- Bullish SWFX market portion was boosted from 35% to 42% due to selloff
- Full attention should now be paid to 1,205 where monthly PP is backed by weekly S2 and Bollinger band
- Daily technical indicators have become mixed by Thursday morning
- Economic events to watch over the next 24 hours: Italian Retail Sales (Jan); ECB TLTRO Programme Results; FOMC Member Bullard Speaks; US Durable Goods Orders (Feb) and Unemployment Claims (Mar 19); UK Retail Sales (Feb); Japanese National CPI (Feb)
Gold stabilized on Thursday, but was still on track for its biggest weekly loss since early November after declining around 2% in the prior trading session as hawkish comments from Fed officials sparked recovery in the US Dollar. The comments stoked investors' expectations that there might be more US interest rate hikes this year than currently expected.
Sales of newly built single-family homes recovered modestly in February as a rise in the West offset steep declines in other regions, suggesting the housing sector has been recovering gradually amid a limited property supply on the market. The Commerce Department reported home sales increased 2.0% to a seasonally adjusted annual rate of 512,000 units. Moreover, January's figure was revised up to 502,000 units from the previously reported 494,000 units. New single-family home sales were supported by a sturdy 38,5% advance in the West last month, which reversed January's 32.7% plunge. However, excluding the West, home sales declined 8.1%. New home sales account for about 9.2% of the housing market. The median price of a new home stood at $301,400 last month, up 2.6% from a year earlier. Other signs indicate slow gains in the housing market. Sales of existing homes, roughly 90% of all home purchases, plunged 7.1% in February from January, the National Association of Realtors reported this week, but they rose 2.2% from the prior year. With the improving labour market boosting household formation and mortgage rates still low by historical standards, housing fundamentals remain strong. The sector is expected to continue to contribute to economic growth this year.
The US manufacturing activity rose slightly in March, underscoring concerns that have been surrounding America's manufacturing sector, hit by a stronger US Dollar and signs of global slowdown, for some time already. Markit's flash manufacturing PMI ticked up to 51.4 in the reported month, up from the final February print of 51.3, but below economists' expectation for the preliminary reading to come in at 51.9. Manufacturers have been struggling with weakening global demand, exacerbated by a strong US Dollar, which hurts domestic producers' competitiveness abroad, coupled with the rout in energy prices that has resulted in decreased spending budgets across the oil patch. While ne business volumes increased in March, the latest rise was only slightly quicker than in February and still weaker than the post-crisis trend. The report earlier in the week showed sales of previously owned US homes declined more than expected in February after hitting the second highest level since 2007, a sign that demand for housing could be weakening due to increasing prices and low inventory. The National Association of Realtors reported that existing home sales plunged 7.1% in February from the preceding month to an annual rate of 5.08 million units, the lowest level since November.
Upcoming fundamentals: UK retail sales to slide down in February after good January
The only fundamental event from Britain will be about retail trade in February. A month before this indicator skyrocketed by 2.3% on a monthly basis and lifted the annual reading up to 5.2%. Monthly data is normally quite volatile, meaning this is not a surprise that today the analysts foresee a correction of 0.7% for the headline reading and a drop of 1% on the core basis that does not include car fuel sales. As for tomorrow's Asian session, economists are going to have a look at Japanese inflation numbers that are due at 23:30 GMT in the night between Thursday and Friday. An average forecast suspects a spike in the headline annual CPI reading to 0.3% in February from 0% in the first month of 2016.
Gold plunges amid hawkish Fed comments
Gold sank the most since July 2015 yesterday, by coming down from the 1,250 area in the beginning of daily trading to below 1,220 later. This is due to substantially higher Greenback in the wake of hawkish remarks by St. Louis Fed head James Bullard. On Wednesday, XAU/USD breached its primary support in face of the weekly S1 and the 23.6% Fibonacci retracement of Dec-Mar uptrend. Now the 1,205 mark is clearly exposed to bearish pressure, but here they will find the monthly pivot point, weekly S2 and the lower Bollinger band, meaning the task to penetrate all of them is going to be difficult at first attempt.Daily chart
Yesterday's development of gold prices was surprisingly biased in favour of the bears. Due to that the bullion has penetrated the recent low of 1,225. In the 1H chart we are looking at the Feb 26 low at 1,211 and the Feb 22 low at 1,201. An immediate slide below the latter is unlikely, but earlier movements are clearly signalling that the Dollar is appreciating and this is going to weigh on the precious metal in the foreseeable future.
Hourly chart
Bullish market share soars to 6-day high
The bullish positioning has also been boosted in both OANDA and SAXO Bank markets on Wednesday. Moreover, for now these two marketplaces are having a very similar distribution between the bulls and bears at 59-41%.