- 58% of all SWFX positions are short (60% yesterday)
- Risks are technically skewed to the upside (1,258/63 profit target), but Fed risks rapidly changing market conditions
- Daily technical indicators support gold price growth
- Economic events to watch over the next 24 hours: Spanish Retail Sales (Mar); US International Trade Balance (Mar) and Pending Home Sales (Mar); FOMC Interest Rate Decision and Rate Statement; UK GDP (Q1); RBNZ Interest Rate Decision; Japanese National CPI (Mar), Unemployment Rate (Mar), Industrial Production (Mar) and Retail Sales (Mar); Bank of Japan Interest Rate Decision
Gold rose for a third consecutive session on Wednesday amid a weaker US Dollar and soft US economic data. However, the precious metal traded in a tight range as investors awaited the Fed's policy decision later in the day. The US central bank is likely to keep interest rates on hole, while the focus rests on the tone of the Fed's statement and timing for a further rate hike. Meanwhile, official data showed orders to US factories for long-lasting manufactured goods increased less than expected in March, while a key category that tracks business investment plans remained weak for a second month.
Orders to US factories for long-lasting manufactured goods increased less than expected in March, while a key category that tracks business investment plans remained weak for a second month. The Commerce Department reported orders for durable goods, items meant to last three years or more, climbed 0.8% last month following a downwardly revised 3.1% decrease in February. Non-defence capital goods orders excluding aircraft, a closely watched proxy for business spending plans, were unchanged after a downwardly revised 2.7% decline in the prior month. Manufacturing, which makes up 12% of the US economy, is faltering due to the lingering effects of the Dollar's past strength and weak overseas demand. Prospects for 2016 remain uncertain. Some economists believe that factories should see an increase in demand since the Greenback has stopped rising versus other currencies. The global economy also seems to have stabilized after a shaky start to the year. However, other analysts are uncertain about how long it might take for manufacturing to rebound. Meanwhile, the mood among American shoppers surprisingly fell in April. The Conference Board's measure dropped to 94.2 in April from a downwardly revised 96.1 in March. The present-situation index advanced to 116.4 in April from 114.9 a month earlier, while the expectations index declined to 79.3 from 83.6.
New US single-family home sales unexpectedly fell in March, but the decline was mainly concentrated in the West region, implying that the housing market continued to strengthen. According to the Commerce Department, sales of newly built homes in the US unexpectedly dropped 1.5% to 511,000 on an annual pace, reaching a three-month low despite better supplies as well as lower prices. Meanwhile, economists had expected a rise of 1.6% to an annualised pace of 520,000 homes. Despite a considerable slide in new construction in March, the positive tendency still could be observed, since the data is 14% higher compared to the preceding year, signalling a continued strength of the US economy. March's sales pace put the market on track to overshoot 2015's total 501,000 new homes, the highest annual level since 2007. The report also showed inventory expanded to its highest level since September. Based on the current sales pace, it would take 5.8 months to exhaust the supply of newly built homes, compared with 5.6 months in the previous month. The total number of new homes for sale at the end of the month was 246,000, the highest figure since September 2009. Meanwhile, the median price of a newly built home plunged to $288,000 from $297,400 in February. That was down 1.8% from a year earlier.
Upcoming fundamentals: It is all about Fed. Is it?
A decision day for the Federal Reserve is undoubtedly going to be a crucially important event on Wednesday, possibly the most important one this week. Statement about the FOMC meeting's outcome will be released at 18:00 GMT, with analysts waiting for no interest rate increases for a third consecutive time after they raised rates back in December. However, the statement may shed light on the possibility of a June move. Markets are also interested, whether Kansas City Fed President Esther George will remain the only dissenter across the board. In the meantime, there are many other vital events taking place all around the globe on Wednesday-Thursday. Firstly, the Reserve Bank of New Zealand is going to announce its rate decision at 21:00 GMT. Secondly, the bunch of data is out in Japan later in the day, with monthly unemployment rate, CPI, industrial production and retail sales all being up for a revision. Moreover, the Bank of Japan will communicate its monetary policy decision at 1:00 GMT on Thursday. BOJ meeting is taking place in the wake of recent appreciation of the Yen and falling Japanese bond yields.
Gold erases earlier losses with eyes on Fed
By the end of Tuesday the volume of trading has risen to a three-day peak, which supported the bulls in attacking the nearest resistance at 1,241/43. By creating the long lower shadow, gold closed near the upper bound of the mentioned supply where the weekly pivot is resting at the moment. Additionally backed by the 55-day SMA at 1,236.91 and March-April uptrend at 1,235, the bullion has accumulated a well-positioned upside potential. With strong enough momentum the base scenario would allow for an advance up to the next resistance zone created by the weekly R1, Bollinger band and February peak at 1,258/63.Daily chart
From the point of view of 1H chart, we are now looking for an extension of the positive momentum and a rally in the direction of the April 20 high at 1,257.92. It is acting as the first short-term formidable resistance level, which is followed by the April 12 peak at 1,262.67. Gains above here are unlikely, given density of this area indicated by the daily chart. We see the support coming out from the 200-hour SMA, currently at 1,240.77, the early-April uptrend at 1,238 and the new April 22-26 uptrend at 1,233.
Hourly chart
58% of the SWFX market is gold-short
Consolidation of bullish momentum has brought the OANDA gold-bullion market share up to almost 63% by Wednesday morning. Alongside, the difference between bullish and bearish SAXO Bank bets is much narrower at 53% versus 47%, respectively.