- 58% of all SWFX positions are short
- Risks are skewed to the upside (1,258/63 profit target)
- Five out of eight daily technical indicators are neutral on Thursday
- Economic events to watch over the next 24 hours: Spanish Unemployment Rate (Q1); Swedish Retail Sales (Mar); German Unemployment Change (Apr), Unemployment Rate (Apr) and CPI (Apr); US Advance GDP (Q1), PCE Price Index (Q1) and Unemployment Claims (Apr 23); Australian PPI (Q1) and Private Sector Credit (Mar)
Gold traded flat on Thursday as the US Dollar lost 2% versus the Japanese Yen after the Bank of Japan stunned markets by staying pat on its monetary policy. The BoJ Governor Haruhiko Kuroda and his colleagues opted to take more time to assess the impact of negative interest rates. Meanwhile, the Fed opted not to hike interest rates and remained ambiguous about raising rates in June amid moribund economy and weakening consumer spending. Market participants will be watching closely US GDP data due later in the session.
The Fed opted not to hike interest rates and remained ambiguous about raising rates in June amid moribund economy and weakening consumer spending. The US central bank proceeded with its plan to move cautiously on raising the benchmark federal-funds rate, which has been between 0.25% and 0.50% since December, when the Fed increased short-term rates after keeping them near zero since 2008. Policy makers pointed that the US economy is performing robustly in some respects, but continuing to falter in others. Household spending has diminished even though real income has increased and consumer sentiment remains high, while the labour market conditions have improved further. The Fed's caution underlines how policy makers still lack confidence they can move away from extraordinary easy-money policies without derailing the fragile US growth and knocking the global economy off balance. The seven weeks until the June meeting could help determine how many times, if any, the Fed will hike short-term interest rates this year. Policy makers will get two months of inflation and labour-market data as well as two estimates of first-quarter growth before their next meeting. One major source of uncertainty for policy makers is the UK's referendum over whether to leave the EU, which is scheduled for June 23, a week after the Fed meets.
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.
Upcoming fundamentals: US economy to expand just 0.6% in Q1
The time slot to watch is exactly the one at 12:30 GMT today. This is when the US will publish a number of very important statistical indicators including economic growth, unemployment and individual readings for consumer prices. The first reading of Q1 GDP may indicate to the weakest pace of economic expansion in a year, as economists are projecting a 0.6% annualized gain. In October-December period the US economy added 1.4%. US initial jobless claims are expected to surge to 259,000 for the week ended April 23, up from a multi-decade low of 247,000 this reading had posted last time. The personal consumption expenditures index is due at the same time. Market participants, on average, assume that the annualized Q1 PCE Index will slow down to 1.7% from 2.4% in Q4 2015. However, core reading that excludes food and energy prices is estimated to strengthen to 1.9% from 1.3%. PCE is one of the US Federal Reserve's most preferred readings of inflation.
Gold continues to appreciate gradually
The precious metal has finally dealt with the closest resistance cluster represented by the monthly and weekly pivot points at 1,241/43. Now the doors are open for extension of the rally up until the following supply at 1,258/63. There the bullion is going to face the weekly R1, which is backed by the upper Bollinger band and February high. In spite of strongly positive daily and weekly technical indicators, gold may turn bearish near that important zone and commence a correction lower. Nevertheless, deep sell-offs are not a part of the short-term scenario amid a formidable support sector around 1,243/36.Daily chart
XAU/USD has been flirting with the 200-hour SMA on Thursday morning. This is adding to uncertainty for the moment, but overall medium-term risks are still tilted to the North. We are keeping an eye on the April 20 high at 1,257.92, followed by the April 12 high at 1,262.67. On the downside, there are two distinct upward-sloping trend-lines that are expected to keep the bullion away from losses in the days to come.
Hourly chart
58% of SWFX traders are gold-short
The portion of bullish OANDA market participants dropped from 63% to 59% by Thursday morning. On the other hand, SAXO Bank clients improved their expectations on gold, as 54% of them are now keeping long positions (53% yesterday).