China, the second-largest economy in the world has been in the spotlight as of late. With an insatiable hunger for imported commodities and an accelerated growth in the past, this country was in the positive side of most investors. The sentiment started to change when the Chinese stock markets peaked with a mammoth 150% gain around mid-June. The crash early July which shaved a near $3 trillion from the markets brought red flags, spooked investors and rippled throughout the global economy.
It did not end here. Many hoped that China would increase its gold holdings as it planned to make the Yuan into a reserve currency. Reports released showed that China had reduced its Gold holdings which further created uncertainty within investors. Gold hit the ground hard and most commodity pairs dragged along. Insult was added to injury last week with the weak Markit flash manufacturing PMI. Figures printed below the 50 level, dragging the AUD, NZD and CAD lower. The PMI has been in decline since March, suggesting a contraction.
This is a US dominated week fundamentally, but we have some releases which will undeniably affect some commodity pairs such as the RBA speech on Thursday and the ANZ Business confidence on Friday. Manufacturing PMI will be released on Saturday for China. The forecast is 50.2, but investor sentiment states otherwise. A figure below this level may accelerate the obvious decline of the commodity currencies which are reliant on the growth of China.
To say China may be another Greece in the making may be ridiculous for now, but this feeling is all too nostalgic.
Gold remains bearish fundamentally. The demand for this precious metal seems to be deteriorating globally, such can be seen with China. Dollar’s strength in addition to the impending interest rate hike by the FED late this year has made fiat money desirable once more. Fewer investors are keeping their money in safe havens. News wise this is a heavily US dominated week, if results come out positive overall then Gold may continue to decline with the potential of breaching the 1073 support. Enforcing technical analysis, this is a bearish market. We have lower lows and lower highs. The daily trend defining level remains at 1100, as long as prices can keep below here, we may see a potential decline back down to the 1090.0 regions. A breach above the 1100.0 may trigger a further incline to the 61.8% Fibonacci level of 1135.24
Intraday – Gold is bullish intraday. The MACD has crossed to the upside and prices reside above the daily pivot. We may see a continual incline to the daily R1 of 1109. The daily trend defining level holds as 1095.0. If prices trade below this level, then this intraday bullish view becomes invalidated.
Silver is correlated to Gold and is also bearish. The slowdown in China will have an impact on the price of Silver. As the Dollar ascends, this precious metal descends. We identified a range last week and decided to play the breakout or breakdown. There is resistance at 15.00 and support at 14.50. Prices currently reside above the weekly pivot, but the MACD has crossed to the downside. The best action may be to simply wait until the correct signal is handed over.
Intraday – Silver is intraday bullish. Prices are not only above the daily pivot, but we have observed a breakout above the 14.70 hourly resistance. Prices have almost clipped the daily R1. An hourly close above this level may open gates to the daily R2 of 14.93. The hourly bullish trend defining level remains at 14.60. Prices must keep above this level for this bullish outlook to stay valid.
US Oil remains bearish both technically and fundamentally. Prices of this commodity have been declining since 2014. A further decline below $50 occurred when data was released showing that crude oil inventories in the United States rose. The next key technical support is at 47.0, this level may be hit before the end of this week.
Intraday – US oil is intraday bearish. Prices are below the daily pivot and 20 SMA. There was a breakdown in the early sessions of this morning. Prices may continue to decline to the daily S1 of 47.50. This bearish view holds as long as prices can keep below the hourly resistance of 48.30.
The AUDUSD has been on the receiving end of the events of China and the global fall in commodity prices. We saw the AUDUSD hit new yearly lows and closing below the psychological 0.7300 level. This is bearish on the daily timeframe and most technical leading and lagging indicators point down. Prices reside below the weekly pivot and daily 20 SMA. As long as we keep below 0.7450, prices may decline to the daily S1 of 0.7200.
Intraday - Intraday this pair is somewhat flat. There is resistance below the daily pivot of 0.7300 but some support at the 0.7260. This is the recipe for a breakout. Such may occur in the US session.
The NZDUSD bulls have been resilient. This pair has taken a beaten not only globally but domestically. The global drop in commodities has affected this pair but also the sharp drop in demand for milk in which is the bulk of its exports. The RBNZ have cut interest rates on this pair and still plan to cut more as the year progresses. NZDUSD is heavily bearish in a fundamental sense, the technical slightly say otherwise. On the daily time frame, prices reside around the sticky 0.6600 regions and the MACD is flat. We are below the daily 20 SMA but above the weekly pivot. Mixed signals here and the best strategy may be to simply wait.
Intraday - Intraday bulls seem to have taken some control. Prices are above the hourly 20 SMA and R1. A solid close above the 0.66125 may open gates to the daily R2 of 0.6650. An hourly close back below the daily pivot will signal intraday bullish weakness and prices will be back within the range.
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