- Bears dominate the market
- 200-hour SMA implies resistance at 1,216
- The lower bound of the emerging triangle is at 1,210/1,205
- Economic events: Euro Area and German Manufacturing and Services PMIs (Feb)
US underlying inflation surged to the highest level in more than four years in January, led by increasing rents and medical costs, a sign that price pressures started to build that could allow the Fed to gradually hike interest rates this year. According to the Labor Department, the consumer price index, excluding the volatile food and energy components, increased 0.3% last month. That was the biggest surge since August 2011 and followed a 0.2% rise in December. In the 12 months through January, the core CPI jumped 2.2%, the largest rise since June 2012 and exceeded the 1.9% average annualized increase over the last 10 years. The overall CPI was unchanged last month after slipping 0.1% in December. The CPI increased 1.4% in the 12 months through January, the biggest rise since October 2014, after gaining 0.7% in December.
The Fed hopes to see more widespread price increases taking hold this year, so that central bankers can deliver their promise to gradually hike short-term interest rates. Recent economic and international developments have raised doubts among analysts and even within the US central bank whether rate hikes are still the right decision. Tighter financial market conditions in the wake of a recent sharp stock market sell-off and weakening domestic and global growth have wiped out bets for a March rate increase. The probabilities of rate hikes for the rest of the year are slim.
Quiet day for commodities
Today's calendar is nearly empty with news that might have an impact on commodities. Tuesday, however, is going to be a lot more interesting, being that apart from a series of reports from Europe in the first half of the day, in the afternoon we will await the updates on the US CB consumer confidence and existing home sales.
Gold looks for support
Although gold confirmed a breakout by bouncing off of the new support at 1,191.50, the bullion does not seem to be in a hurry to advance further north. However, it seems that the price is forming a symmetrical triangle, and at the same time there is a strong support level at 1,210, which should be able to trigger a new wave of buying. On the other hand, a deeper decline will imply formation of a descending triangle, meaning the downside risks will substantially increase.Daily chart
The hourly chart confirms that gold is forming a symmetrical triangle. However, unless there is a rally from 1,210/1,205 dollars, there well may be a decline of 30 dollars, down to the recently broken trend-line at 1,175.
Hourly chart
Bears dominate SWFX
There is a completely different situation observed at OANDA and at Saxo Bank. Canadian broker reports that 56% of positions opened by its clients are long the bullion. The sentiment at Saxo Bank is even more bullish - 58% of positions are long and 42% are short.