- SWFX bearish traders are managing to maintain a 14 pp lead over bullish market participants
- Fed Chair Janet Yellen's speech estimated to weigh on Dollar; gold prices likely to be turbulent
- Daily indicators assume the bullion will today copy the sideways development seen on Tuesday
- Economic events to watch over the next 24 hours: French Industrial Production (Dec); Italian Industrial Production (Dec); Fed Chair Yellen Testifies; US Crude Oil Inventories (Feb 5) and Monthly Budget Statement (Jan); UK Industrial and Manufacturing Production (Dec) and NIESR GDP Estimate (Jan)
Gold continued to rise on Wednesday, reaching the highest level in more than seven month as investors turned to safe-have assets amid plunging stock markets and uncertainty about the global economy. Global equity markets have been undermined by concerns over the Euro zone's banking sector health. Meanwhile, investors are awaiting Fed Chair Janet Yellen's testimony to Congress later today. Yellen is expected to voice dovish comments, which would provide additional support to gold prices.
The number of job openings in the US surged more than expected in December, adding to signs that the labour market continues to improve. According to the Labor Department, US companies advertised 4.9% more jobs in the reported month, totalling 5.6 million, the most since July. The JOLTS report is among the data closely watched by the Fed officials. The increase raised the job openings rate to 3.8% from 3.6% in November. At the same time the hiring rate remained unchanged at 3.7%, indicating that employers faced challenges to find qualified workers for vacant positions. A total of 3.1 million Americans quit their jobs in December, the highest number since 2006, pushing the quits rate, a measure of confidence in the jobs market, to 2.1%, the highest level since 2008. The report came ahead of Fed Chair Janet Yellen testimony to Congress later in the day. A number of disappointing economic reports, plunging oil prices and a stock market sell-off have fuelled doubts as to whether the Fed would raise interest rates this year. However, the data last week showed the US unemployment rate declined to 4.9% in January, down from 5.0%. In addition to that, average weekly earnings increased 12 cents an hour or 0.5% on a monthly basis, translating into a 2.5% annualized gain. As the unemployment rate remains low, many economists expect Americans to see paychecks increase.
The UK retail spending growth hit the highest level in four month in January, as consumers bought more big-ticket items like furniture. The British Retail Consortium reported retail sales values jumped 3.3% last month compared with a year ago, up from a 1.0% gain in December. Furniture and home appliances were the top performers, while discounts in the New Year sakes boosted clothing and footwear sales. The report added to signs that Britons continued to spend freely, despite a gloomier global economic outlook. The Bank of England revised down its short-term outlook for both inflation and economic growth, referring to external and domestic headwinds as well as low price pressures and the major factors weighing down on the UK economy and production. A separate report showed Britain's trade deficit widened in the final quarter of 2015 amid global market turmoil and a slowdown in emerging markets that hurt British exports. The gap between exports and imports increased from 8.6 billion pounds in the September quarter to 10.4 billion pounds, sparking concerns that UK's worsening trading position would be a drag on the economy's growth this year. Moreover, the UK's goods trade shortfall with the rest of the world widened by 1.9 billion pounds to a record high of 125 billion pounds in 2015. However, 2015 saw a record surplus in the UK's dominant services sector of 90 billion pounds.
Upcoming fundamentals: Yellen's testimony and a bunch of UK data
At 15:00 GMT the Chair of the Federal Reserve System Janet Yellen will talk to lawmakers before the US House Financial Services Committee. Analysts are waiting for any hints about the March FOMC meeting and future path of policy normalisation. In the meantime, important UK statistics will be out by 9:30 GMT. Manufacturing production is set to be unchanged on a monthly basis in December, following a drop of 0.4% in the preceding month. Industrial output is in turn projected to continue falling by 0.1% month-on-month. This sector has remained weak in recent times, given weaker economic growth in China and fragile recovery in the Euro zone, the UK's main trading partner. Meanwhile, the NIESR research institute will publish its monthly expectation for British GDP growth at 15:00 GMT. The number will show the likely UK economic advance for the three months through January.
Gold is contained by October 2015 high
The seven-day long rally of the bullion was ultimately limited by the 1,191/93 resistance area, where gold met the October high of the previous year and weekly R1. We are closely watching this supply, because any market turmoil may end up with violation of these levels. In this case, the long traders will immediately expose the next resistance at 1,207/13 represented by the upper Bollinger band, monthly R3 and weekly R2. Gold will have a good chance to commence a down-leg from here, even though there are few fundamental signals the current growth phase is over.Daily chart
Yellow metal is in a good position to start attacking the major 1,200 mark, followed by the June high of 2015 at 1,205. Supported by the 200-hour SMA at 1,148 and August 2015 high, the near-term continuation of the rally seems inevitable for the moment.
Hourly chart
Bullish market share is unchanged at 43%
The bears have also expanded their market position on the OANDA market, as their share rose from sub-51% to 51.05% by Wednesday morning. Alongside, there is a very fragile majority for bullish market participants on the SAXO Bank market, which currently stands at slightly below 52%.