line

Gold price remains inside the trading range. Price has broken above the black downward sloping trend line and above the 4hour Ichimoku cloud. These two signs are bullish. However price need to stay above the cloud and the trend line in order to confirm these bullish signals. This back test is normal and common to be seen after break out. A bounce off cloud support would increase the chances of the bullish scenario for a move to $1,740 and higher. Do not forget that price remains inside the trading range we have noted several days ago. As long as we stay inside the range, we are going nowhere.

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EURUSD technical analysis

Trading 09 mai 2020 Commentaire »

On Friday we saw EURUSD bounce strongly out of the bearish short-term channel we noted in our last analysis on Thursday. Price has bounced and touched 2 of our bounce targets so far. Price made a high at 1.0875 where we find the 38% Fibonacci retracement level.

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Red lines - bearish channel

Blue lines - Fibonacci retracement levels

EURUSD has bounced towards the 38% Fibonacci retracement but could not overcome this resistance level. If bulls manage to recapture 1.0870 we should then expect price to move towards the next two Fibonacci retracement levels at 1.0894 and 1.0922. The latter is the most probable target if price breaks again above the 38% level. Support is found at 1.0814 and next at 1.0767.

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EUR/USD and GBP/USD. Results of May 8. Steven Mnuchin, Robert Lighthizer, and Liu He agreed to cooperate but did not ask

Trading 09 mai 2020 Commentaire »

4-hour timeframe

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Average volatility over the past 5 days: 79p (average).

The EUR/USD currency pair continued its corrective movement on the last trading day of the week, which it started the day before. However, it can be considered corrective in relation to the "dead cross" from the Ichimoku indicator. In General, we continue to believe that the pair's quotes continue to consolidate in the 250-point side channel, limited by the levels of 1.1000 and 1.0750. Since yesterday there was a rebound from the lower border of this channel. Today, the upward movement continued. During the day, the pair managed to work out the critical Kijun-sen line, but we expect movement to the upper border of the channel, that is, to the psychological level of $1.10. Thus, with a high probability, the Senkou Span B and Kijun-sen lines will be overcome. If a rebound does occur, traders may try to resume the downward movement, but we do not expect a new trend to form until the lower border of the side channel is overcome.

The macroeconomic background of today would normally trigger a surge in volatility. And if we take into account the value of the indicators published on May 8, we could expect a 200 or 300-point movement. However, now the logic of traders is completely different. The vast majority of reports continue to be ignored. With grief in half yesterday, market participants found the strength to react at least a little to the results of the meeting of the Bank of England, and even then, this event and the market reaction did not concern the euro/dollar pair. On March 8, the most important indicators of the state of the economy were published in the United States. Let's start with the positive news. The level of average wages in April unexpectedly increased by 7.9% on an annual basis and by 4.7% on a monthly basis. This is an absolutely record increase over the past 25 years, that is, for the period of time for which statistics are available at all. Before that, the annual growth rate did not exceed one percent. However, even in the morning articles, we said that the report on wages is now far from the most significant, or rather completely unimportant because, in a collapsing economy, the increase in wages means little. Especially with unemployment rising by giant leaps. It was the unemployment rate that was published as the second, and all the positive news for the US dollar ended on the first report. The official unemployment rate rose in April to 14.7%, while hidden unemployment increased to 22.8% with a forecast of 11.2%. Recall that hidden unemployment takes into account not only those who have lost their jobs and can not find a new one but also those who are dissatisfied with their current job and can not find a new one. Thus, the numbers are already huge, and by the end of May, they may become even worse. Donald Trump, of course, is slowly starting to open up the US economy, and quarantine measures are gradually easing in some states, but it is still very early to talk about a full restart. In any case, the rate of applications for unemployment benefits is growing, which means that people continue to be dismissed from their jobs. The last indicator published was Nonfarm Payrolls, which is usually one of the most important indicators. Minus 20.5 million jobs outside the agricultural sector. This indicator has never seen such values. However, in previous articles, we have already said that traders are unlikely to be surprised by such failed values of unemployment and Nonfarm Payrolls. This is because recent similar publications have already formed an impression of the current state of the US economy. Thus, traders were absolutely not surprised by the 20.5 million minus jobs. Most of the day, the euro/dollar pair stood in one place and continued to move up only in the US session. Thus, we can assume that market participants still reacted to the publication of reports. However! In total, the pair passed 55 points in 4 hours of the American session, and the final fall of the dollar during this time was about 20 points. If this is called the market reaction to three such important reports, then...

At the same time, many media outlets and periodicals said today that the new trade war between the United States and China is being canceled. A "loud" headline that has nothing to do with reality. What happened was that US Treasury Secretary Steven Mnuchin, trade representative Robert Lighthizer, and Chinese Vice Premier Liu He held a telephone conversation in which they agreed to "expand favorable conditions for the implementation of the first phase of the deal." What this means in practice is unknown. The parties only noted that cooperation in the field of health and macroeconomics can be expanded. And here comes the most interesting question: what is the opinion of Donald Trump or Mike Pompeo, who in the past few weeks has accused China of all the deadly sins and, especially, of spreading the "coronavirus", of its deliberate creation in the laboratory, of misinformation around the world, which has led to the infection of more than 3.5 million people (and this is only according to official information). Donald Trump promised to present evidence of China's guilt in the coming weeks and promised to impose new trade duties if China does not compensate America. Mike Pompeo claimed to have seen documents proving Beijing's guilt with his own eyes. However, then the chief epidemiologist of the countries Anthony Fauci said that the virus is unlikely to be the work of man, and according to American intelligence, there is no evidence of deliberate spread of the virus by China or its creation in the laboratory. However, both Pompeo and Trump continued to give identical interviews. Thus, the top US officials either did not agree among themselves, or we should expect new information from Trump in the near future, who can easily say that the evidence has been found and now China must compensate the United States, otherwise – a new trade war.

4-hour timeframe

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Average volatility over the past 5 days: 106p (high).

The GBP/USD currency pair also continued its correction movement on May 8, which also started after a rebound from the lower border of the side channel. Thus, in the case of the British pound, we now expect a move up to the upper border of the channel – around the level of 1.2650. The Kijun-sen line was successfully crossed today, so the sell signal is already weakened. The pair has worked out the Senkou Span B line and will most likely finish trading this week, and a new upward movement can be expected as early as next week. As in the case of the euro currency, the concept of correction is now relative, as the pair continues to consolidate within the 400-point side channel. Thus, we do not recommend counting on the formation of a downward trend until the price is fixed below its lower line, the area of 1.2200-1.2250.

Recommendations for EUR/USD:

For short positions:

On the 4-hour timeframe, the EUR/USD pair continues to adjust. Thus, it is recommended to consider new sales of the euro currency with targets in the range of 1.0750-1.0740 in the event of a price rebound from the Kijun-sen line. Overcoming this range will allow you to keep open sell positions with the goal of 1.0717.

For long positions:

Long positions will become relevant with the target resistance level of 1.1063, when the price will be fixed above the Kijun-sen and Senkou Span B lines.

Recommendations for GBP/USD:

For short positions:

The pound/dollar pair also continues to adjust. Thus, traders are recommended to sell the pair with targets of 1.2265 and 1.2215 if the quotes return to the area below the critical line.

For long positions:

Purchases of the GBP/USD pair can be considered now with the goals of 1.2477 and 1.2498, but in small lots, since there is not even a buy signal from Ishimoku yet.

Explanation of the illustrations:

Ichimoku Indicator:

Tenkan-sen - red line.

Kijun-sen - blue line.

Senkou Span A - light brown dotted line.

Senkou Span B - light purple dotted line.

Chinkou Span - green line.

Bollinger bands indicator - 3 yellow lines.

The MACD indicator is a red line and a histogram with white bars in the indicator window.

Support/resistance levels are classic - red and gray dotted lines with price symbols.

Pivot level - yellow solid line.

Volatility levels - solid red lines.

Possible variants of the price movement:

Red and green arrows.

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Dollar Retreats After Recovering From Early Fall

Trading 09 mai 2020 Commentaire »

The U.S. dollar recovered a bit Friday morning after data showed a slightly smaller than expected drop in U.S. employment in the month of April, although the fall was quite steep and the biggest in several decades.

However, the dollar's recovery proved short-lived, as the data gave rise to expectations that the Federal Reserve might well cut interest rate to hitherto unseen level of 0 - 0.25%.

The dollar index, which rose to 99.94 by mid-morning, tumbled to 99.46 subsequently, and was last seen at 99.78, down 0.1% from previous close.

Against the Euro, the dollar was almost flat at $1.0835 after having dropped to $1.0876 earlier.

The Pound Sterling was stronger at $1.2405, recovering from around $1.2350. It had strengthened to $1.2465 at one points.

The Japanese currency was down more than 0.4% at 106.73 a dollar, easing from Thursday's close of 106.27 a dollar.

The Aussie was stronger US$0.6531, firming up from US$0.6495.

The Swiss franc gained more than 0.2% to 0.9709 after closing at 0.9731 on Thursday.

The loonie was gaining about 0.3%, firming up to C$1.3930 from C$1.3973.

Data from the Labor Department showed that non-farm employment plummeted by 20.5 million jobs in April after tumbling by a revised 870,000 jobs in March.

The steep drop in employment was not as bad as feared, however, as economists had expected employment to plunge by 22.0 million jobs compared to the loss of 701,000 jobs originally reported for the previous month.

The unemployment rate climbed to 14.7% in April from 4.4% in March. Economists had expected the unemployment to spike to 14%.

Trade war fears receded after US and Chinese trade officials had held a phone call and pledged to co-operate to implement the Phase 1 trade deal. After a sharp rise in weekly initial jobless claims, investors have started to price in the chance of the Fed cutting official interest rates below zero in early 2021.


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Treasuries Come Under Pressure After Early Volatility

Trading 09 mai 2020 Commentaire »

Treasuries showed a lack of direction in morning trading on Friday before coming under pressure over the course of the afternoon.

Bond prices slid more firmly into negative territory after spending the morning bouncing back and forth across the unchanged line. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 5.1 basis points to 0.682 percent.

The afternoon pullback by treasuries came as bond traders eventually shrugged off concerns raised by a Labor Department report showing a record nosedive in U.S. employment in the month of April.

The report said non-farm employment plummeted by 20.5 million jobs in April after tumbling by a revised 870,000 jobs in March.

The steep drop in employment was not as bad as feared, however, as economists had expected employment to plunge by 22.0 million jobs compared to the loss of 701,000 jobs originally reported for the previous month.

Nonetheless, the Labor Department said the unemployment rate still skyrocketed to a post-World War II record high of 14.7 percent in April from 4.4 percent in March. Economists had expected the unemployment rate to spike to 14.0 percent.

Despite the record plunge in unemployment, traders seem to be looking ahead to an anticipated economic rebound as states begin to reopen following their coronavirus-induced lockdowns.

However, comments from several economists suggest investors may be overly optimistic about the pace of the economic rebound.

Economists at Oxford Economics said they anticipate "the severe income loss, elevated precautionary savings and lingering virus fear will curtail consumer demand well past the lockdowns."

"Social distancing, consumer angst, travel restrictions and the legacy of up to 40 million jobs lost mean there is zero prospect of a V-shaped recovery," added ING Chief International Economist James Knightley.

Reports on consumer and producer price inflation, retail sales and initial jobless claims may attract attention next week, although traders could also look at the data as old news.

Bond traders are likely to keep an eye on the results of the Treasury Department's auctions of three-year and ten-year notes and thirty-year bonds.


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Oil Futures End Notably Higher For The Day, Gain Over 25% In Week

Trading 09 mai 2020 Commentaire »

Crude oil prices moved up sharply on Friday amid slight improvement in demand for petroleum products.

With several countries easing lockdown restrictions and reopening some crucial businesses, it is widely expected that the demand for energy will gradually improve in coming weeks.

Traders were also betting on output cuts by major oil producers this month. Another factor contributing to the rise in oil prices was the report from Baker Hughes saying another drop in U.S. rig count.

West Texas Intermediate Crude oil futures for June ended up $1.19, or about 5.1%, at $24.74 a barrel.

On Thursday, WTI crude oil futures ended down $0.44, or 1.8%, at $23.55 a barrel, despite spurting to a high of $26.74 earlier in the day.

WTI front-month contract ended more than 25% in the week.

Brent Crude futures moved up by about $1.50 to $30.97 a barrel today.

Australia became the latest country to announce plans to reopen its economy. The country has a three-step plan to build confidence and momentum that will see its economy get back up and running by July.

France, parts of the United States and countries such as Pakistan are also planning to ease their lockdown restrictions.

On the supply side, North American oil companies are slashing production faster than OPEC officials and industry analysts had expected.

Positive news regarding the U.S.-China trade talks also supported oil prices.

According to the report released by Baker Hughes the number of active U.S. rigs drilling for oil fell for an eighth straight week, dropping by 33 to 292. Meanwhile, the total active U.S. rig count fell by 34 to 374, the report said.


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Gold Settles Lower For The Session, Posts Modest Gain In Week

Trading 09 mai 2020 Commentaire »

Gold prices drifted lower on Friday, despite data showing U.S. unemployment to have plunged to a historic low in April.

The dollar's weakness limited gold's downside. The dollar index, which dropped to 99.46 around mid-morning, edged up slightly after that, but was still down in negative territory at 99.71, trailing previous close by 0.18%.

Gold futures for June ended down $11.90, or about 0.7%, at $1,713.90 an ounce.

Gold futures gained about 0.8% in the week.

Silver futures for July ended up $$0.188, at $15.778 an ounce, while Copper futures for July gained $0.0255 more than 1% to $2.4060 per pound.

Data from the Labor Department showed U.S. non-farm employment plummeted by 20.5 million jobs in April after tumbling by a revised 870,000 jobs in March.

The steep drop in employment was not as bad as feared, however, as economists had expected employment to plunge by 22.0 million jobs compared to the loss of 701,000 jobs originally reported for the previous month.

Traders appeared to be betting on hopes the markets have already factored in the dismal jobs picture, and an economic rebound is bound to happen in the not too distant future as states have begun reopening of their businesses that were shutdown from mid-March due to the coronavirus pandemic.

A report released by the Commerce Department showed wholesale inventories in the U.S. decreased by slightly less than expected in the month of March. The Commerce Department said wholesale inventories slumped by 0.8% in March after falling by 0.7% in February. Economists had expected inventories to tumble by 1%.


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